Andhra HC (Pre-Telangana)
Rachana Flour Mills P. Ltd. vs Lal Chand Bhanagadiya And Anr. on 14 October, 1985
Equivalent citations: [1987]62COMPCAS15(AP)
JUDGMENT
1. The criminal miscellaneous petition has been filed under section 482, Criminal Procedure Code, for quashing the proceedings in C.C. No. 58 of 1985 on the file of the Court of the Munsif magistrate, Chevella, initiated against the petitioners.
2. The complaint in substance is: the complainant is a partner of M/s Shri Sarveshwar Trading Co. situated at Murtuzaguda village, Chevella. The first accused, M/s Rachana Flour Mills P. Ltd. ("the company", Forshort), is a private limited company situated at Madras and is registered under the companies Act. A-2 is the director and sole in- charge of its branch at attenchery under the same name. A-3 to A-5 are the directors and A-6 and A-7 are the subscribers and A-8 is the accountant and A-9 is the canvassing agent, in wheat and wheat products. Ass per the complaint, accused persons Nos. 1 to7 claim to deal in manufacturing and allied business as reveled by the memorandum and articles of the company. They established a flour mill with the name and style Rachana Flour Mills (Company) at pattencheru. on october 2, 1984, the complainant received an order from A-9, a commission agent of A-1 to A-8, for the delivery of certain quantity of wheat and the said agent informed the A-1 To A-7 are leading businessmen of india. The commission agent (a-9) also represented that the amount shall be paid as per business convention A-9 also introduced A-2 as the director of the company and as the person who will be responsible for parents. it is further stated that A-2 also represented that they have a wide network of activities throughout South India and the company has many manufacturing units in Andhra pradesh. He also represented that the amounts, whatever due, shall be paid on delivery of the goods at the site of the company. A-2 also represented that he himself will be responsible for the business at section and payments, and delivered a copy of the memorandum of the company. believing in the representation which he made, the complainant accepted the order, on October 2, 1984, sent 235 bags of wheat and 123 bags of wheat on October 3, 1984, costing R. 71,652.59 and transported the same to the company and delivery was effected. it was complained that the bill amounts were not received by the complainant but a letter was received from A-8 on november 24, 1984, admitting the delivery of the goods and alleging that they have not received the bills though they have paid the amounts/ in fact, the bills were sent with the consignment and no amount was received. The complainant, therefore, issued registered letter on December 15, 1984, stating that no payments were made. however, A-2 himself approached the complainant and regretted for the mistake in the office and passed on a cheque dated January 2, 1985, for a sum of Rs. 31,653.59 and another cheque dated January 4, 1985, for Rs. 40,000 drawn on Indian Bank Begum bazaar Branch, Hyderabad, in favour of the complainant. When, however, the cheques were presented they were returned dishonored. on the cheque being dishonored, the complainant got suspicious and visited the company and was shocked to see that there was no evidence of functioning of factory and A-1 to A-8 had closed down and run away. it is further alleged that while A-1 A-9 hatched a big conspiracy to make illegal money and cause loss to business persons and to deprive them with false representations, the accused persons misrepresented the complainant and believing the same the complainant parted with 358 bags of wheat and so sustained a loss of Rs.71,653.59. Hence, the accused persons had committed the offence under sections 420 and 120B Indian penal Code, and that all the accused are liable for the said offence.
3. In view of this complaint, the petitioners herein who are accused Nos. 1,3 to 8 filed this petition for quashing the said proceedings on the ground that some of these petitioners are no more the directors of the company nor were they directors at the time when the alleged transaction was entered into. It may, however, be stated that accused Nos. 2 and 9 do not figure in the petition. A-2 is the managing director who actually issued the cheques and A-9 us the commission agent who was responsible for placing the order. The second contention, therefore, is that it is at the most a civil liability but it cannot be a criminal liability and even assuming it is a criminal liability, the petitioners herein cannot be criminally prosecuted ass they were not the persons who either made any explicit representation or the parties directly connected with the alleged transaction and, therefore, no vicarious liability can be established. Thirdly, the drawal of the cheques and the return of the same being dishonored cannot be said to give rise to the criminal liability under the provisions of the Negotiable Act, 1881.
4. The converse case of the respondent-complainant is that at the time when the transaction was entered into, A-2 has given a copy of the memorandum and articles of association of the company wherein the names of the accused have been mentioned as directors and, therefore, believing the same and also believing the representation made by A-2 goods were second accused, also must be held to be by all the accused persons. Secondly, they are , as per the well-settled decisions, vicariously liable for the acts of the company and for the acts of their agent. Thirdly, the allegation of conspiracy also has been made to the effect that all have collectively conspired to see that the complainant parts with the goods and thereby played fraud against the complainant. Therefore, all the accused are responsible. Sri Rama Rao appearing for the complainant, stated that he would produce a copy of the memorandum of association of the company in question on or before the next Friday. i.e., October 18, 1985, and, therefore, on the aspect ass to who were actually the directors at the time when the transaction was entered into will be gone into on Friday, i.e. October 18, 1985.
5. Now, to the merits Before adjudicating, however, the provisions of the relevant statute and also the case-law cited may be adverted to.
6. The relevant provisions of the Negotiable Instruments Act, 1881, are sections 6, 30 31, and 91 to 94. The above sections read as under :
"6. A `cheque' is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand."
" 30. The drawer of a bill of exchanger or cheque is bound, in case of dishonor by the drawee or acceptor thereof, to compensate the holder, provided due notice of dishonor has been given to, or received by, the drawer as hereinafter provided."
" 31. The drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required so to do, and, in default of such payment, must compensate the drawer for any loss or damage caused by such fault."
" 91. A bill of exchange is said to be dishonored by non-acceptance when the drawee, or one of several drawees not being partners makes default in acceptance upon being duly required to accept the bill, or where presentment is excused and the bill is not accepted."
Where the drawee is incompetent to contract, or the acceptance is qualified, the bill may be treated as dishonored."
" 92. A promissory note, bill of exchange or cheque is said to be dishonored by non-payment when the maker of the note, acceptor of the bill or drawee of the cheque makes default in payment upon being duly required to pay the same."
" 93. When a promissory note, bill of exchange or cheque is dishonored by non-acceptance or non-payment, the holder thereof, or some party thereto who remains liable thereon, must give notice that the instrument has been so dishonored to all other parties to whom the holder seeks to make severally liable thereon, and to some one of several parties whom he seeks to make jointly liable thereon.
Nothing in this section renders it necessary to give notice to the maker of the dishonored promissory note or the drawee or acceptor of the dishonored bill of exchange or cheque."
" 94. Notice of dishonor may be given to a duly authorised agent of the person to whom it is required to be given, or, where he has died, to his legal representative, or, where he has been declared an insolvent, to his assignee ; may be oral or written ; may, if written, be sent by post; and may be in any form but it must inform the party to whom it is given either in express terms or by reasonable intendment, that the instrument has been dishonored, and in what way, and that he will be held liable thereon ; and it must be given within a reasonable time after dishonor, at the place of business or (in case such party has no place of business) at the residence of the party for whom it is intended.
If the notice is duly directed and sent by post and miscarries, such miscarriage does not render the notice invalid."
7. On reading the above provisions in combination, what becomes apparent is that a cheque is a bill of exchange drawn on a specified banker and on demand the amount mentioned therein will have to be paid by the drawee. In case the cheque is dishonored, the drawer will have to compensate the person named in the cheque. In other words, there is no criminal liability postulated under the Negotiable instruments Act.
8. Section 34 of the Companies Act, 1956, which is relevant in this case, is as follows ;
"34. (1) On the registration of the memorandum of a company, the Registrar shall certify under his hand that the company is incorporated and, in the case of a limited company, that the company is limited.
(2) From the date of incorporation mentioned in the certificate of incorporation, such of the subscribers of the memorandum and other persons as may from time to time be members of the company, shall be a body corporate by the name contained in the memorandum, capable forth with of exercising all the functions of an incorporated company, and having perpettual succession and a common seal, but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is mentioned in this Act."
9. It is true, the moment a company is registered under section 34 of the Companies Act, such of the subscribers of the memorandum and other persons, as may from time to time be members of the company, will become liable to contribute to the assets of the company in the event of its being wound up. Relying on a case in Regina v. McDonnel [1966] 36 Comp Cas 125 (BA), learned counsel for the respondent argued that the company is criminally liable for breach of any of the provisions of the Act, though it is laid down in the same case that the company cannot be guilty of conspiracy with its own director as, being without a mind, it cannot act in concern with anybody. Learned counsel also relied on an observation made by Buckly in his commentary on The Companies Acts which is to the following effect :
" A company can also be indicted for conspiracy to defraud."
10. In DElhi Municipality v. Ram Kishan Rohagi, , wherein the Inspector of Food Adulteration went to the shop of respondent No.6 therein, took a sample and sent it to the public analyst, who found it to be adulterated, the question that came to be considered was whether on the allegations the manager as also the other respondents Nos. 1 to 5 committed any offence. The main clause of the complaint which was the subject-matter of the disputes contained (at page 70):
"That accused No. 3 is the manager of accused No. 2 and accused Nos. 4 to 7 are the directors of accused No.2 and, as such, they were in charge of and responsible for the conduct of business of accused No.2 at the time of sampling."
11. While dealing with the situation, the Supreme Court, after referring to the observations of the Supreme Court made in Dr. Sharda Prasad Sinha v. State of Bihar, :
"It is now settled law that where the allegations set out in the complaint or the charge-sheet do not constitute any offence, it is competent to the High Court exercising its inherent jurisdiction under section 482 of the code of Criminal Procedure to quash the order passed by the Magistrate taking cognizance of the offence"
held (at page 70) "It is therefore, manifestly clear that proceedings against an accused in the initial stages can be quashed only if on the face of the complaint or on the papers accompanying the same, no offence is constituted. In other words, the test is that taking the allegations and the complaint as they are, without adding or subtracting anything, if no offence is made out, then the High Court will be justified in quashing the proceedings in exercise of its p[owners under section 482 of thee present Code."
The Supreme Court further held (at page 70) "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, various 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 Court that no case against the directors (accused Nos. 4 to 7) has been made out ex facie on the allegations made in the complaint and the proceedings against them were rightly quashed."
12. In Sakhirchand Dhavan v. State of A. P. [1981] 2ALT 101, a prosecution was launched against a company called "A. K. Corporation Ltd." and also A-7, who was the resident director and the power of attorney holder of the company, coupled with A-10 to A-14 who were its directors. A-14, however, died after the complaint was filed. The question that fell for consideration was whether A-10 to A-13 were liable for prosecution. The offence was said to be that certain railway property was found to e in possession of the company. It is in that state of circumstance this court held (at page 103) :
"It is true that in the Railway property (Unlawful Possession) Act, 1966, we do not have a provision similar to section 17 of the Prevention of Food Adulteration Act, 1954, section 10 of the Essential Commodities Act, 1955, and section 14 of the Rice Milling Industry (Regulation) Act, 1958, where a company and persons in charge of the affairs of thee company are made liable. The only two relevant provisions in the Railway property (Unlawful Possession) Act, 1966, are sections 3 and 4. Section 3 of that Act penalises a person who in found or proved to have been in possession of any railway property reasonably suspected of having been stolen or unlawfully obtained. Obviously, A-10 to A-13, who are directors of the company and residents of Calcutta, cannot be said to be in possession of the railway property in question at Visakhpatnam. Therefore, that section has no application...
Admittedly, an individual director is not the owner or occupier of the land or building. it is the A.K. Corporation that is the owner or occupier of the land. It is not also the case of the prosecution that these non-resident directors are agents of the company in charge of the management of the land or building. It is not also their case that they have wilfully connived at the offence against the provisions of the Act. The only allegation in the complaint against them is that the company had received huge profits and they are sharing them. According to the complaint, it is A-7 who is the whole time director of the company, residing at Visakhapatnam and A-8 is the manager of the company, residing at Visakhapatnam. in these circumstances, I find it difficult to hold that A-10 to A-13, the non-resident directors of the company, are liable under sections 3 and 4 of the Act"
13. In P. ESwars Reddy v. State of A. P. [1985] 3 APLJ 43, the facts in brief are that the petitioner therein went to the complainant's shop and agreed to purchase a transport vehicle and paid a sum representing 10% of the consideration and while promising to pay the balance of 90% later, got physical possession of the vehicle. After three months the petitioner is alleged to have gone to the seller and represented that due to non-availability of F form and the sale letter from the seller, the petitioner was liable to register the vehicle. Then on good faith the seller issued F form ad the sale letter to petitioner. After a few months the petitioner gave a cheque for a certain sum and when it was presented, it was dishonored. During the investigation it was disclosed that the accused falsely represented to the complainant and obtained F form and sale letter from him and also gave a cheque knowing that there was no balance in his account. It is in this state of circumstance, the accuses was said to have committed an offence under section 420, Indian Penal Code. ADverting to the proposition, the learned single judge of this court held :
"Once the debt is already incurred by the accused and the vehicle is received without there being any dishonest intention, at that stage there is no `cheating' within section 420, indian Penal Code, in the eye of law."
14. In G. Therton and Co. v. Calcutta Municipality [1979]Crl LJ 86 (Cal) a Division Bench of the Calcutta High Court, while considering the scope of section 17 of the prevention of Food Adulteration ACt (37 of 1954),held:
"Under section 17, a company has been made primarily liable but to make other persons vicariously liable, it has to be shown that such persons were in charge of or were responsible to the company for the conduct of its day-to day business. in the absence of any mention in the petition of complaint as to how the accused persons were concerned in the carrying on of the day-to by business of the company, process could not have been issued against them."
15. In M.M.S.T.Chidambbarm Chettiar v. Shanmugham Pillai, AIR1938 Mad 129, it is held (at page 130):
"A post-dated cheque in payment of goods already received is a mere promise to pay on future date... and a broken promise is not a criminal offence, though it may amount in certain business relations to discreditable behavior."
16. The Orissa high Court in Duryodhan Khuntia v. Ali Ahmed [1971] Crl lJ 1797 held:
" Thus, in the absence of any evidence to show that the accused has made any representation that he had sufficient cash in the bank to cover the cheque at that point of time, or that he had definite knowledge that the amount to his credit would not be sufficient to cover the cheque from mere drawing of the cheque, the element of deception cannot be inferred."
17. The converse position is, as stated by Loard Denning J. in a case, h>l> balton (Engineering) Co. Ltd v. T. J. Graham and Sons Ltd. [1956] 3 ALL ER 624 (CA):
"A company may in may ways be likened to a r body. They have a brain and a nerve center which controls what they do. they also have hand which hold the tools and act in accordance with directions from center. Spate of the people in the company are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the mind or will. others are directors and managers who represent the directing mind and will of the company, and control what they do. The state of mind of these managers is the state of mind of company any is treated by the law as such. So you will find that in cases where the law requires personal fault as a condition of liability in tort, the fault of the manager will be the personal fault of the company...
So also in the criminal law, in cases where the law requires a guilty mind as a condition of criminal offence, the guilty mind of the directors or the managers will render the company themselves guilty."
18. The aforesaid observation was made after referring to the observations of the trial judge, wherein it was stated :
"I am told their board only meets once a year and it seems to me that the mode of conducting their business is to leave nearly everything to their agents and so as as there agents are concerned, i think there is no doubt about what they mean to do.... So far as the agents of the company, the business managers, or the directors of the company who manage the business (to use a more accurate expression) are concerned, they in their managerial capacity have certainly affirmed the intention to occupy the premises in question. An intention of a company, of course, cannot be formed in the company- a company are an abstract being and must act by agents or by their board of directors particularly in matters of importance"
19. This court in public Prosecutor v. Srinivasan [1983]2APLJ 166, while dealing in particular with the provisions enacted under sub-section(2) if section 33 if the Companies Act, which reads :
"Notwithstanding anything contained in sub-section (1) where an 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 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."
held:
"It can be seen from section 33(1) that whenever an offence is committed by a company, every person who, at the time when the offence was committed was in charge of, as well as the company shall be deemed to be guilty and shall e liable to be proceeded against and punished accordingly. The sanction is no doubt for the protection of the company. when once it is established by the prosecution that the offence has been committed by the company, then as laid down under section 33(1), the company as such is liable. The section further lays down that every person in charge of the company at the relevant time will also be liable. Therefore, section 33(1) does not present any difficulty. The argument which is rather highly technical, is based on the contents of the auction order. As a matter of fact in the sanction order it is clearly mentioned that the company represented by its managing director shall e prosecuted. Now, if we examine section 33(1) carefully, it becomes clear that when once t is proved that the company has committed the offence, then every person who was in charge of the company, as well as the company shall be deemed to be guilty of the offence committed by the company. Therefore, the conviction of A- 3 and A-4 cannot be said to be in any manner incorrect. The learned Sessions judge, however, relied much on section 33(2) which deals with a different situation. Section 33(2) lays down that where an offence under the Act has been committed by a company it is proved further that the offence has been committed with the consent or connivance of or is attributable to any neglect on the part of a director or manager or secretary, etc., then such a director manager, secretary, etc., shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. It can be seen that section 33(2), which is a deeming provision, ropes in such other person also when it is proved that they are connected with or has connived, as mentioned in that section. But, for purposes of section 33(1), what all thee prosecution has to prove is that the company has committed the offence. The prosecution need not prove further that the persons in charge of the company also in their individual capacity have committed any offence. Section 33(1), which is also a deeming provision clearly lays down that when a company has committed an offence, then the company as well as persons in charge of the company shall be deemed to be guilty. The object behind this section is not difficult to be understood. Therefore, I am unable to agree with the learned counsel for the respondents that A-3 and A-4 cannot be found to be guilty just because the sanction order mentions about the prosecution of the company represented by its managing director. We can also examine the position from a different angle. SEction 31(1) simply lays down that no prosecution for and offence under this Act shall be instituted except by, or with the written consent of, the State Government, or a person authorised in this behalf by the State Government. In the instant case, section is accorded to prosecute the company represented by its managing director. Now, the prosecution has established that the company has committed the offence. Inevitably we have to apply section 33(1) when once there is proof and consequently the persons in charge o the company as well as the company shall be deemed to be guilty. That being so, A-3 and A-4 who are managing directors and who are in charge of the company along with the company should be deemed to be guilty as laid down under section 33(1)."
20. The Supreme Court in a case, Pratibha Rani v. Suraj Kumar, , after referring to the decision uninitiated by the Supreme Court in Smt. Nagawwa v. Veeranna Shivallingappa Konjalgi, , which enunciated the principles as under (at page 212) :
"(1) where the allegations made in the complaint or the statement of the witness recorded in support of to same taken at their face value make out absolutely no case against the caused or the complaint does not disclose the essential ingredients of an offence which is alleged against the accused ;
(2) where the allegations made in the complaint are palpably absurd and inherently improbable, so that no prudent person can ever reach a conclusion that there is sufficient ground for proceeding against the accused ;
(3) where the discretion exercised by the Magistrate in issuing process is capricious and arbitrary having been based either on no evidence or on materials which are wholly irrelevant or inadmissible ; and (4) where the complaint suffers from fundamental legal defects, such as, want of section, or absence of a complaint by a legally competent authority and the like."
held :
" We now come to the question as to whether or not a clear allegation of entrustment and misappropriation of properties was made by the appellant in the complaint and, if so, was the High Court justified in quashing the complaint at that stage. it is well settled by a long course of decisions of this court that for the purpose of exercising its power under section 482,,, Criminal Procedure Code, to quash a FIR or a complaint, the High Court would have to proceed entirely n the basis of the allegations made in the complaint or the documents accompanying the same per se. it has no jurisdiction to examine the correctness or otherwise of the allegations. in case no offence is committed or the allegation and the ingredients of sections 405 and 406, indian Penal Code, are not made out, the High Court would be justified in quashing the proceedings. In the present case, we shall show that the allegations are both clear, specific and unambiguous and, therefore, the complainant should have been given a chance to prove her case. It is, of course open to the accused at the trial to take whatever defences that were open to him but stage had not yet come ad, therefore, the High Court was totally in-advised to speculate on the merits of the case at that stage and quash the proceedings. We have narrated the facts in detail in the earlier part of our judgment, but we might again, even at the risk of repetition, indicate the bare facts which prima facie make out a clear case under section 406, Indian Penal Code, against the accused."
21. A learned single judge of the Bombay High Court in the case reported in State of Maharashtra v. Syndicate Transport Co. P. Ltd., , held (at page 199):
"In our country also, corporate bodies were initially indictable for minor breach of rules or bye-laws or for offenses involving petty fines only. In recent times the ideas of corporate activities have taken route and several legislation permitting the formation of corporate bodies have been passed. Numerous corporate bodies have come into existence. These corporate bodies include various public and private limited companies also. These corporate bodies necessarily act though the human agency of their directors or officers and authorised agents. They reap all the advantages flowing from the acts of their directors,servants or authorised agents and there seems to be no reason to exempt them from liability for crimes committed by their agents or servants while purporting to act for or on behalf of the corporate bodies. The ordinary citizen is now very mush exposed to the activities of persons acting, in the name of corporate bodies, to hi detriment. Even in our country, now in the words of Russell Quoted above:
`The point is being reached where what is called for is comprehensive statement of principle formulated to meet the needs of modern life in granting the fullest possible protection of criminal law to persons exposed to the action of the many powerful associations which surround them."
And then further held (at page 200):
" I do not mean or intend to suggest that in every case where an agent of a limited company acting in its business commits a crime, the company is automatically to be held criminally responsible. As adumbrated, a company cannot be indictable for offences like bigamy, perjury, rape, etc., which can only be committed by a human individual or corporal punishments. Barring these exceptions, a corporate body ought to be indictable for criminal acts or omissions of its directors, or authorised agents or servants, whether they involve or not, provided they have acted or have purported to act under authority of the corporate body or in pursuance of the aims or objects of the corporate body. The question whether a corporate body should or should not be liable for criminal action resulting from the acts of some individuals must depend on the nature of the offence disclosed by the allegations in the complaint or in the charge sheet, the relative position of the officer or agent vis-avis the corporate body and the other relevant facts and circumstances which could show that the corporate body,, as such, meant or intended to commit that act. Each case will have necessarily to depend on its own facts which will have to be considered by the Magistrate or Judge before deciding whether to proceed against a corporate body or not."
22. In State of U.P.v. Jyoti Prasad, , it is held (at page 584) :
"A fraudulent representation may be made directly or indirectly. It is not the prosecution case that the accused made any representation himself. Indeed, he never came into contact with Radhey Lal, Mahendrapal and Ghanshyam Singh and not even Raja Ram."
23. It is further held (at page 584):
"It is thus clear that Raja Ram was acting as an agent for the accused and, therefore, a fraudulent representation by him would be by and on behalf of the accused."
24. On the above conspectus, the principles that emerge are:
(1) Reading in combination sections 6, 30 31, and 91 to 94 of the Negotiable Instruments Act, a drawer of a cheque cannot be held criminally liable on the cheque being dishonored unless it is established that he knew at the time of drawing the cheque there was no money in the bank and that he intended to cheat the payee.
(2) A post-dated cheque in payment o goods already received is mere promise to pay on a future date and a broken promise is not a criminal offence, though it may amount in certain business relations to discreditable behavior.
(3) Under section 34 of the Companies Act, the subscribers of the memorandum and other members of the company will become civil and criminally liable for any commissions or omissions of the company to contribute to the assets of the company in the event of its being wound up.
(4)Under section 33 of the Companies Act whenever an offence is committed by a company, every person who at the time when the offence was committed was committed was in charge of, as well as the company, shall be deemed to be guilty and shall be liable to be proceeded against and punished accordingly.
(5) The question whether a corporate body should or should not be liable for criminal action resulting from the acts of some individuals must depend on the nature of the offence disclosed by the allegations in the complaint or in the charge sheet, the relative position of the officer or agents vis-a- vis the corporate body and other relevant facts and circumstances which could show that the corporate body, as such,, meant or intended to commit that act.
(6) A manager or even a director of a company, if it is shown that a particular act is committed by him or even if it is shown that a particular act is committed by him or even if a reasonable inference can be drawn, could be vicariously liable.
(7) Under section 17 of the Prevention of Food Adulteration Act,1954, a company has been made primarily liable but to make other persons vicariously liable, it has to be shown that such persons were in charge of or were responsible to the company for the conduct of its day-to-day business. In the absence of any mention in the petition of complaint as to how the accused persons were concerned in toe carrying on the day-to-day business of the company, process could not be issued against them and the proceedings initiated are liable to be quashed under Section 482 of the Code of Criminal Procedure.
(8) The court will be justified in quashing the proceedings in exercise of its powers under section 482, Code of Criminal Procedure, if on the allegations and the complaint as they are without adding or subtracting anything, no offence is made out.
(9) A Company may in ways be likened to a human body, they have a brain and never center which controls what they do. They have also hands which hold the tools and act in accordance with directions from the center. T;he state of mind of those managers and directors who represent the directing mind and will of the company, is the state of mind of the company and is treated by the law as such.
25. Bearing in mind the above, we may now examine the facts relevant to this case. The averments in detail with reference to paragraphs 5, 7 and 8 have already been adverted to. Nowhere do we find the allegation that the alleged accused have made directly any representation to the complainant with regard to the transaction involved, nor any communication ensued before or subsequent to t;he transaction entered into between A-9 and A-2 and the complainant. In fact, the explicit allegation against A-9 was that the complainant is said to have received an order from him on October 2, 1984, being the commission agent of A-1 to A-8 for the delivery of 358 bags of wheat. A-2 represented that he himself was also responsible for the business transaction and payments and he is said to have delivered a copy of memorandum of the company.. Therefore, accepting the allegation, that believing the representation made by A-2, the complainant accepted the order and transported the material to the place of the company. They are merely absentee directors away from the place of the company and there has been no explicit resolution with reference to this transaction so as to fasten criminal liability on them. Therefore, unless actual managerial responsibility or active connivance is established, the directors cannot be held to be criminally responsible for such day to-day transactions or for that matter for payment of certain amounts through cheques, which were dishonored later, they cannot be held responsible. They might at the most be civilly liable. It is not, therefore, possible on the basis of the material brought in the complaint to hold ;that a prima facie case has been made out against the petitioners herein so as to sustain the complaint. Even the two cheques dated January 2, 1985, and January 4, 1985, that were issued by A-2 long after the alleged transaction, i.e., October 2, 1984, cannot give rise to criminal liability (see p. Eswara Reddy v. State of A.P. [1985] 3 APLJ 43 and M.M.S.T. Chindambaram Chettiar v. Shanmugham Pillai, AIR 1938 Mad 129), unless it is established that A- 2 represented to the payee that he had adequate funds in the bank and also had an intention to cheat or fraud the payee. Since these ingredients have not been even prima facie made out in the complaint, it cannot be held that A-2 and much less the company who is the first petitioner herein could be held to be criminally liable.
26. This apart, it has been specifically averred in the criminal miscellaneous petition that the original subscribing directors were the following :
1. Balwant Roy 2. Rajiv Roy 3. Susil Kumar 4. Eswar Agarwal 5. Ravinder Agarwal (A-2)
27. It has also been further stated in the petition that the second petitioner, who is A-3, is a director stationed at Madras, and not connected in any way with the day to-day affairs of the company. The fifth petitioner (A-6) has resigned from the board of directors last month. The fourth petitioner (A-5) was a director till 1980 and, therefore, she had no connection whatsoever with the company. The third petitioner (A-4) ceased to be a director from the year 1982. The sixth petitioner (A-7) is an initial subscriber and not a director of the company. All this has not been however, controverted by the complaint-respondent. So what becomes manifest from these averments is that barring the fifth petitioner who is said to have resigned only last month, all the others severed their connections with the company one way or the other long ago and prior to the transaction. The transaction. The transaction relates to October, 1984, and all of them, as stated earlier excepting the fifth petitioner, have nothing to do with the company or its business. In so far as the fifth petitioner is concerned,however, as analyzed earlier, no responsibility can be fastened on him inasmuch as he was either a manager nor a director who is said to have actually assisted in the transaction being carried out.
28. Learned counsel for the respondent had stated that he would produce a copy of the memorandum and articles of association today showing who actually are the subscribers to the memorandum. But no such copy has been produced today. In the circumstances, the material furnished by the petitioners herein showed that Sarvasri Balwant Roy, Rajiv Roy, susil Kumar, Eswar Agarwal and Ravinder Agarwal (A-2) must be held to be the original subscribing directors. Even otherwise, there is n immaterial on record including the allegations made by the petitioners herein established the fact that the petitioners herein were in any way acting in managerial capacity or actively assisted in bringing the transaction alleged into being or any resolution that could be said to have been passed by the board of directors so as to implicate these petitioners as well. Petitioners Nos. 2 to 4, 6 and 7 are not at all concerned as it has been controverted that these six petitioners resigned long prior to the date of the transaction. In any view of the matter, on the basis of analysis made earlier, none of the petitioners could be said to be criminally liable in respect of the transaction alleged herein. In the circumstances, therefore, no criminal liability could be fixed on the petitioners. Hence, the proceedings initiated in C.C. No. 58 of 1985 on the file of the court of the Munsif Chevella, in respect of accused Nos. 1, 3 to 8 who are the petitioners Nos. 1 to 7 herein, are quashed and Crl. M.P. is accordingly allowed.