Allahabad High Court
Sharda Agarwal And Ors. vs Additional Chief Metropolitan ... on 27 November, 1991
Equivalent citations: [1993]78COMPCAS123(ALL), 1992CRILJ1442
JUDGMENT Palok Basu, J.
1. This is an application under Section 482, Criminal Procedure Code, filed by Smt. Sharda Agarwal, Smt. Kiran Agarwal and Sri M. P. Agarwal who are admittedly directors of a company named and styled Madhu Chandra Techno Chem Complex Pvt. Ltd. challenging the process issued against them by the Chief Metropolitan Magistrate, Kanpur, on January 17, 1990, in Complaint Case No. 1116 of 1990, under Section 138 of the Negotiable Instruments Act, 1881.
2. The facts are that Karam Chand Thapar and Brothers, a company having its registered office at Calcutta and its branch office at Thapar House, Kanpur, has filed the aforesaid complaint through its deputy manager, Vishalpuri, against four accused. Three of the accused are the applicants and the fourth one is Sri P. K. Agarwal, managing director of the aforesaid company, Madhu Chandra Techno Chem Complex Pvt. Ltd. It is said in para 2 of the complaint that P. K. Agarwal is the managing director while the applicants are the directors and as such all of them are jointly and severally liable for the acts of omission and commission of the offence committed by the company. In para 3, it is stated that the accused persons had appointed the complainant company as its coal mailing agent on behalf of the company in the year 1989, on the terms and conditions mentioned in the appointment letter dated January 2, 1989. In paras 4, 5, 6, 7 and 8, it has been stated that coal was supplied against which cheques were issued by the company which bounced. Some cheques were again handed over and the result of all this was that out of Rs. 5 lakhs odd, Rs. 4 lakhs odd were paid but Rs. 1,62,512.87 were still outstanding on which the company was entitled to Rs. 48,000 odd as interest. Then in para 9, it is stated that all the accused persons were having mala fide intentions since the beginning and had hatched a criminal conspiracy to cheat the complainant company to effect the delivery of the above said quantity of coal valuing Rs. 5,62,512.87. Paragraphs 10, 11 and 12 deal with statement of facts regarding jurisdiction of the court. The prayer in the complaint is that the accused persons be summoned and punished under Section 138, Negotiable Instruments Act, and the outstanding dues of Rs. 1,62,512.87 along with interest, and the cost of legal expenses be got paid to the complainant company.
3. Counter and rejoinder affidavits have been exchanged. Sri Amar Nath Srivastava, learned counsel for the applicant, Sri Shashikant, learned counsel for the complainant and Surendra Singh A.G.A, have been heard. The entire records have been perused.
4. The first fact to be noted from the allegations made in the complaint is that out of the total amount of Rs. 5 lakhs odd, Rs. 4 lakhs odd had been paid by the accused. The outstanding amount now remaining as per the complaint is Rs. 1,62,512.87 and the interest payable on that amount. The allegation of the complainant, therefore, that the accused had conspired to cheat the complainant company to the tune of Rs. 5 lakhs is per se false.
5. Coming to the question whether the applicants as directors can be prima facie made accused because of outstanding liability against the accused company it is necessary to look into Section 141 of the Negotiable Instruments Act. It reads as under :
"141. Offences by companies.--(I) If the person commiting 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 :
Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in Sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation.--For the purpose of this section,--
(a) 'company' means any body corporate and includes a firm or other association of individuals ; and
(b) 'director', in relation to a firm, means a partner in the firm."
6. There is no allegation in the complaint that the directors, i.e., the applicants, were in charge of, and responsible to, the company for the conduct of the business of the company. Therefore, as it is, the complaint cannot proceed against the directors only.
7. In this connection, the appointment letter creating the relationship between the complainant and the accused company was referred to by learned counsel. It is interesting to mention here that the said order is signed only by the managing director. The other facts to be noted are that the cheques were issued by the managing director and even the bank draft appears to have been prepared in the name of the accused company. Thus, from the facts emerging out of the complaint, it cannot be said that the applicants have got anything to do with the bouncing of the cheque. However, if evidence is led during trial about the applicants or any one of them being in charge of and responsible to the company for the conduct of the business of the company the court below would be at liberty to proceed against them or him also in accordance with law. As it is, the complaint does not make out an offence in so far as the applicants, Smt. Sharda, Smt. Kiran and Sri M. P. Agarwal are concerned.
8. The application consequently succeeds and is allowed. The summon and process issued on January 17, 1990, by the Chief Metropolitan Magistrate under the Negotiable Instruments Act in Case No. 1116 of 1990, Karam Chand Thapar v. Smt Kiran Agarwal is quashed. The interim order dated April 11, 1991, is vacated.