Delhi High Court
Cdr. Shekhar Singh And Arun Anand vs Mr. N.K. Wahi S/O Sh. Nathu Ram Wahi on 7 August, 2002
Equivalent citations: [2003]113COMPCAS293(DELHI)
JUDGMENT V.S. Aggarwal, J.
1. By this order three petitions Crl.M(M) 787/2001, 789/2001 and Crl. R 415/2002 can conveniently be disposed together as they arise out of the similar order passed by the learned Metropolitan Magistrate dated 25th November, 2000.
2. Some of the relevant facts are that respondent Shri N. K. Wahi had presented a criminal complaint under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 in the court of the Metropolitan Magistrate, New Delhi. It had been pleaded that M/s Western India Industries Ltd. is a limited company. The present petitioners along with certain other persons were directors/persons responsible for carrying out the business of the company and liability of those persons is joint and several. Thereafter it had been pointed that certain cheques had been given which were dishonoured on being presented. After giving the necessary notice etc. the complaint as such was filed.
3. Petitioners had presented applications for dropping the proceedings against them alleging that they were not the directors of the company and further there were no allegations against them that in terms of Section 141 of the Negotiable Instruments Act they should not be arrayed as accused or summoned as such.
4. The learned Metropolitan Magistrate had dismissed those applications holding that whether petitioners in the above said three petitions were directors at the relevant time of the company or not is to be decided on evidence. It was further held that company is a jurist person and works through the persons responsible for carrying out its activities. If some transaction has been entered into between the company and third persons, all persons managing the affairs of the company should be arrayed as such. with These findings the impugned order as such was passed which prompts the petitioners to file the present petitions invoking Section 482 of the Code of Criminal Procedure.
5. In the first instance it had urged that petitioners had seized to be director at the time when the alleged cheques had been given and therefore they should not have been summoned as accused persons. The fact as such has been disputed at the bar by the contesting respondent.
6. Indeed it is matter of evidence to be gone into as to whether petitioners on the relevant date were the directors of the accused company or not. At the initial stage unless there is any other conclusive evidence a finding to that effect cannot be returned. In these circumstances trial court was justified in passing any such order on this controversy. To the same effect is the decision of this Court in the case of A. K. Goenka v. State and Anr. 2001 I AD (Delhi) 387 and also in the case of Anurag Modi v. MSTC Ltd. 2002 I AD (Delhi) 445. In that view of the matter the said argument necessarily must fail.
7. However, it was contended that the assertions in the complaint and preliminary evidence does not establish that petitioners were in charge and were responsible to the company for the conduct of the business of the company as well as the company. In the absence of any such evidence or assertion in the complaint necessarily it must be held that there were no material before the learned Metropolitan Magistrate to summon the petitioners.
8. Chapter XVII has been incorporated under the Negotiable Instruments Act with effect from 1.4.1989. In certain contingencies referred to under Section 138 of the Negotiable Instruments act on the cheques being dishonoured a new offence as such had been created. But to take care of the offences purported to have been committed provisions of Sub-section (1) to Section 141 of the Act comes into play. It reads as under:-
"141 Offence 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."
9. This provision clearly show that so far as the companies are concerned if any offence is committed by it then every person who is a director or employee of the company is not liable. Only those persons would be held liable if at the time when offence is committed he was in charge and was responsible to the company for the conduct of the business of the company as well as the company. Merely being a director of the company in the absence of above factors will not make him liable.
10. 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 how the directors are in charge 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. After all while analysing common sense cannot be left in cold storage. But still in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable.
11. This court in the case of Mahiendra Pratap Singh Ratra and Anr. v. N.K. Metals and Anr. had considered this controversy and thereupon in paragraph 10 held:-
".....There is no averment or allegation in the complaint or pre-summoning evidence even to obliquely suggest that the petitioners/Directors were at any point of time directly or indirectly in charge of and responsible to the company for the conduct of its day to day business or any material on record which may even remotely suggest that the alleged offence was committed with the consent or connivance of, or was attributable to any neglect on the part of the petitioners. In the absence of such an averment/evidence, in my view, the petitioners cannot be roped in under Section 141 of the Act."
12. The Supreme Court in the case of K.P.G. Nair v. Jindal Menthol India Ltd. JT 2000 (Suppl) SC 519 also referred to the same fact that in the complaint there should be specific averments or allegations and evidence to that effect should be forthcoming. The precise findings recorded are:
"From a perusal of the excerpts of the complaint, it is seen that nowhere it is stated that on the date when the offence is alleged to have been committed, the appellant was in charge of or was responsible to the accused company for the conduct of its business."
13. Same view had been taken by Allahabad High Court in the case of Smt. Sharda Agarwal and Ors. v. Additional Chief Metropolitan Magistrate-II, Kanpur 1992 Criminal Law Journal 1442 and also by this court in he case of K.K. Chug v. State and Ors.. In other words, the assertions must be made supported by the preliminary evidence about the ingredients of Section 141. In the present case in hand, the complaint in paragraph 1 recites:
"That the present complaint is directed against the accused no.1 which is a limited company incorporated under the Companies Act, 1956. 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."
14. Preliminary evidence had been recorded and at that time also no specific evidence or assertion was forthcoming. Shri Wahi who appeared at that time only stated that accused 2 to 12 are directors and responsible officers of the company. They are liable for the acts of the company. In other words, there was no averment or evidence that the present petitioners were in charge of or responsible to the company for the conduct of the business of the company as well as the company. Merely because it is alleged that they were responsible for carrying out the business of the company will not meet the requirement of law. There cannot be joint and several liability in this regard. It is not shown as to who was in charge of the company and who was responsible to the company for the conduct of the business of the company. When the evidence and averments in this regard were lacking indeed summoning order cannot be sustained.
15. For these reasons petitions are allowed.The orders summoning the present petitioners are quashed.