Andhra HC (Pre-Telangana)
Arrakuntal V.Ganeshan vs Counsel For The on 7 June, 2013
Author: C. Praveen Kumar
Bench: C. Praveen Kumar
THE HON'BLE SRI JUSTICE C. PRAVEEN KUMAR
CRIMINAL PETITION No.12501 of 2010
Dated:07-06-2013
Arrakuntal V.Ganeshan....Petitioner/A-3
M/s.Sai Rama Cotton Syndicate, and another.... Respondents
Counsel for the Petitioner: Sri M.Naga Raghu
Counsel for Respondents: 1) ----
2)Public Prosecutor, High Court of A.P.,Hyderabad.
<Gist :
>Head Note:
?Cases referred:
1. (2005) 8 Supreme Court Cases 89
2. (2010) 3 Supreme Court Cases 330
3. (2010) 11 Supreme Court Cases 203
4. (2007) 3 Supreme Court Cases 693
5. (2012) 1 Supreme Court Cases 520
CRIMINAL PETITION No.12501 of 2010
ORDER:
The present application is filed by the petitioner, who is A-3, under Section 482 of the Code of Criminal Procedure, 1973 (for short 'Cr.P.C.'), seeking to quash the proceedings against him in C.C.No.570 of 2008 on the file of Judicial First Class Magistrate (Excise), Guntur.
2. A private complaint was filed by the 1st respondent against the petitioner and others, alleging that the 1st accused is a firm carrying on business in cotton, 2nd accused is the Managing Director of the said firm, for which accused Nos.3 and 4 are Directors. It is alleged that all the accused have been actively participating in the day-to-day transaction of the company, and with the consent and knowledge of accused Nos.3 and 4, 2nd accused issued four cheques on behalf of the 1st accused. The said cheques, when presented, were returned due to insufficient funds. After complying with legal requirements as contemplated under the provisions of the Act, a private complaint came to be filed against the accused.
3. Learned counsel appearing for the petitioner mainly contends that even accepting the allegations in the complaint as true, no offence is made out against the petitioner, who was only a director of the company, and as such, continuation of proceedings against him would amount to an abuse of process of law.
4. Learned Public Prosecutor appearing for the 2nd respondent-State opposed the petition contending that in view of the allegations made against the petitioner, this Court should not invoke its inherent jurisdiction under Section 482 of the Code and interdict the proceedings. Though notice was sent to the correct address of the 1st respondent, the same could not be served. Hence, the counsel for the petitioner was permitted to serve notice on the counsel appearing for the 1st respondent in the trial Court. Accordingly, notice was served on the counsel for the 1st respondent appearing in the trial Court and proof of service is also filed.
5. Section 141(1)of the Negotiable Instruments Act (for short "the Act") reads as under :-
"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. 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".
Section 141 of the Act does not say that a Director of the company shall automatically be vicariously liable for commission of an offence by or on behalf of the company. What is necessary is that sufficient averments should be made to show that the person who is sought to be proceeded against on the premise of he being vicariously liable for commission of an offence by the company must be incharge of, and shall also be responsible to the company for the conduct of its business. Sub-section (2)of Section 141 fortifies the above reasoning because sub-section (2) envisages direct involvement of any Director, Manager, Secretary or other officer of a company in the commission of an offence. This section operates when in a trial it is proved that the offence has been committed with the consent or connivance or is attributable to neglect on the part of any of the holders of these offices in a company. In such a case, such persons are to be held liable. Provision has been made for Directors, Managers, Secretaries and other officers of a company to cover them in cases of their proved involvement. In S.M.S. Pharmaceuticals Ltd., Vs., Neeta Bhalla and another1, the Apex Court held that 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. In order to bring a case within Section 141 of the Act, the complaint should disclose the necessary facts which makes a person liable.
6. In National Small Industries Corporation Limited Vs., Harmeet Singh Paintal2, the Apex Court has categorically held that " complaint should specifically spell out as to how and in what manner the Director was in charge of or was responsible to the accused company for the conduct of its business and mere bald statement that he or she was in charge of and was responsible to the company for conduct of its business is not sufficient".
7. Similarly, in Central Bank of India Vs., Asian Global Limited and others3, the Apex Court, after referring to S.M.S.Pharmaceuticals Ltd., Vs. Neeta Bhalla case, held that "merely being a Director will not make a person liable for an offence that may have been committed by the Company. For launching a prosecution against the Directors of a company under Section 138 read with Section 141 of the 1881 Act, there has to be a specific allegation in the complaint with regard to the part played by them in the transaction in question. It was also laid down that the allegations had to be clear and unambiguous showing that the Directors were in charge of and responsible for the business of the company. This was done to discourage frivolous litigation and to prevent abuse of the process of Court and from embarking on a fishing expedition to try and unearth material against the Director concerned".
8. In Saroj Kumar Poddar Vs., State (NCT of Delhi) and another4, the Apex Court held as follows :
" ... It may be true that as to exactly on what date the said registration 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 made in para-3, thus, in our opinion do not satisfy the requirements of section 141 of the Act".
9. In Anita Malhotra Vs., Apparel Export Promotion Council and another5, at paragraph No.22, the Apex Court quashed the proceedings against the Director of a company on the ground that the complaint petition has not specified the role of a Director in the day-to-day affairs of the company except making a bald allegation that he was in charge of and was responsible to the company for conduct of its affairs.
10. In the case on hand, admittedly, the petitioner is neither the Managing Director nor the authorized signatory to sign on the cheques, which were dishonoured. In the absence of any allegation attributing specific role to the petitioner in discharge of the day-to-day affairs of the company, and in the light of the principles laid down by the Apex Court in the above referred decisions and as the statutory requirements of Section 141 of the Act have not been satisfied with in so far as the petitioner is concerned, continuation of proceedings against the petitioner would amount to an abuse of process of law.
11. Accordingly, the Criminal Petition is allowed, and the proceedings against the petitioner/A-3 in C.C.No.570 of 2008 on the file of Judicial First Class Magistrate (Excise), Guntur, are hereby quashed. The miscellaneous applications, if any, pending in this Criminal Petition shall stand closed. ________________________ C. PRAVEEN KUMAR, J Date:07-06-2013