Delhi District Court
Tarang Madhukar Desai vs M/S Metro Infrasys Pvt. Ltd on 4 March, 2024
IN THE COURT OF HEM RAJ ADDITIONAL SESSIONS JUDGE-08
WEST DISTRICT: TIS HAZARI COURTS : DELHI
Presided by: Hem Raj, DHJS
CNR No. DLWT01-003386-2023
Criminal Revision No. 229/2023
In the matter of :
1. Tarang Madhukar Desai, Director,
2. Vasistha Patel, Director
3. Sashin Vishnu Bhai Patel, Director
4. Sandip Vinod Kumar Patel, Director
5. Nitin Kumar Ramesh Chandra Patel, Director
6. Hardik Jignesh Kumar Modi, Director
7. Arun Bhai Shanker Lal Patel, Director
8. Anjali Nirav - Choksi. Director
(All directors of M/s Sadbhav Engineering Limited)
At: Sadbhav Hours, Opposite Law
Garden, Police Chowki, Ellisbridge,
Ahmedabad - 3860009, Gujarat . ....Revisionists
Versus
1. State
Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 1/19
2. M/s Metro Infrasys Private Limited,
Registered Office At: B-92, Mayapuri
Industrial Ara, Phase-I
New Delhi-110064 .... Respondents
Date of institution : 20.04.2023
Date of reserving for order : 16.01.2024
Date of pronouncement of order : 04.03.2024
ORDER
1. The revisionist finds grievance with the summoning order dated 07.11.2022 of the Ld. MM (N.I Act) Digital Court-01 West in CC No. 2765/2022 titled as M/S Metro Infrasys Private Lim- ited Vs M/S Sadhbhav Engineering Ltd & Ors.
2. The facts, which are necessary for the disposal of the revi- sion petition are as that respondent no.2 (complainant) filed a complaint against the revisionists, who are alleged to be Direc- tors of M/s Sadhbhav Engineering Ltd. The said company M/s Sadhbhav Engineering Ltd. approached the complainant through the revisionist to supply, installation and commission of Toll Management System for different toll plazas and as per the par- ties order, the company supplied and installed the material as per the requirement. The company maintained an open mutual sepa- rate account of M/S Sadhbhav Engineering Ltd & Ors. In dis- charge of its admitted liability of Rs. 1,48,36,725/-, the company issued the following three post dated cheques:-
i).Cheque no. 1384 dated 15.04.2022 for Rs. 50,00,000/-
ii).Cheque no. 1385 dated 15.05.2022 for Rs. 50,00,000/-
iii).Cheque no. 1386 dated 15.06.2022 for Rs. 48,36,725/-
Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 2/19 All drawn at ICIC Bank, Ahmadabad.
3. The complainant further alleged that it intimated the revi- sionists about the presentation of the cheque no. 1384 as per schedule, but the revisionist requested not to present the afore- said cheque as the cheque amount would be transferred in com- plainant's account through NEFT and accordingly it was not de- posited. The revisionist transferred a sum of Rs. 25 Lakh on 18.04.2022 in the account of the complainant but failed to pay the remaining amount of Rs. 25 Lakh. However, when the revi- sionist failed to transfer the amount, the cheque was presented but the same was received unpaid vide memo dated 01.06.2022 with the reason "payment stopped by the drawer". The com- plainant further alleged that despite the statutory legal notice, the revisionist failed to pay the remaining sum of Rs. 25 Lakh. The complainant further alleged that all the revisionist being the Di- rectors of company M/s Sadbhav Engineering Limited were looking after day-to-day business affairs of the company and thus, being jointly and individually responsible and accordingly, vicariously liable.
4. Ld. Counsel for the revisionists argued that the revisionists have been wrongly summoned by the Ld. MM as the com- plainant did not specify the role of the revisionist and only the general allegations were levelled against the revisionists. He fur- ther argued that the complainant has failed to aver as to who was the signatory of the cheques. He further argued that revisionist no.2 to 8 being in the different capacity, were not responsible for Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 3/19 day to day affairs of the company and, thus, they have been wrongly summoned.
5. Ld. Counsel for the revisionists contended that revision pe- tition against the summoning order is maintainable. He relied upon the judgment in case of Urmila Devi Vs. Yudhvir Singh, (2013) 15 SCC 624. On the propositions that unless and until the specific role of the Director of the company is not mentioned in the complaint, the Director cannot be summoned, he has relied upon the following judgments:-
i). Har Sarup Bhasin Vs Orgio Commodities India Pri-
vate Limited 2020 Legal Eagle (DEL) 470
ii). Pawan Kumar Goel Vs State of U.P & Anr 2020 Le- gal Eagle (SC) 1337
iii). Smt. Dharna Goyal @ Dharna Gard Vs M/s Aryan Infratech Pvt. Ltd CRL M.C 708/2022 & CRL. M.A 2910/2020 & 2912/2020 dated 16.10.2020.
iv). Central Bank of India Vs Asian Global Ltd & Ors. 2010 Legal Eagle (SC) 427
v). Sunita Palita & Ors Vs Panchami Stone Quarry, 2022 Legal Eagle (SC) 814
vi). National Small Industries Vs Harmeet Singh Paintel & Anr 2010 Legal Eagle (SC) 120
vii). Siby Thomas Vs M/s Somany Ceramics Ltd. SLP No.12 of 2020 decided on 10.10.2023
viii). Ashok Shewakaramani & Ors Vs State of Andhra Pradesh & Anr Crl. Appeal no. 879 of 2023 dated 03.08.2023
ix). Bikash Chakraborty & Ors Vs Reliance Structure Ltd 2012 Legal Eagle (DEL) 470.
Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 4/19
x). Rajendra Kumar Sitaram Pande & Ors Vs Uttam & Anr 1999 Legal Eagle (SC) 161.
6. On the other hand, Ld. Counsel for the respondent has firstly challenged the maintainability of the revision petition sub- mitting that no revision petition is maintainable against the order issuing the process against the accused persons. He canvassed that the impugned order is an interlocutory order and thus is not challengeable under the revisional jurisdiction. He further argued that there are sufficient material in the complaint which war- ranted the summoning of the revisionist and there is no infirmity or illegality in the summoning order passed by the Ld. MM. He further argued that the present revision petition is not maintain- able and should be accordingly, dismissed. He has relied upon the following judgments in support of his arguments.
i). Ashutosh Ashok Parasrampuriya Vs M/s Gharrkul Indus- tries Pvt. Crl. Appeal no. 1207/2021 arising out of SLP (Crl.) No. 9520/2014
ii). S.P Mani and Mohan Dairy vs Dr. Snehalatha Elangovan Crl. Appeal no. 1586 of 2022 arising out of SLP (Crl.) No.9811/2021
7. I have heard the arguments and perused the material avail- able on record carefully and gone through the judgments relied upon both the parties.
Whether the impugned order is challengeable being an inter- locutory order:
Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 5/19
8. To decide the present query, one needs to advert to section 397 Cr.P.C. Section 397 reads as under:-
"397. Calling for records to exercise powers of revision - (1) The High Court or any Sessions Judge may call for and ex- amine the record of any proceedings before any inferior Criminal Court situate within its or his local jurisdiction for the purpose of satisfying itself or himself as to the correct- ness, legality or propriety of any finding, sentence or order, recorded or passed, and as to be regularity of any proceed- ings of such inferior Cour, and may, when calling for such record, direct that the execution of any sentence or order be suspended, and if the accused is in confinement, that he be released on bail or on his own bond pending the examination of the record.
Explanation - All Magistrates, whether Executive or judicial and whether exercising original or appellate jurisdiction, shall be deemed to be inferior to be Sessions Judge for the purposes of this sub-section and of section 398. (2) The powers of revision conferred by sub-section (1) shall not be exercised in relation to any interlocutory order passed in any appeal, inquiry, trial or other proceeding. (3) If any application under this section has been made by any person either to the High Court or to the Sessions Judge, no further application by the same person shall be entitled by either of them."
9. It is well settled principle of law the the revision petition is maintainable against a final or immediate order and not against an interlocutory order. In the judgment of Madhu Limaye Vs State of Maharashtra (2000) 6 SCC 195, it was held that an immediate order is one which is interlocutory in nature but when reversed, it has the effect of terminating the proceedings and thereby resulting in a final order. The effect would be that if it is passed in a certain way, the proceedings would terminate but if passed in another way, the proceedings would continue.
Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 6/19
10. The interlocutory order has been defined in judgment of Amar Nath v. State of Haryana, (1977) 4 SCC 137 the relevant para is reproduced herein under:
"6. ................The main question which falls for determi- nation in this appeal is as to what is the connotation of the term "interlocutory order" as appearing in sub-section (2) of Section 397 which bars any revision of such an order by the High Court. The term "interlocutory order" is a term of well- known legal significance and does not present any serious difficulty. It has been used in various statutes including the Code of Civil Procedure, Letters Patent of the High Courts and other like statutes. In Webster's New World Dictio- nary "interlocutory" has been defined as an order other than final decision. Decided cases have laid down that interlocu- tory orders to be appealable must be those which decide the rights and liabilities of the parties concerning a particular as- pect. It seems to us that the term "interlocutory order" in Section 397(2) of the 1973 Code has been used in a re- stricted sense and not in any broad or artistic sense. It merely denotes orders of a purely interim or temporary nature which do not decide or touch the important rights or the liabilities of the parties. Any order which substantially affects the right of the accused, or decides certain rights of the parties cannot be said to be an interlocutory order so as to bar a revision to the High Court against that order, because that would be against the very object which formed the basis for insertion of this particular provision in Section 397 of the 1973 Code. Thus, for instance, orders summoning witnesses, adjourning cases, passing orders for bail, calling for reports and such other steps in aid of the pending proceeding, may no doubt amount to interlocutory orders against which no revision would lie under Section 397(2) of the 1973 Code. But orders which are matters of moment and which affect or adjudicate the rights of the accused or a particular aspect of the trial cannot be said to be interlocutory order so as to be outside the purview of the revisional jurisdiction of the High Court."
11. In the judgment of V.C Shukla Vs State through CBI, (1999) SCC (Cri.) 393, the following propositions were laid down :-
"34. ............ Thus, on a consideration of the authorities, mentioned above, the following propositions emerge:
Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 7/19 "(1) that an order which does not determine the right of the parties but only one aspect of the suit or the trial is an in- terlocutory order;
(2) that the concept of interlocutory order has to be ex-
plained in contradistinction to a final order. In other words, if an order is not a final order, it would be an interlocutory order;
(3) that one of the tests generally accepted by the English courts and the Federal Court is to see if the order is decided in one way, it may terminate the proceedings but if decided in another way, then the proceedings would continue, be- cause, in our opinion, the term 'interlocutory order' in the Criminal Procedure Code has been used in a much wider sense so as to include even intermediate or quasi-final or- ders;
(4) ********************"
(5)*********************"
12. In view of the aforesaid law, if the impugned order is con- sidered, then it is clear that the impugned order is not an interlocu- tory order in as much as, if the said order is set aside, the same would culminate the proceedings and the result would be that the ac- cused would stand discharged from the case and the proceedings would stand culminate and if the order is not set aside, the proceed- ings would continue. Accordingly, it is clear that impugned order had the capacity to culminate or continue the proceedings before the Ld. Trial Court.
13. Now, let me discuss the judgments relied upon by the par- ties. The revisionist has relied upon the judgment of Urmila Devi Vs. Yudhvir Singh (supra) to argue that the revision against the is- suance of process is maintainable. In the said judgment, the relevant observations of the Hon'ble Supreme Court are reproduced here asunder:-
21. Having regard to the said categorical position stated by this Court in innumerable decisions resting with the decision Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 8/19 in Rajendra Kumar Sitaram Pande [Rajendra Kumar Sitaram Pande v. Uttam, (1999) 3 SCC 134 : 1999 SCC (Cri) 393] , as well as the decision in K.K. Patel [K.K. Patel v. State of Gujarat, (2000) 6 SCC 195 : 2001 SCC (Cri) 200] , it will be in order to state and declare the legal position as under:
21.1. The order issued by the Magistrate deciding to summon an accused in exercise of his power under Sections 200 to 204 CrPC would be an order of intermediatory or quasi-final in nature and not interlocutory in nature. 21.2. Since the said position viz. such an order is intermediatory order or quasi-final order, the revisionary jurisdiction provided under Section 397, either with the District Court or with the High Court can be worked out by the aggrieved party.
21.3. Such an order of a Magistrate deciding to issue process or summons to an accused in exercise of his power under Sections 200 to 204 CrPC, can always be subject-matter of challenge under the inherent jurisdiction of the High Court under Section 482 CrPC.
22. When we declare the above legal position without any ambiguity, we also wish to draw support to our above conclusion by referring to some of the subsequent decisions.
In a recent decision of this Court in Om Kumar Dhankar v. State of Haryana [(2012) 11 SCC 252 : (2013) 1 SCC (Cri) 493 : (2013) 1 SCC (L&S) 47] , the decisions in Madhu Limaye [Madhu Limaye v. State of Maharashtra, (1977) 4 SCC 551 : 1978 SCC (Cri) 10] , V.C. Shukla [V.C. Shukla v. State, 1980 Supp SCC 92 : 1980 SCC (Cri) 695 :
(1980) 2 SCR 380] , K.M. Mathew [K.M. Mathew v. State of Kerala, (1992) 1 SCC 217 : 1992 SCC (Cri) 88] , Rakesh Kumar Mishra v. State of Bihar [(2006) 1 SCC 557 : (2006) 1 SCC (Cri) 432] ending with Rajendra Kumar Sitaram Pande [Rajendra Kumar Sitaram Pande v. Uttam, (1999) 3 SCC 134 : 1999 SCC (Cri) 393] , was considered and by making specific reference to para 6 of the judgment in Rajendra Kumar Sitaram Pande [Rajendra Kumar Sitaram Pande v. Uttam, (1999) 3 SCC 134 : 1999 SCC (Cri) 393] , this Court has held as under in para 10: (Om Kumar Dhankar case [(2012) 11 SCC 252 : (2013) 1 SCC (Cri) 493 : (2013) 1 SCC (L&S) 47] , SCC p. 255) "10. In view of the above legal position, we hold, as it must be, that revisional jurisdiction under Section 397 CrPC was available to Respondent 2 in challenging the order of the Magistrate directing issuance of summons. The first question is answered against the appellant accordingly."
Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 9/19
14. Therefore, in view of the afore-mentioned pronounce- ments, it is clear that a revision petition u/s 397 Cr.P.C is maintain- able against an order summoning an accused in a complaint case. The same is not an interlocutory order and is not hit by embargo of section 397(2) Cr.P.C. Hence, I am of the opinion that the present revision petition is maintainable against the impugned order.
Whether summoning (impugned) order is legally justified
15. To have a better prospective on the aspect of summoning of the Directors of the company in a case u/s 138 N.I Act, it is appo- site to have a look at section 141 N.I Act. Section 141 N.I Act reads as under: -
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 further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (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, Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 10/19 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 purposes 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.
16. Now, let us discuss the law as enshrined in the various judgments by the Hon'ble Supreme Court.
17. In the judgment of National Small Industries Corp. Ltd Vs. Harmeet Singh Paintal reported as (2010) 2 SCR 805, the Hon'ble Apex Court in para 25 of the judgment laid down the following principles regarding the liability of the directors in a case u/s 138 r/w 141 N.I Act. The same is reproduced here asunder:-
25. 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 the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the 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.
Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 11/19
(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred.
(v) If the accused is a Managing Director or a 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 the 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 the 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.
18. Again in the judgment of Central Bank of India v. Asian Global Ltd., (2010) 11 SCC 203, the Apex Court held as under:
17. The law as laid down in S.M.S. Pharmaceuticals Ltd.
case [(2005) 8 SCC 89 : 2005 SCC (Cri) 1975] has been consistently followed and as late as in 2007, this Court in N.K. Wahi case [(2007) 9 SCC 481 : (2007) 3 SCC (Cri) 203] , while considering the question of vicarious liability of a Director of a company, reiterated the sentiments expressed in S.M.S. Pharmaceuticals Ltd. case [(2005) 8 SCC 89 :
2005 SCC (Cri) 1975] that merely being a Director would 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 had to be a specific allegation in the complaint in 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.
19. In the judgment of Anita Malhotra v. Apparel Export Promotion Council, (2012) 1 SCC 520, it was observed as under:-
Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 12/19
22. This Court has repeatedly held that in case of a Director, the complaint should specifically spell out how and in what manner the Director was in charge of or was responsible to the accused company for 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. (Vide National Small Industries Corpn.
Ltd. v. Harmeet Singh Paintal [(2010) 3 SCC 330 : (2010) 1 SCC (Civ) 677 : (2010) 2 SCC (Cri) 1113] .) In the case on hand, particularly, in Para 4 of the complaint, except the mere bald and cursory statement with regard to the appellant, the complainant has not specified her role in the day-to-day affairs of the Company. We have verified the averments as regards to the same and we agree with the contention of Mr Akhil Sibal that except reproduction of the statutory requirements the complainant has not specified or elaborated the role of the appellant in the day-to-day affairs of the Company. On this ground also, the appellant is entitled to succeed.
20. In the case of Pooja Ravinder Devidasani v. State of Maharashtra, (2014) 16 SCC 1, it was held as under:-
17. There is no dispute that the appellant, who was wife of the Managing Director, was appointed as a Director of the Company--M/s Elite International (P) Ltd. on 1-7-2004 and had also executed a letter of guarantee on 19-1-2005. The cheques in question were issued during April 2008 to September 2008. So far as the dishonour of cheques is concerned, admittedly the cheques were not signed by the appellant. There is also no dispute that the appellant was not the Managing Director but only a non-executive Director of the Company. Non-executive Director is no doubt a custodian of the governance of the company but is not involved in the day-to-day affairs of the running of its business and only monitors the executive activity. To fasten vicarious liability under Section 141 of the Act on a person, at the material time that person shall have been at the helm of affairs of the company, one who actively looks after the day-to-day activities of the company and is particularly responsible for the conduct of its business. Simply because a person is a Director of a company, does not make him liable under the NI Act. Every person connected with the Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 13/19 Company will not fall into the ambit of the provision. Time and again, it has been asserted by this Court that only those persons who were in charge of and responsible for the conduct of the business of the Company at the time of commission of an offence will be liable for criminal action.
A Director, who was not in charge of and was not responsible for the conduct of the business of the Company at the relevant time, will not be liable for an offence under Section 141 of the NI Act. In National Small Industries Corpn. [National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330 : (2010) 1 SCC (Civ) 677 :
(2010) 2 SCC (Cri) 1113] this Court observed: (SCC p. 336, paras 13-14) "13. Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent 1 was in charge of or was responsible to the accused Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability.
14. A company may have a number of Directors and to make any or all the Directors as accused in a complaint merely on the basis of a statement that they are in charge of and responsible for the conduct of the business of the company without anything more is not a sufficient or adequate fulfilment of the requirements under Section 141."
(emphasis in original)
21. The Hon'ble Apex Court in the case of Gunmala Sales (P) Ltd. v. Anu Mehta, (2015) 1 SCC 103, observed as under:-
28. We are concerned in this case with Directors who are not signatories to the cheques. So far as Directors who are not signatories to the cheques or who are not Managing Directors or Joint Managing Directors are concerned, it is clear from the conclusions drawn in the abovementioned cases that it is necessary to aver in the complaint filed under Section 138 read with Section 141 of the NI Act that at the relevant time when the offence was committed, the Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 14/19 Directors were in charge of and were responsible for the conduct of the business of the company. This is a basic requirement. There is no deemed liability of such Directors.
This averment assumes importance because it is the basic and essential averment which persuades the Magistrate to issue process against the Director. That is why this Court in SMS Pharma (1) [S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89 : 2005 SCC (Cri) 1975] observed that the question of requirement of averments in a complaint has to be considered on the basis of provisions contained in Sections 138 and 141 of the NI Act read in the light of the powers of a Magistrate referred to in Sections 200 to 204 of the Code which recognise the Magistrate's discretion to reject the complaint at the threshold if he finds that there is no sufficient ground for proceeding. Thus, if this basic averment is missing the Magistrate is legally justified in not issuing process. But here we are concerned with the question as to what should be the approach of a High Court when it is dealing with a petition filed under Section 482 of the Code for quashing such a complaint against a Director. If this averment is there, must the High Court dismiss the petition as a rule observing that the trial must go on? Is the High Court precluded from looking into other circumstances, if any? Inherent power under Section 482 of the Code is to be invoked to prevent abuse of process of any court or otherwise to secure ends of justice. Can such fetters be put on the High Court's inherent powers? We do not think so.
22. In the judgment of Sunita Palita v. Panchami Stone Quarry, (2022) 10 SCC 152, it was held as under:-
35. The High Court rightly held that when a complaint was filed against the Director of a company, a specific averment that such person was in charge of and responsible for the conduct of business of the company was an essential requirement of Section 141 of the NI Act. The High Court also rightly held that merely being a Director of the company is not sufficient to make the person liable under Section 141 of the NI Act. The requirement of Section 141 of the NI Act was that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company. This has to be averred as a fact.
23. It was further observed in case of Sunita Palita v. Panchami Stone Quarry,(supra) as under:-
Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 15/19
42. Liability depends on the role one plays in the affairs of a company and not on designation or status alone as held by this Court in S.M.S. Pharmaceuticals [S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89 :
2005 SCC (Cri) 1975] . The materials on record clearly show that these appellants were independent, non-executive Directors of the company. As held by this Court in Pooja Ravinder Devidasani v. State of Maharashtra [Pooja Ravinder Devidasani v. State of Maharashtra, (2014) 16 SCC 1 : (2015) 3 SCC (Civ) 384 : (2015) 3 SCC (Cri) 378] a non-executive Director is not involved in the day-to-day affairs of the company or in the running of its business. Such Director is in no way responsible for the day-to-day running of the accused Company. Moreover, when a complaint is filed against a Director of the company, who is not the signatory of the dishonoured cheque, specific averments have to be made in the pleadings to substantiate the contention in the complaint, that such Director was in charge of and responsible for conduct of the business of the Company or the Company, unless such Director is the designated Managing Director or Joint Managing Director who would obviously be responsible for the company and/or its business and affairs.
24. In the judgment of Siby Thomas Vs. M/s Somani Ceram- ics Ltd., SLP (Crl.) No. 12/2020 decided on 10.10.2023, the Hon'ble Supreme Court held that a vicarious liability would be at- tracted only when the ingredients of Section 141 (1) of NI Act are satisfied. Only the person who at the time of the offence was com- mitted was in charge of and was responsible to the conduct of the business of the company as well as the company alone shall be deemed to be guilty of the offence u/s 138 NI Act. Accordingly, the averments and the essential requirements of Section 141 (1) NI Act are mandatory.
Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 16/19
25. In view of the aforesaid proposition of law, let us see the averments in the complaint. In para no. 4 of the complaint, the com- plainant stated that the accused no. 1 company through accused no. 2 to 10 approached the complainant for various works at different toll plazas. In para no. 23 of the complaint, it was averred that ac- cused no. 2 to 10 being the directors of accused no. 1 were looking after day to day affairs/business of the accused company and are controlling various projects individually and / or jointly and are re- sponsible to the accused company for its projects separately and therefore, are vicariously liable to be prosecuted and punished along with accused no. 1 company as per section 141 of NI Act. These were the only averments by the complainant regarding the vicarious liability of accused no. 2 to 10 in the complaint. It is clear from the aforesaid averments that the complainant has also not averred as to who the signatory of the cheque.
26. Section 141 NI Act provides that when an offence is com- mitted by a company, private persons who at the time the offence was committed, was in charge of and was responsible to the com- pany for the conduct of the business of the company as, as well as the company shall be deemed to be guilty of offence u/s 138 NI Act. It is settled law that the vicarious liability would be attracted only when the ingredients of section 141 (1) of NI Act are satisfied. It is also settled that the Managing Director of the company and the sig- natory of the cheque are liable for the offence by virtue of their posi- tion. However, for the vicarious liability of the other directors, it has to be averred specifically that a director was in charge of and was responsible for the conduct of the business of the company. By Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 17/19 merely saying that the director was managing the affairs of the com- pany or looking after day to day affairs of the company would not satisfy the essential ingredients of section of 140 (1) NI Act.
27. I have already discussed the averments in paragraph no. 4 and 23 of the complaint. In paragraph no. 4, the complainant states that all the directors approached him for the various jobs at several toll plazas. In paragraph 23, it is averred that accused no. 2 to 10 be- ing the director of the accused no. 1 i.e. the company, were looking after day to day affairs/business of the company and were individu- ally and / or jointly responsible towards accused company. There are no specific averments that the revisionists, being the Directors of the company were in charge of and responsible for conduct of the busi- ness of the company. The averments only stated that they were look- ing after day to day affairs/business of the company. The same do not meet the essential requirements of Section 141 (1) of NI Act.
28. I have also gone through the judgments relied upon by the Ld. Counsel for respondent. The judgment of S.P. Mani (supra) has been discussed and distinguished by the Hon'ble Supreme Court in the judgment of Siby Thomas (supra). Hence, in view of the judg- ment of Siby Thomas, the judgments relied upon by the Ld. Counsel for respondent do not help his case.
29. Therefore, in view of the aforesaid law as discussed above this Court finds that the averments in the complaint in the aforesaid paragraphs do not satisfy the essential ingredient of section 141 (1) of NI Act. This Court is of the opinion that Ld. Magistrate while is- suing the summons to the revisionists no. 1 to 8 failed to exercise Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 18/19 due discretion and thus, the impugned order suffers from illegality and impropriety. Accordingly, the impugned order i.e. order dated 07.11.2022 of Ld. MM is hereby set aside.
30. Accordingly, the present revision petition stands allowed.
31. Trial Court record alongwith attested copy of this order be sent back.
32. File of revision petition be consigned to record room.
HEM Digitally signed
by HEM RAJ
Date: 2024.03.04
Pronounced in the open RAJ 17:01:58 +0530
Court on 04-03-2024 (Hem Raj)
Additional Sessions Judge -08
(West) Tis Hazari Courts Delhi
Cr. Rev. No. 229/2023 Tarang Madhukar Desai & Ors Vs. The State & Anr. 19/19