Calcutta High Court
A.K. Goenka vs Magma Leasing Limited on 18 July, 2007
Equivalent citations: 2007(4)CHN113
JUDGMENT Tapan Mukherjee, J.
1. This application under Section 401/482 of the Code of Criminal Procedure registered as C.R.R. No. 3623 of 2006 at the instance of the accused is directed for quashing the proceeding being case No. C 4482 of 1999 pending in the 12th Court of ld. Metropolitan Magistrate, Calcutta under Section 138/141 of the Negotiable Instruments Act against the petitioner/ accused.
2. The respondent/complainant filed complaint case before the ld. Chief Metropolitan Magistrate, Calcutta alleging that in discharge of existing liability-arising out of a lease agreement between the complainant and the accused company dated 1.2.96, the accused-company Ms. Premier Vinyl Flooring Limited issued two cheques bearing numbers 790939 dated 1.6.99 and 790940 dated 1.9.99 on Canara Bank S.D Area New Delhi each for Rs. 4,35,000/- in favour of the complainant company. The said cheques were presented for clearance by the complainant company through Oriental Bank of Commerce, Park Street Branch, Calcutta but the same were returned dishonoured with the remark 'not arranged for' and 'exceeds arrangement'. The complainant company served demand notice upon the accused No. 1 company in the petition of complaint and notice was also sent to the accused Nos. 2 to 10 including the present petitioner/accused which were returned with postal remark "refused". The accused company did not pay any amount and as such the company was liable for penal provision of Section 138 of the NI Act and accused Nos. 2 to 10 were vicariously liable under Section 138/141 of the NI Act.
3. Cognizance was taken by the ld. Chief Metropolitan Magistrate and the case was then transferred to the ld. Metropolitan Magistrate, 12th Court who issued process against the accused persons. The accused Nos. 3, 4 and 5 including the petitioner who is accused No. 9 in the petition of complaint as Director of the company appeared before the ld. Magistrate. The complainant withdrew the case against accused Nos. 2, 4, 8 and 10 at different times by filing petition before ld. Magistrate. On 15.10.01 the petitioner and two others filed application challenging the maintainability of the same case before the ld. Magistrate and the said petition was rejected by the order dated 22.3.2004.
4. Challenging the order of ld. Magistrate dated 22.3.04 petitioner moved the Hon'ble Court on 19.5.04 and this Court disposed of the said revision application being C.R.R. No. 1309 of 2004 on 30.08.2004 with certain directions, On 21.12.04, ld. Magistrate split up the case of accused No. 1 company. On 20.1.05, petitioner filed an application to the Id. Magistrate for dropping proceeding challenging the continuation of the proceeding against him and accused No. 3 after splitting up the case against accused company. On 13.3.06, the said application was rejected by the Id. Magistrate. Against that order the petitioner moved the application under Section 397 of Cr.PC before ld. Chief Judge, Sessions Court, Bichar Bhavan and on 30.08.06 the said application was rejected by the ld. Chief Judge, City Sessions Court. Then the petitioner/ accused No. 9 in the complaint case has filed this instant application for quashing the proceeding.
5. Ld. Counsel for the petitioner/accused has contended that the mere fact that the accused/petitioner is the Director of the accused company is not sufficient to prove the vicarious liability of the accused for the offence alleged to have been committed by the company under Section 138 of the NI Act and the provision of Section 141 of the NI Act cannot be invoked. Within the four corners of the petition of complaint and initial ejahar there is nothing to show as to how and in what manner the petitioner was responsible for the conduct of the business of the company. It is not stated how the accused was responsible for dishonour of the cheques. There is no specific averment about the role of the accused/petitioner in the alleged offence. The allegations made in the petition of complaint do not satisfy the requirement of Section 141 NI Act and the proceeding against the petitioner only for the fact that he is Director of the company is not maintainable and the same is liable to be quashed.
6. Ld. Counsel for the petitioner has further contended that admittedly the complaint case has been withdrawn against some of the accused and the fact of withdrawal amounts to acquittal under Section 257 Cr.PC and acquittal by way of withdrawal under Section 257 proves that the allegations against the petitioner and others are based on no evidence.
7. Ld. Counsel for the petitioner has placed reliance upon the ruling reported in 2007(2) SCC (Cri) at page 135, AIR 2006 SC at page 3086, 2007(2) SCC (Cri) at page 192.
8. Ld. Counsel for the opposite party has contended that the complaint was filed as back in 1999 against 10 accused persons but due to the evading tactics of the accused persons to delay the trial the complainant had to withdrew the case against many of the accused and due to non-representation of the accused company under Section 305 of the Code of Criminal Procedure on prayer ld. Magistrate split up and filed the case against the accused company for the time being. After repeated unsuccessful attempts before ld. Magistrate and ld. Sessions Judge the accused has filed this case.
9. Ld. Counsel for the opposite party has further contended that Section 141 of the N I Act embodies the provision of vicarious liability and this section is part materia of Section 10 of the E C Act, Section 141 of the EPF Act, Section 86 of the E S I Act when the offence is committed by the company each of the officer who was in charge and responsible for the conduct of the business of the company at the time of offence was committed may be separately prosecuted. Section 138 of the Act postulates liability of the drawer of the cheque in case of dishonour. Section 141 of the Act comes to play when the drawer is the legal entity such as the company. As per Explanation of Section 141 company includes a firm and Director of company includes a partner. It is true that the Director only being a Director of a company will not be held liable for the offence committed by the company but he will be liable if he was in charge and responsible for the conduct of the business of company and the Apex Court consistently held that in the petition of complaint there must be averment that he was in charge and responsible for the conduct of the business of the company.
10. In the case of MCD v. Purshotam Dass Junjunwala reported in 1983 SCC (Cri) at page 123, the same view was reiterated and the same view was also taken by a larger Bench of the Apex Court in the case of Raj Lakshi Mills v. Shakti Bhankoo reported in 2003(1) DCR 453. The same question was mooted again before the Apex Court regarding the necessary averment in a case under Section 141 read with Section 138 of the Act and the matter was referred to a larger Bench in SMS Pharmaceuticals Limited v. Neeta Bhalla reported in 2005 Cr. LJ at page 4140 and disposing of the case on 20.9.05 the larger Bench of Apex Court answered that it is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge and responsible for the conduct of the business of the company.
11. It was further held by the Apex Court that it is not necessary to reproduce the language of Section 141 verbatim in a complaint since the complain is required to be read as a whole.
12. Ld. Counsel for the opposite party has further contended that plea of the accused/petitioner that a specific role was played by the accused must be mentioned in complaint in terms of decision in the case of Saroj Kumar Poddar v. State NCT of Delhi reported in 2007(2) SCC (Cri) at page 135, decided on 16.1.2007 has no substance as in subsequent decision in the case of SMS Pharmaceuticals Limited v. Neeta Bhalla, the same Bench observed that in Saroj Poddar no such general law has been laid down and the complaint petition only must contain averment satisfying the requirement of Section 141 of the Act. His Lordship clarified that the averments must state that the person who is vicariously liable for the commission of the offence of the company both was in charge and was responsible for the conduct of the business of the company. Requirements laid down therein must read conjointly and not disjunctively. The said view of the Apex Court was reiterated in some subsequent decisions in the case of Everest Advertising Private Limited v. State Government of NCT of Delhi and Ors. reported in 2007(2) RAJ 412, decided on 10.04.2007, in the case of N. Rangachari v. Bharat Sanchar Nigam Limited reported in 2007(2) RAJ 511, decided on 19.4.2007.
13. Ld. Lawyer for the opposite party has further contended that a decision is to be read as a whole like a statute. To pick up a word from a decision segregating the whole decision and interpretation of the same will not suffice. If view of the Apex Court in the case of Sabitha Rammurthy and Anr. v. RBS Channabasavaradhya decided on 13.9.06, is read from such angle then it appears that in that case also the Apex Court adopted the larger Bench view in SMS Pharmaceuticals Limited v. Neeta Bhalla, reported in 2005 Cr. LJ at page 4140. This Court in the case reported in 2007(2) Crimes at page 446 Calcutta held that if requisite averment is present in petition of complaint then non-mentioning of the same in statement under Section 200 of Cr.PC will not vitiate the trial. In another case reported in 1994(4) Calcutta Criminal Law Reported reported at page 2432 this Court also held that initial deposition may not be very elaborate or detailed. If averment is present in petition of complaint non-mentioning of the same only in initial deposition will not falsify the averment in complaint. Moreover the complaint and the initial deposition must be read together not separately.
14. Ld. Counsel for the opposite party contended that in the instant petition of complaint it is specifically averred that the accused/petitioner was in charge of and/or responsible to the company for its day-to-day business and regular affairs. So obviously at the time of issuing the cheques the accused/petitioner was in charge of or responsible for the conduct of the business of the company and the petition of complaint made out the case of vicarious liability of the accused/petitioner and satisfied the requirement of Section 141 of the Negotiable Instruments Act and was also responsible for the offence committed under Section 138 N I Act and the question of quashing the proceeding does not arise.
15. Ld. Counsel for the opposite party further stated that despite withdrawal of the complaint against some of the accused the case against other accused should continue and bare acquittal under Section 257 Cr.PC does not amount to acquittal of the accused/petitioner.
16. In reply to another ground taken by the petitioner/accused in the memo of appeal that for splitting up the case of the company the prosecution against the rest including this petitioner/accused cannot proceed, ld. Counsel for the opposite party has contended that the case of the company was split up and filed as there was frequent change of the representative of the said company and for splitting up of the said case it cannot be said that the case against the company has been dropped. Accused/petitioner can be tried separately and there is no need of joint trial of the accused/petitioner with the company and the question that the accused/petitioner has been prejudiced does not arise.
17. The fact remains as alleged that the company issued two cheques in favour of the complainant company, the said cheques were presented and the same were dishonoured and a notice in terms of the provision of N I Act was served upon the company and its officers and despite service of notice no payment was made within 15 days from the date of receipt of the notice. The petitioner accused has been made vicariously liable for commission of offence on the part of company by virtue of Section 141 of the Negotiable Instruments Act. Under the provision of Section 141 of the Negotiable Instruments Act if the person committed an offence under Section 138 is a company, every person who at the time the offence was committed was in charge or 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 and shall be liable to be proceeded against the accused and punished accordingly.
18. From the reading of the petition of complaint it appears that at the time of occurrence accused petitioner was not only Director of the accused company but he was in charge of, and responsible to, the company for its day-to-day business and regular affairs and he was made accused as he had vicarious liability under Section 141 of the Negotiable Instruments Act.
19. In the case of Sabitha Rammurthy and Anr. v. RBS Channabasavaradhya, disposed of 13.9.2006 by the Supreme Court, , relied by the ld. Lawyer for the petitioner it was held that it is not necessary for the complainant to specifically reproduce the wordings of the Section 141 N I Act but what is required is a clear statement of fact so as to enable the Court to arrive at a prima facie opinion that the accused are vicariously liable. Section 141 raises a legal fiction. By reason of the said provision, a person although is not personally liable for commission of such an offence would be vicariously liable therefor. Such vicarious liability can be inferred so far as company registered or incorporated under the Companies Act, 1956 is concerned only if the requisite statements, which are required to be averred in the complaint petition are made so as to make the accused therein vicariously liable for the offence committed by the company. Before a person can be made vicariously liable strict compliance of the statutory requirements would be insisted. Not only the averments made in paragraph 7 of the complaint petitions does not meet the said statutory requirements, the sworn statement of the witness made by the son of respondent herein does not contain any statement that appellants were in charge of the business of the company. In a case where the Court is required to issue summons which would put the accused to some sort of harassment the Court should insist strict compliance of the statutory requirements. In terms of Section 200 of the Code of Civil Procedure, the complainant is bound to make statements on oath as to how the offence has been committed and how the accused persons are responsible therefor. In the event, ultimately, the prosecution is found to frivolous or otherwise mala fide the Court may direct registration of case against the complainant for mala fide prosecution of the accused. The accused would also be entitled to file a suit for damages. The relevant provisions of the Code of Criminal Procedure are required to be construed from the aforesaid point of view.
20. Thereafter, On 16.1.2007 in the case of Saroj Kumar Poddar v. State NCT of Delhi and Anr. reported in 2007(2) SCC (Cri) at page 135. relied by the ld. Lawyer for the petitioner the Supreme Court held that the appellant who was Director of the company did not issue any cheque. He had resigned from the directorship of the company before the date of issuance of the cheques. It may be true that exactly on what date the said resignation was accepted by the company is not known but even otherwise, 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, thus, do not satisfy the requirements of Section 141 of the Act.
21. Allegations to satisfy the requirements of Section 138 of the Act might have been made in the complaint petition but the same principally relate to the purported offence made by the company. 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.
22. Then on 20.2.2007 in the case between SMS Pharmaceuticals Limited v. Neeta Bhalla and Anr. reported in 2007(2) SCC (Cri) 192, relied by the ld. Lawyer for the petitioner where the petition of complaint contained the allegations that the accused No. 1 is a duly incorporated company, having its registered office at the address mentioned in the petition of complaint represented by the Director, accused No. 2. Accused No. 3 and 4 are also the Director of accused No. 1 company and accused No. 2 to 4 are actively involved in the management of the affairs of accused No. 1 company, Supreme Court held that on a plain reading of the averments made in the complaint petition, the statutory requirements as contemplated under Section 141 of the N I Act are not satisfied. If the complaint petition is read in its entirety, the same would show that the only person who was actively associated in the matter of obtaining loan, signing cheques and other affairs of the company which would lead to commission of the alleged offence was Accused No. 2. By reason of the purported resolution dated 15.2.1995 only accused No. 2 was authorised to do certain acts on behalf of the company. The cheques were issued on 15.8.1996 i.e. after a period of 17 months from the date of the said resolution. Only because respondent No. 1 herein was a party to the above resolution by itself does not lead to an inference that she was actively associated with the management of the affairs of the company. The High Court has gone into the matter at some length. The High Court found that the resolution by itself did not constitute an offence even assuming that the same bore the signature of respondent No. 1 (although the genuineness thereof was disputed). Thus, the judgment of the High Court cannot be faulted. The suggestion that the Supreme Court in Saroj Kumar Poddar, 2007(3) SCC 693 laid down the law that the complaint petition not only must contain averments satisfying the requirements of Section 141 of the N I Act but must also show as to how and in what manner the accused was responsible for the conduct of the business of the company or otherwise responsible to it in regard to its functioning, cannot be accepted. A plain reading of the said judgment would show that no such general law was laid down therein.
23. In the case reported in 2007(2) RAJ at page 511, it was held by the Supreme Court that while Section 138 made a person criminally liable on dishonour of a cheque for insufficiency of funds and the circumstances referred to in the section and on the conditions mentioned therein. Section 141 laid down a special provision in respect of issuance of cheques by companies and commission of offence by companies under Section 138 of the N I Act. Therein it was provided that if the person committing an offence under Section 138 is a company, every 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, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. The scope of Section 141 has been authoritatively discussed in the decision in SMS Pharmaceuticals Limited v. Neeta Bhalla and the same is binding on Their Lordships and there is no scope for redefining it in the case before Their Lordships. Suffice it to say, that the prosecution could be launched not only against the company on behalf of which the cheque issued has been dishonoured, but it could be initiated against every person who at the time of offence was committed, was in charge of and was responsible for the conduct of the business of the company.
24. It was further observed by Apex Court in that case that in fact Section 141 deems such persons to be guilty of such offence, liable to be proceeded against and punished for the offence, leaving it to the person concerned, to prove that the offence was committed by the company without his knowledge or and he has exercised due diligence to prevent the commission of offence. Sub-section (2) of Section 141 also roped in Directors, Managers, Secretaries and other officers of the company, if it was proved that the offence was committed with their consent or connivance. It was observed in the said case by Their Lordships that in the case on hand, reading the complaint as a whole, it is clear that; the allegations in the complaint are that at the time of which the two dishonoured cheques were issued by the company, the appellant and another were the Director of the company and were in charge of the affairs of the company. It is not proper to split hairs in reading the complaint so as to come to a conclusion that the allegations as a whole are not sufficient to show that at the relevant point of time the appellant and other are not alleged to be a person in charge of the affairs of the company.
25. In the Three Bench judgment of the Supreme Court in the case SMS Pharmaceuticals Limited v. Neeta Bhalla and Anr. reported in 2005 Cr.LJ at page 4140, it was held that it is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for, the conduct of the business of the company. This averment is essential requirement of the Section 141 and has to be made in a complaint. Without this averment being made in a complaint the requirements of Section 141 cannot be said to be satisfied.
26. In this case as already observed the complaint read as a whole shows that at the time of commission of offence the petitioner-accused was in charge of, and responsible for, the conduct of the business of the company. As the essential requirements of Section 141 have been averred in the petition of complaint, so, following principles laid down in the case of SMS Pharmaceuticals Limited v. Neeta Bhalla and Ors. reported in 2005 Cr.LJ at page 4140, it must be said that the complaint contains the essential requirements of Section 141 and the same cannot be quashed on this ground. So the first objection raised by the ld. Lawyer for the petitioner as to maintainability of the case and taking cognizance of an offence under Section 138 read with Section 141 against the petitioner accused does not stand.
27. As regards the second objection taken by the ld. Lawyer for the petitioner/ accused that the case against some of the accused was withdrawn under Section 257 Cr. PC and the effect of withdrawal is acquittal and the case against present petitioner also cannot continue as the withdrawal amounts to the fact that allegations against accused is are based on no evidence, it must be said that it is admitted fact that the case against some of the accused has been withdrawn under Section 257 Cr. PC and that withdrawal amounts to acquittal of the said accused from the case under Section 257 Cr. PC and that acquittal of some of the accused does not amount to acquittal of the present accused from the case or for that acquittal it can be contended that the prosecution against the present accused under Section 138 read with Section 141 cannot continue. Under Section 257 Cr.PC Magistrate may permit the complainant to withdraw the complaint against some of the accused and to acquit the accused against whom the complaint has been withdrawn. So, withdrawal of complaint under Section 257 Cr. PC does not entitle the petitioner/accused to be acquitted.
28. Another point taken by the petitioner in the petition is that Court cannot continue with the proceeding against the petitioner as the case against the company has been split up.
29. It is the contention of the ld. Lawyer for the respondent that the case has been split up against the company for the time being as there was continuous non-representation of the accused company under Section 305 of the Code of Criminal Procedure and the case against other accused was being delayed. There is nothing in the NI Act that the company and its officers who have got vicarious liability cannot be prosecuted under Section 138 read with Section 141 of the N I Act. The officers who are vicariously liable may be prosecuted separately from the company. The only condition is that in separate prosecution there should be finding that the company issued the cheques and the same was dishonoured and the payment was not made within the statutory period.
30. In the case reported in 2000 Criminal at page 360 Apex Court held that even if the prosecution proceedings against the company were not taken or could not be continued, it is no bar against other persons falling within purview of Sub-sections (1) and (2) of Section 141 of the Act.
31. In another case reported in 2001 Cr. LJ at page 4936, the view of the Apex Court in the case reported in 2000 Criminal at page 360 was followed and the stand of the High Court that the company on whose behalf the cheque was issued was not made accused in the complaint and the respondent who was the partner has been made an accused, was not accepted. So ground taken by the petitioner that for splitting up the case of the accused company, the Court cannot continue with the proceeding against the petitioner, is not sustainable.
32. Under the circumstances, there is nothing to interfere with the criminal proceeding pending against the petitioner/accused in the case No. 4482 of 1999 before ld. Metropolitan Magistrate, 12th Court, Calcutta and the instant petition is liable to be dismissed.
33. The instant application being C.R.R. No. 3623 of 2006 stands dismissed on contest accordingly.
34. Urgent xerox certified copy, if applied for, be given to the parties as early as possible.