Madras High Court
S.R.Kangeyan vs M/S.Indian Potash Ltd on 19 March, 2012
Author: K.N.Basha
Bench: K.N.Basha
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 19.03.2012 CORAM: THE HONOURABLE MR.JUSTICE K.N.BASHA Crl.O.P.No.25703/2003 & MP.No.72/2010 S.R.Kangeyan .. Petitioner/A3 Vs. M/s.Indian Potash Ltd., rep.by Power Agent R.Balasubramanian Manager [A&A] 727, Anna Salai, Chennai-6. .. Respondent/Complainant Prayer : Criminal Original Petition filed u/s.482 Cr.P.C., to call for the records and quash the proceedings in CC.No.316/1998 initiated by the respondent / complainant by grossly abusing and misusing the provisions of the Special Enactment under Negotiable Instruments Act, by calling for the records of the trial court, i.e., learned XIII Metropolitan Magistrate, Egmore, Chennai. For Petitioner : Mr.M.Balasubramanian For Respondent : Mr.V.Jayachandran O R D E R
The petitioner who has been arrayed as the third accused out of three accused, has come forward with this petition seeking for the relief of quashing the proceedings initiated against him by the respondent / complainant for the offence u/s.138 of the Negotiable Instruments Act.
2.Mr.M.Balasubramanian, learned counsel appearing for the petitioner brought to the notice of this court that the petitioner along with the other accused, viz., A1/Company and A2 [another Director] have filed a quashing petition in Crl.O.P.No.10519/1999 and the same was dismissed by this court by the order dated 12.04.2001. It is submitted that in the earlier occasion, the petitioner has not raised the specific point, viz., that the complainant has not stated in the complaint as to how and in what manner the petitioner/A3 was involved in the day-to-day affairs of the Company or how he is responsible and in-charge of the business of the Company. Learned counsel would submit that a general argument was advanced to the effect that the complainant has made a vague allegation only to the effect that the other Directors of the first accused Company were also responsible and in-charge of the day-to-day affairs of the Company and only the said point was considered by this court while dismissing the earlier petition filed by the petitioner along with the other accused, viz., A1 and A2.
3.The learned counsel appearing for the petitioner would now vehemently contend that in the complaint, there is absolutely no allegation whatsoever made against the petitioner as to how and in what manner, he is responsible and in-charge of the day-to-day affairs of the Company, viz., A1 except to state that all the Directors are responsible and in-charge of the day-to-day affairs of the Company. Therefore, it is contended that second quashing petition is very much maintainable in view of the above said specific point not raised on the earlier occasion. Learned counsel further contended that even the disputed cheque involved in this matter is also alleged to have been signed only by the second accused on behalf of the first accused / Company. It is also pointed out by the learned counsel appearing for the petitioner that the accounts was also maintained by the Company in the Company's name and as far as the petitioner who is aged about 72 years at that time is concerned, he was only a sleeping partner and he is not able to involve himself in the business activities of the first accused - Company and at the request of the other Directors, the petitioner has been continued as a Director and he has absolutely no role to play in the day-to-day affairs of the Company. Learned counsel would also submit that the respondent / complainant, apart from enclosing the disputed cheque, legal notice and the reply to the said notice and the communications from the Bank, has not enclosed any other document to substantiate his contention to the effect of the involvement of the petitioner in the day-to-day affairs of the Company. Therefore, it is contended that allowing the proceedings to continue against the petitioner would amount to a clear case of abuse of process of court and as such, the proceedings insofar as the petitioner is concerned, is liable to be quashed.
4.Per contra, Mr.V.Jayachandran, learned counsel appearing for the respondent / complainant would contend that the petitioner has raised the same question relating to his liability by filing an earlier petition in Crl.O.P.No.10519/1999 and this court has rejected the said contention and as such, the present petition in Crl.O.P.No.25703/2003 is not maintainable. He would contend that there is a specific allegation levelled against the petitioner in paragraph No.3 of the complaint to the effect that the first accused Company as well as its Directors are in-charge of the day-to-day affairs of the Company and they are also responsible for the conduct of the business of the first accused Company. It is pointed out that even in paragraph 7 of the complaint, similar allegation against the petitioner was made stating that the first accused Company and the second and third accused, being the Directors of the Company, are responsible and in-charge of the day-to-day affairs and conduct of the business of the first accused Company and they are liable to be proceed and punished. Learned counsel would place reliance on the reply given to the statutory notice issued by the complainant and in the said reply, it is stated that the reply was sent as per the instructions of the petitioner, viz., the third accused and in that reply, there is no specific plea regarding the non-liability of the petitioner for the day-to-day affairs of the Company and as such, the petitioner cannot be absolved from his liability and he is liable to be proceeded for the offence under section 138 of the Negotiable Instruments Act along with the other accused.
5.This court carefully considered the rival contentions put forward on either side and also thoroughly scrutinised the entire materials available on record including the complaint, statutory notice issued by the respondent/complainant dated 25.11.198 and the reply given by the accused dated 28.11.1998 annexed along with the complaint.
6.The first and foremost contention put forward by the learned counsel appearing for the respondent / complainant is to the effect that the petitioner, on an earlier occasion, moved a similar quash petition along with the other accused raising the same point about the liability of the petitioner as a Director and the said contention was rejected by this court as this court has dismissed the quash petition in Crl.O.P.No.10519/1999 vide order dated 12.04.2001. I am unable to countenance the said contention of the learned counsel appearing for the respondent / complainant for the simple reason that a perusal of the order dated 12.04.2001 made in Crl.O.P.No.10519/1999 would make it abundantly clear that the said petition was filed by the petitioner who has been arrayed as A3 along with two other accused, viz., A1 / Company and A2 / Director and at that time only a general point was raised regarding the liability of the petitioner as a Director and the present point, viz., the absence of specific allegation in the complaint to the effect that as to how and in what manner the petitioner is responsible and in-charge of the day-to-day affairs of the A1/Company, was not at all raised. Therefore, it is needless to state that a second quash petition is very much maintainable in the event of the petitioner raising a new and specific point.
7.The fact remains that a perusal of the complaint would disclose the following allegation in paragraph 3 of the complaint, as far as the petitioner / A3 is concerned. Paragraph 3 reads as here under:-
"..................
3.The complainant states that the accused 2 and 3 above named are the Directors of the 1st accused Company who in their capacity as Directors were and are in-charge of the day-to-day affairs of the Company and also legally responsible for the conduct of the business of the 1st accused Company.
................"
Again, in paragraph 7, the following allegations are found:-
".................
7.........The Accused-1 being the Company and A-2 and A-3 Director of the Company and having been responsible incharge of the day-to-day affairs and conduct of the business of the first accused are all liable to be punished.
...................."
A reading of the above said allegations contained in the complaint would make it crystal clear that there is not a whisper as to how and in what manner the petitioner/A3 is in-charge and responsible for the day-to-day affairs of the Company. The said allegations are nothing but general, vague and bald allegations and the same cannot be construed to be a specific and definite allegation made against the petitioner herein.
8.The yet another aspect to be borne in the mind by this court is that as far as the second accused is concerned, it is specifically stated in paragraph 5 of the complaint to the effect that the 2nd accused, as a Director of the A1 / Company, had issued a cheque bearing No.537961 dated 20.10.1998 in favour of the complainant on behalf of all the accused. But, as far as the petitioner is concerned, as already pointed out, there is not even a single allegation to make out a prima facie case as to how and in what manner, the petitioner / A3, is responsible and in-charge of the day-to-day affairs of the Company in order to maintain the complaint for the offence u/s.138 of the Negotiable Instruments Act.
9.At this juncture, it is relevant to refer the following decisions of the Hon'ble Apex Court.
9.1.The Honourable Apex Court has held in S.M.S.Pharmaceuticals Ltd., V. Neeta Bhalla & Anr. reported in 2005 (8) SCC 89 (cited supra) as follows:
"There is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 of the NI Act is sought to be fastened vicariously on a person connected with a Company, the principal accused being the Company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable.
Under Section 141 what is required is that the persons who are sought to be made criminally liable 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. 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."
It was further held that, "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. ...
A Director in a Company cannot be deemed to be in charge of and responsible to the Company for the conduct of its business."
9.2. In yet another decision in Saroj Kumar Poddar Vs. State (N.C.T. of Delhi) reported in 2007 (1) CTC 529 (cited supra), the Apex Court has held that, "13. The purported averments which have been made in the Complaint Petitions so as to make the appellant vicariously liable for the offence committed by the Company read as under:
"That the accused No.1 is a public limited Company incorporated and registered under the Companies Act, 1956, and the accused 2 to 8 are/ were its Directors at the relevant time and the said Company is managed by the Board of Directors and they are responsible for the in charge of the conduct and business of the Company-Accused No.1. However, cheques referred to in the complaint have been signed by the Accused No.3 & 8 i.e. Shri K.K. Pilania and Shri.N.K. Munjal for and on behalf of the Accused Company No.1."
... there is no averment in the Complaint Petitions as to how and in what manner the appellant was responsible for the conduct of the business of the Company or otherwise responsible to it in regard to its functioning. He had not issued any cheque. How he is responsible for dishonour of the cheque has not been stated. The allegations made in paragraph 3, thus, in our opinion do not satisfy the requirements of Section 141 of the Act."
9.3.The Honourable Supreme Court also considered the principles laid down by the larger Bench in S.M.S. Pharmaceuticals ltd., V. Neeta Bhalla & Anr. reported in 2005 (8) SCC 89(cited supra) and ultimately held that, "With a view to make a Director of a Company vicariously liable for the acts of the Company, it was obligatory on the part of the complainant to make specific allegations as are required in law".
Therefore, it is clear that a mere general allegation to the effect that the accused who are the Directors at the relevant point of time are responsible and in charge of the conduct of the business of the Company is not sufficient to hold a Director to be vicariously liable for the offence said to have been committed by a Company.
9.4.The Hon'ble Supreme Court in N.K.Wahi v. Shekhar Singh & Ors. reported in 2007 (2) Supreme 811 taken a similar view. In that case, the Hon'ble Apex Court has held as follows :
"To launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction. There should be clear and unambiguous allegation as to who the Directors are incharge and responsible for the conduct of the business of the Company. The description should be clear. It is true that precise words from the provisions of the Act need not be reproduced and the Court can always come to a conclusion in facts of each case. But still in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable."
9.5.The Hon'ble Supreme Court further incorporated the allegation contained in that case as follows :
"The accused Nos.2 to 12 are the Directors/persons responsible for carrying out the business of the Company and the liability of the accused persons in the present complaint is joint and several."
The Hon'ble Apex Court, ultimately held that the above said allegations are not sufficient to fasten the accused to be held vicariously liable for the offence committed by the Company.
10.Therefore, in view of the above well settled principle of law laid down by a catena of decisions of the Honourable Supreme Court in order to implicate a particular accused who was holding a position as Director, a mere vague and general allegation to the effect that the said Directors are also responsible and in charge of the business of the Company itself is not sufficient to make them vicariously liable for the offence said to have been committed by a Company and on the other hand, there should be a specific averment and allegation in the complaint to that effect, which should be clear and unambiguous in respect of the specific role played by such Director indicating as to how and in what manner such Director was responsible for the conduct of the business of the Company or otherwise responsible with regard to its functioning.
11.In the instant case also, as already pointed out, there is absolutely no specific, clear and unambiguous allegations as to how and in what manner the petitioner was responsible for the conduct of the business and there is absolutely no specific role assigned to the petitioner in respect of the conduct of the business of the first accused Company.
12.The learned counsel appearing for the respondent / complainant also made a feeble attempt to contend that the petitioner is responsible for the day-to-day affairs of the company on the basis of the reply dated 28.11.1998 given by the first accused / company as represented by the petitioner herein to the Statutory notice dated 25.11.1998 issued by the respondent / complainant. I am unable to countenance such contention for the simple reason that a perusal of the reply dated 28.11.1998 given to the Statutory notice dated 25.11.1998 would make it abundantly clear that the reply was given by the Advocate on behalf of his client, viz., A1/Company and it was also specifically stated in paragraph 5 of the reply that the said reply was sent only on behalf of the first accused / company and as such, merely because the reply was sent by the first accused / company represented by the petitioner, to the statutory notice issued by the complainant, it cannot be construed that the petitioner is responsible for the day-to-day affairs of the first accused / Company.
13.Therefore, this court is of the considered view that allowing the proceedings to continue against the petitioner would certainly amount to a clear case of abuse of the process of court and as such, the proceedings are liable to be quashed insofar as the petitioner is concerned.
14.Accordingly, the proceedings in CC.No.316/1998 initiated by the respondent / complainant on the file of the learned XIII Metropolitan Magistrate, Egmore, Chennai is quashed insofar as the petitioner is concerned and the criminal original petition is allowed. Consequently, connected miscellaneous petition is also closed.
15.Considering the fact that the case itself relates to the year 1998, the learned XIII Metropolitan Magistrate, Egmore, Chennai is hereby directed to expedite the trial as expeditiously as possible and to complete the same within period of six months from the date of receipt of a copy of this order.
19.03.2012 INDEX:Yes INTERNET:Yes ap To
1.The XIII Metropolitan Magistrate, Egmore, Chennai.
2.The Public Prosecutor, High Court, Chennai.
K.N.BASHA, J., ap Crl. O.P. No.25703/2003 19.03.2012