Joydeb Kumar Basu @ J. K. Basu vs Industrial Development Bank Of India on 29 July, 2013

[Cites 6, Cited by 1]

Calcutta High Court (Appellete Side)

Joydeb Kumar Basu @ J. K. Basu vs Industrial Development Bank Of India on 29 July, 2013

Bench: Ashim Kumar Roy

Form No. J(1)

In the High Court at Calcutta
Criminal Revisional Jurisdiction
Appellate Side

Present:

The Hon'ble Justice Ashim Kumar Roy

CRR No.2638 of 2012

Joydeb Kumar Basu @ J. K. Basu
-vs-
Industrial Development Bank of India
For the petitioner : Mr. Pratik Bhattacharyya

For the O.P. : Mr. Shyam Sunder Manna

Heard on 3rd July 2013.

Judgement on: 29.07.2013

In a case relating to the offence punishable under Section 138 of the

Negotiable Instruments Act, the petitioner having been arraigned as an accused

with the aid of Section 141 of the said Act, has now come up before this court for

quashing of the said case.

It is the case of the complainant that Shamon Ispat Ltd., a Company incorporated under

the Companies Act, 1956 in discharge of its legally enforceable debts issued three cheques,

covering total sum of Rs. one crore sixty-five lakhs and the said cheques on being presented to

the Bank for encashment were returned unpaid on the ground of insufficient fund and the

petitioner being one of the Director of the Company is vicariously liable for the said offence

committed by his company.

Now going through the petition of complaint annexed with this application, I find the

allegation against the petitioner is confined in paragraphs 3 and 10 thereof. The same are quoted

below:-
2

"3. The Complainant i.e. IDBI a statutory corporation established under Industrial Development

Bank of India Act, 1964 for the purpose of providing credit and other facilities for development of

industries. The Accused No. 1 is a company within the meaning of Companies Act, 1956 and is

engaged in manufacture of galvanizing grade of Cold Rolled (CR) sheets at Mouza- Debhog,

Haldia, Dist. Midnapur, in the State of west Bengal (hereinafter referred to as the "said Project"}.

The Accused Nos. 2, 3, 4, 5 and 6 are the Managing Director, Chairman, Director, Director, and

Finance Controller respectively of the Accused No. 1 and as such they are in charge of and

responsible to the Accused No. 1 for conduct of its day-to-day business specifically when the

Complainant described hereinafter was concerned.

10. The Complainant further states that despite the demand Notices having been received

and even after the expiry of 15 days of the receipt of Notice of demand, the Accused No. 1 failed

to pay the dues whereby they have committed an offence under Section 138 read with Section

141 of the N.I. Act, 1881 and hence this complaint is filed before the Hon'ble Court. The

aforesaid act of the accused persons rendered themselves liable to be prosecuted under the

provisions of the N. I. Act, 1881 as amended upto date. Since the Accused Nos. 2 to 6 were

managing the affairs of the Accused No. 1 and are also responsible for the day-to-day business of

the Accused No. 1 and the offences committed in this transaction they have also committed the

offence U/S. 138 read with Section 141 of N.I. Act, 1881.

Now on perusal of the complaint , I find while the petitioner Joydeb Kumar Basu @ J. K. Basu

in the cause title has been described as Director, in the averment made in aforesaid two

paragraphs it was categorically alleged that the petitioner was one of the Director, as such he

was in charge and responsible to the company for conduct of its day-to-day business. Then again

it is alleged since he was managing the affairs of the accused no. 1, the company, therefore, he is

responsible for conduct of the day-to-day business of the accused company and committed the

offence and punishable under Section 138 read with Section 141 of the Negotiable Instrument

Act.
3

It is then pointed out by the learned Counsel for the petitioner that along with him one T. C.

Dutta, the Chairman of the said Company was also implicated in the main proceeding on

identical allegations and the case against him has already been quashed by a co-ordinate Bench

of this court and the petitioner is standing on the same footing with him. Such facts has not

been disputed from the side of the complainant.

So far as the contention of the learned Counsel of the petitioner that his client is standing

on the same footing with the co-accused, the Chairman of the Company, on the face of the

allegation made in the petition of complaint, I do not find any reason to hold otherwise. Although

only on such findings, this case against the present petitioner could have been quashed without

any further consideration still I am of the opinion, the case of the petitioner be considered

independently.

In the case of Municipal Corporation of Delhi -vs- Ram Kishan Rohtagi & Ors., reported

in (1983) 1 SCC 1, a three

Judges' Bench of the Hon'ble Apex court in a similar situation quashed the case against the

Director and it would be more apposite to refer what have been observed by the Apex Court in

that case at paragraphs 12 to 15 which are quoted below:-

"12. Before going to the complaint, we might state that it is common ground that the complaint

clearly contains the allegations regarding the visit of the Inspector to the shop of respondent no. 6

(Madan Lal) and that the sample taken by him, which was sent to the Public Analyst, was manufactured by M/s. Upper Ganges Sugar Mills, Daryaganj, Delhi having its registered office at Calcutta and that the Public Analyst found the samples to be adulterated. There is no dispute regarding these facts. The only point on which the controversy centres is as to whether or not on the allegations, the Manager as also the other respondents l to 5 committed any offence. The main 4 clause of the complaint which is the subject matter of the dispute is Clause 5 which may be extracted thus:

5. That accused 3 is the Manager, of accused 2 and accused 4 to 7 are the Directors of accused

2 and as such they were in-charge of and responsible for the conduct of business of accused 2 at the time of sampling.

13. According to this Clause, accused 3 (Ram Kishan) who is respondent 1 in this appeal and accused 4-7 who are respondents 2 to 4 were the Directors of the Company, respondent 5. So far as the Manager, respondent 1, is concerned it was not and could not be reasonably argued that no case is made out against him because from the very nature of his duties, it is manifest that he must be in the knowledge about the affairs of the sale and manufacture of the disputed sample. It was, however, contended that there is no allegation whatsoever against the Directors, respondents 2 to

14. Reliance has been placed on the words 'as such' in order to argue that because (sic) the complaint does not attribute any criminal responsibility to accused 4 to 7 except that they were in-

charge of and responsible for the conduct of the business of the Company. It is true that there is no clear averment of the fact that the Directors were really in-charge of the manufacture and responsible for the conduct of business but the words 'as such' indicate that the complainant has merely presumed that the Directors of the Company must be guilty because they are holding a particular office. This argument found favour with the High Court which quashed the proceedings against the Directors as also against the Manager, respondent 1.

15. So far as the Manager is concerned, we are satisfied that from the very nature of his duties it can be safely inferred that he would undoubtedly be vicariously liable for the offence; vicarious liability being an incident of an offence under the Act. So far as the Directors are concerned, there is not even a whisper nor a shred of evidence nor anything to show, apart from the presumption drawn by the complainant, that there is any act committed by the Directors from which a reasonable inference can be drawn that they could also be vicariously liable. In these circumstances, therefore, we find ourselves in complete agreement with the argument of the High 5 Court that no case against the Directors (accused 4 to 7) has been made out ex facie on the allegations made in the complaint and the proceedings against them were rightly quashed."

Similarly in the case of S.M.S. Pharmaceuticals Ltd. -vs- Neeta Bhalla & Anr. Reported in (2005) 8 SCC 89, the Hon'ble Apex confronting with similar issues observed as follows in paragraphs 10 and 19, which is quoted below.

10. While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. The key words which occur in the section are "every person". These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words:

"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, etc."

What is required is that the persons who are sought to be made criminally liable under Section 141 should be, at the time the offence was committed, in charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for the conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a director of a company 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 under the provision. The liability arises from being in charge of and responsible for the conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Conversely, a person not holding any office or designation in a company may be liable if he satisfies the main requirement of being in charge of and responsible for the conduct or business of a company at the relevant time. Liability depends on the role one plays in the affairs of a company and not on designation or status. If being a director or manager or secretary was enough to cast criminal liability, the section would have said so, Instead of "every person" the section would have said "every director, manager or secretary in a company is liable".... Etc. The legislature is aware that it is a case of criminal liability, which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action.

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 l4l 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 © 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.

The learned Counsel for the opposite party cited two decisions of this Court while one is unreported being Pradeep Kumar Malhotra & Anr. -vs- State of West Bengal & Anr. passed in connection with CRR No. 756 of 2011 with CRR No. 955 of 2011, and another in the case of N. K. Agarwal reported in {2011 (2) CLJ (Cal) 462.

Now having examined the case in hand in the light of the law laid down in the aforesaid two decisions by the Hon'ble Apex Court and considering the fact the case against the Chairman of the Company, who undoubtedly standing on 7 same footing with the present petitioner, has been quashed by this court, the impugned proceedings against the petitioner also stands quashed.

This application stands allowed.

Office is directed to communicate this order to the court below at once by special messenger at the cost of the petitioner to be deposited in course of five days.

Criminal Section is directed to deliver urgent xerox certified copy of this order to the parties, if applied for, as early as possible.

(Ashim Kumar Roy,J.)

Unlock Advanced Research with PRISMAI

Calcutta High Court (Appellete Side)