Madras High Court
K.Kathirvel vs M/S.Kirorimal Kasiram on 13 August, 2010
Author: R.Mala
Bench: R.Mala
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 13/08/2010 CORAM THE HONOURABLE Ms.JUSTICE R.MALA Crl.O.P(MD)Nos.11880 of 2009 Crl.O.P(MD)Nos.11881 of 2009 Crl.O.P(MD)Nos.11882 of 2009 Crl.O.P(MD)Nos.11883 of 2009 Crl.O.P(MD)Nos.11884 of 2009 Crl.O.P(MD)Nos.11885 of 2009 Crl.O.P(MD)Nos.11886 of 2009 Crl.O.P(MD)Nos.11887 of 2009 Crl.O.P(MD)Nos.11888 of 2009 Crl.O.P(MD)Nos.11889 of 2009 Crl.O.P(MD)Nos.11890 of 2009 Crl.O.P(MD)Nos.11891 of 2009 Crl.O.P(MD)Nos.11892 of 2009 Crl.O.P(MD)Nos.11893 of 2009 Crl.O.P(MD)Nos.11894 of 2009 12029 and 12031 to 12035 of 2009 AND M.P(MD)Nos.1 and 2 of 2009 and 1 of 2010 Crl.O.P(MD)No.11880 of 2009: 1.K.Kathirvel 2.K.Bala Muruganandam ... Petitioners/ A.2 and A.3 Vs M/s.Kirorimal Kasiram represented by its Manager, H.Kamalesh Kumar ... Respondent/ Complainant Prayer in Crl.O.P.(MD) No.11880 of 2009 Petition under Section 482 of the Code of Criminal Procedure, to call for the records relating to the case in S.T.C.No.2012 of 2007 on the file of the learned Judicial Magistrate No.IV, Madurai and quash the same. !For Petitioners ... Mr.B.Saravanan ^For Respondents ... Mr.G.Prabhu Rajadurai * * * * * :COMMON ORDER
In view of the fact that the petitioners 1 and 2/A2 and A3 in all the petitions and 3rd petitioner/A5 in Crl.O.P.(MD) No.11884 of 2009 and the sole respondent are one and the same in all the cases with similar issues both factual and legal, they have been taken up together for disposal.
2. The respondent is the complainant, who has preferred complaints under Section 138 and 142 of the Negotiable Instrument Act before various Judicial Magistrate Courts at Madurai.
3. It is the case of the respondent that there have been number of transactions between the petitioners and the respondent. The first accused is a Partnership firm and the accused 2 to 6 are its partners. All the accused persons including the petitioners herein have made a request to the respondent for payment of certain amount to be paid to some other concern and accordingly, on their request, the respondent has made the payment. Thereafter, the fourth accused has signed the cheques, which were given to the respondent by all the accused. At the request of all the accused, the first respondent presented the cheques which got returned. Hence, The respondent issued a legal notice, which was not received by some of the accused, some of the accused refused and not received the notice and some of the accused have given reply on untenable grounds.
4. Since all the accused persons joined together with an intention to cheat the respondent after getting the money and after giving the cheques which have been returned as 'insufficient funds', the complaints have been filed.
5. The learned Counsel for the petitioners 1 and 2/A.2 and A.3 in all the cases and third petitioner/A5 in Crl.O.P.(MD) No.11084 of 2009, submitted that merely because the petitioners are partners of the 1st accused firm, they cannot be made as accused and there is no specific averment or allegation as to the part played by the petitioners herein in respect of day to day business affairs of the 1st accused firm and there is also no evidence to show that the petitioners were in-charge and responsible for the conduct of the business at the relevant point of time. To substantiate his contention, the learned Counsel for the petitioners relied upon the following decisions:
(i) S.M.S.Pharmaceuticals Ltd. v. Neeta Bhalla and another [(2005) 8 Supreme Court Cases 89].
(ii) Sabitha Ramamurthy and another v. R.B.S.Channabasavaradhya [(2006) 10 Supreme Court Cases 581].
(iii) Saroj Kumar Poddar v. State (NCT of Delhi) and another [(2007) 3 Supreme Court Cases 693].
(iv) S.M.S.Pharmaceuticals Ltd. v. Neeta Bhalla and another [(2007) 4 Supreme Court Cases 70].
(v) N.K.Wahi v. Shekar Singh and others [(2007) 9 Supreme Court Cases 481].
(vi) Ramrajsingh v. State of Madhya Pradesh and another [(2009) 6 Supreme Court Cases 729].
(vii) K.K.Ahuja v. V.K.Vora and another [2009 (5) CTC 81]. and prayed for the allowing of the petitions.
6. Repudiating the same, the learned Counsel for the respondent submitted that the allegations against the petitioners as well as the other accused are very clear and specific. It has been specifically averred in the complaints that all the petitioners sought for money, cheques have been given by all of them, but signed by one of them, who is A4 and the cheques have been presented only on their advice. It is further submitted that even in the notice issued by the respondent, the above said facts have been clearly stated. He relied upon the order dated 30.04.2010 made in Crl.O.p.(MD) Nos.9584 to 9591 of 2009 and submitted that the petitioners who are the accused in S.T.C.Nos. 354, 355, 359, 360, 361, 365, 366 and 367 of 2009 on the file of the learned Judicial Magistrate No.1, Madurai have filed the above said applications and after arguments, the learned Judge dismissed the applications observing that there are specific unambiguous and clear averments about the petitioners to the effect that they were in-charge of and responsible for the conduct of the business of the firm. Therefore, the learned Counsel for the respondent prayed for the dismissal of the petitions.
7.Heard the learned counsel appearing for the petitioners as well as the respondent and perused the entire materials available on records and perused the decisions relied upon by the petitioners.
8. Admittedly, the complaints have been given under Section 138 of N.I.Act. The first and foremost fact to be decided in all these petitions, is as to whether sufficient averments have been made in the complaints in accordance with Section 141 of the Negotiable Instruments Act, 1881, making the said complaints maintainable against the accused persons who are partners of the first accused firm or not?.
9. A reading of the complaints would clearly show that there are specific averments to the effect that all the accused persons have made a request to the respondent for the amount. The said complaints have also indicated that the cheques have been given for the business purpose of the first accused.
10. In order to appreciate the said contention of the learned Counsel for the petitioners, it would be appropriated to extract the relevant provisions of Negotiable Instruments Act, 1881:
"Section 141. Offences by companies.-(1) 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;
Provided.....
(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 shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly."
11. Therefore, it is clear that a Director of a company cannot be deemed to be in-charge of and responsible to the company for the conduct of his business in the absence of any material to substantiate the same.
12. A material evidence in a private complaint can only be in pursuance of the averment in accordance with the provisions. Therefore, there has to be a factual averment to that effect. The allegations made in the complaints should be clear and unambiguous about the involvement of the Partners or the Directors as the case may be, in the affairs of the concern and their responsibilities for the conduct of the business. The description of a Partner or a Director viz-a- viz concern will have to be clear. There is a difference between the provision contained in Section 141(1) and (2) of the Negotiable Instruments Act, 1881. Under Section 141(1) of the Act, not only a Managing Director, Director, Managing Partner, Partner or an Officer can be made liable, but any other person who is in-charge of and responsible for the conduct of the business of the concern, would be liable. However, under Section 141(2) of the Act, there should be necessary averments in the complaint as to how and what manner an accused was guilty of a concern and connivance or negligence. Even under Section 141(1) of the Act, there is a difference between the Managing Director or a Director, who signs the cheque which is dishonoured and other Directors. A person who signed a cheque, becomes automatically liable and for such a person, the averments which are mandatory under Section 141(1) of the Act are not required. In other words, the said averments are applied only for the other Directors or Partners other than the one who signs the cheque which is dishonoured.
13.It is appropriate to consider the decisions relied on by the learned counsel appearing for the petitioners. In S.M.S.Pharmaceuticals Ltd. v. Neeta Bhalla and another [(2005) 8 Supreme Court Cases 89], the Honourable Apex Court has observed as follows:
"18. To sum up, 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 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. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of Section 141 has to be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within Section 141, he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of Section 141. Even a non-director can be liable under Section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial.
19. In view of the above discussion, our answers to the questions posed in the reference are as under:
(a) 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 business of the company. This averment is an essential requirement of 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.
(b) The answer to the question posed in sub-para (b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. 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 is 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. This has to be averred as a fact as there is no deemed liability of a director in such cases.
(c) The answer to Question (c) has to be in the affirmative. The question notes that the managing director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141."
14. Hence, what is required to be seen is as to whether the allegations made in the complaint if taken as a whole, would constitute an offence in compliance of Section 141 of the Negotiable Instruments Act, or not.
15. The said decision of the Honourable Apex court was followed in Sabitha Ramamurthy and another v. R.B.S.Channabasavaradhya [(2006) 10 Supreme Court Cases 581], wherein it has been observed as follows:
"7. A bare perusal of the complaint petitions demonstrates that the statutory requirements contained in Section 141 of the Negotiable Instruments Act had not been complied with. It may be true that it is not necessary for the complainant to specifically reproduce the wordings of the section 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 a 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 with the statutory requirements would be insisted. Not only the averments made in para 7 of the complaint petitions do not meet the said statutory requirements, the sworn statement of the witness made by the son of the respondent herein, does not contain any statement that the 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 with the statutory requirements. In terms of Section 200 of the Code of Criminal 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."
16. Similarly, in Saroj Kumar Poddar v. State (NCT of Delhi) and another [(2007) 3 Supreme Court Cases 693], the Honourable Apex Court after following the judgment rendered in S.M.S.Pharmaceuticals Ltd. v. Neeta Bhalla and another, has held on the facts of the case that the allegations made in the complaint even if they are taken to be correct in its entirety, do not disclose any offence. Therefore, they are liable to be quashed.
17. In N.K.Wahi v. Shekar Singh and others [(2007) 9 Supreme Court Cases 481], the very same proposition of law as held by the Honourable Apex Court earlier, has been reiterated to the effect that the allegations should be clear and unambiguous insofar as the other Directors and Partners are concerned.
18. In K.K.Ahuja v. V.K.Vora and another [2009 (5) CTC 81], the Honourable Apex Court has observed as follows:
20. The position under Section 141 of the Act can be summarised thus:
(i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix "Managing" to the word "Director" makes it clear that they were in charge of and are responsible to the company, for the conduct of the business of the company.
(ii) In the case of a Director or an officer of the company who signed the cheque on behalf of the company, there is no need to make a specific averment that he was in charge of and was responsible to the company, for the conduct of the business of the company or make any specific allegation about consent, connivance or negligence. The very fact that the dishonoured cheque was signed by him on behalf of the company, would give rise to responsibility under sub- section (2) of Section 141.
(iii) In the case of a Director, secretary or manager [as defined in Section 2(24) of the Companies Act] or a person referred to in clauses (e) and
(f) of Section 5 of the Companies Act, an averment in the complaint that he was in charge of, and was responsible to the company, for the conduct of the business of the company is necessary to bring the case under Section 141(1) of the Act. No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under Section 141(2) by making necessary averments relating to consent and connivance or negligence, in the complaint, to bring the matter under that sub-section.
(iv) Other officers of a company cannot be made liable under sub-section (1) of Section 141. Other officers of a company can be made liable only under sub-section (2) of Section 141, by averring in the complaint their position and duties in the company and their role in regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligence."
19. Considering the above judgments, the Honourable Apex Court in the latest judgment in National Small Industries Corporation Limited v. Harmeet Singh Paintal and another [(2010) 3 Supreme Court Cases 330], has laid down the following ratio:
"39.From the above discussion, the following principles emerge :
(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.
(ii) Section 141 does not make all the Directors liable for the offence.
The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.
(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make accused therein vicariously liable for offence committed by company along with averments in the petition containing that accused were in-charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.
(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred.
(v) If accused is Managing Director or Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.
(vi) If accused is a Director or an Officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint.
(vii) 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. This has to be averred as a fact as there is no deemed liability of a Director in such cases."
20. Therefore, from the above said principles of law laid down by the Honourable Apex Court, it is clear that what is required is a clear and unambiguous statement in the complaints about the involvement of the other partners to the effect that they are in-charge of and responsible for the conduct of the business of a concern so as to make the complaint maintainable against them by making about a prima facie case of vicarious liability. Further, in view of the averments mentioned alone regarding the role of the petitioners in respect of issuance and dishonour of cheques and receipt of money, the provisions of Section 141(2) of the Act is attracted disclosing consent and connivance.
21. The learned Counsel for the petitioners relied upon the decision in National Small Industries Corporation Limited v. Harmeet Singh Paintal and another [(2010) 3 Supreme Court Cases 330], wherein, clause (vii) of paragraph 39, it has been specifically stated by the Honourable Apex Court that there has to be an averment as a matter of fact, since in the absence of the same, there cannot be any deemed liability of a Director and hence, the above said citation is not applicable to the facts of the case.
22. I have also considered the order dated 30.04.2010 rendered in Crl.O.P.(MD) No.9584 to 9591 of 2009, wherein, the same petitioners have filed the petitions for quashing the complaints filed by the same respondent against them in S.T.C.Nos.354, 355, 359, 360, 361, 365, 366 and 367 of 2009 on the file of the learned Judicial Magistrate No.1, Madurai, which were dismissed by this Court and I am also agree with the findings of the learned Judge in the above said cases.
23. Applying the above said ratio to the present cases on hand, this Court is of the opinion that as observed earlier, there are specific, unambiguous and clear averments about the petitioners to the effect that they were in-charge of and responsible for the conduct of the business of the firm. The averments are also clear to the effect that only in view of the same, they made a request for the money, issued the cheques and advised the respondent to present the same.
24. Hence, on consideration of the above said factual position and by applying the principles of law as considered earlier, this Court is of the opinion that the present Criminal Original Petitions are liable to be dismissed.
25. In the result, all the Criminal Original Petitions are dismissed. Consequently, the connected Miscellaneous Petitions are also dismissed.
26. After pronouncement of the judgment, the learned Counsel for the petitioners submitted that the personal appearance of the petitioners may be dispensed with before the trial Court.
27. Considering the facts and circumstances of the case and on a consideration of the request made by the learned Counsel for the petitioners, the petitioners are directed to appear before the trial Court, whenever, the learned trial Court is required.
arul TO
1.The Judicial Magistrate No.I, Madurai.
2.The Judicial Magistrate No.II, Madurai.
3.The Judicial Magistrate No.IV, Madurai.
4.The Judicial Magistrate No.V, Madurai.