Madras High Court
Ashok Muthana And 6 Others vs Escorts Finance Ltd., 54. Montieth ... on 19 January, 2001
Equivalent citations: 2001(2)ALT(CRI)9
ORDER
1. In this petition, the petitioners who are accused 2 to 8 before the trial court are seeking to quash the entire proceedings in C.C.No.8736 of 1999 on the file of the XIV Metropolitan Magistrate, Egmore.
2. The short facts are:
The respondent/complainant filed a complaint under section 138 of the Negotiable Instruments Act (herein after referred to as the Act for short) against the petitioners and three others, as the cheque issued for Rs.24,99,840 had been dishonoured, Accused No.1 is the company and accused 9 and 10 are the signatories of accused No.1 except the bald allegation that the petitioners are directors, no overact has been attributed to them in the complaint. The complaint without even ascertaining the fact the petitioners 3 and 6 are dead and petitioners 4,5 and 7 have retired from the company two years ago, has filed the complaint. Petitioners 4,5 and 7 are only employees of the first accused company and they left the services of the company in 1997 itself, but they have been wrongly described as Directors of the company.
3. The learned counsel for the petitioners strenuously contended except the vague allegation in the complaint that the petitions are also responsible for the conduct of the business of the company and they are also liable for the offence committed by the first accused, there is no other material to show prima facie that there was any act committed by the petitioner, from which a reasonable inference can be drawn of their vicarious liability. It is pointed out not even the requirements as embodied in Section 141, sub-clause (2) of the Act, namely, the offence has been committed by the company with the consent or connivance and negligence in the part of the petitioners. It is argued that the allegations made in the complaint are most vague and therefore, no vicarious liability can be attached to the petitioners. The other contention that had been raised is without even ascertaining that petitioners 3 and 6 are dead and petitioners 4,5 and 7 have retired from the company two years ago, but the complaint has been filed in a mechanical and causal way. To substantiate the fact that petitioners 3 and 6 are dead and petitioners 4,5 and 7 retired from the company, a certified copy from No.32 issued by the company secretary has been produced for the perusal of this Court, which supports the case of the petitioners.
4. Though several decisions have been cited in support of the contentions raised in the petition, in my opinion it is suffice to refer the decision of the Supreme Court in Anil Hada v. Indian Acrylic limited, and the decisions reported in Alfred Itorg and Co. India (P) Ltd. and 13 others v. Antox India (P) Ltd. 1992 LW (Crl) 120. In the Supreme Court case in paragraph 10 it had been laid down as follows:
"10. Three categories of persons can be discerned from the said provision who are brought within the purview of the penal liability through the legal fiction envisaged in section. They are: (1) The company which committed the offence, (2) Everyone who was in charge of and responsible for the business of the company, (3) any other person who is a director or a manager or a secretary or officer of the company with whose connivance of due to whose neglect the company has committed the offence."
5. I find it difficult to agree with the learned counsel for the respondent/complainant that necessary and sufficient allegations have been made in the complaint that the petitioners are also responsible for the conduct of the day-to-day business and are equally guilty of the offence under section 138 of the Act and that it is for the trial court to find out whether the petitioners are also responsible for the day -to-day conduct of the business of the company and the same cannot be decided by this court. Considering the fact that petitioners 3 and 6 are dead already and petitioners 4,5 and 7 have retired form the company two years before, I am satisfied that no vicarious liability can be altached to them as the cheque itself came into existence only on 23.8.1999. In the second case, which arose under the Drugs and Cosmetics Act, 1940, a learned Judge of this Court had observed the following in the middle of Paragraph II which is extracted below:
"....In catena of cases, the Apex Court has held that intiating prosecution against sleeping partners or women, when the company is the main offender, cannot be sustained unless there was basic material to show that such partners or directors were also in charge of and responsible for the conduct of the business of the company. Merely, by alleging that directors are in charge of the company, as is found in paragraph 11 of the complaint, petitioners 2 to 6 cannot be prosecuted. The complainant should further show that petitioners 2 to 6 were also responsible for the day-to-day conduct of the business of the company. Similarly, as far as petitioners 8 to 14 are concerned, paragraph 11 reads that they were responsible for the business of the company, but does not allege that they were in charge of the company. A quick look at the law laid down by the Apex Court will be useful in this context. In Delhi Municipality v. Ram Kishan, the pronouncement reads as hereunder:
"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 complaint, that there is any Act committed by the directors from which a reasonable inference can be drawn that they could also be victoriously liable. In these circumstances, therefore, it can be said that no case against the Directors has been made out ex facie in the allegation made in the complaint and the proceedings against them were rightly quashed by the High Court."
In that case the averments in the complaint reads as follows:
" That the 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."
In Municipal Corporation of Delhi v. Purushotam Das, , the Supreme Court stated thus, after extracting the relevant para in the complaint:
" Complaint :That accused Rani Kishan Bajaj is the chairman, accused R.P.Neyatia is the Managing Director and accused 7 to 12 are the Directors of the Hindustan Sugar Mills Ltd., and were in charge of and responsible to it for the conduct of its business at the time of commission of offence......
"Unlike the other case, para 5 of the complaint of this case gives complete details of the role played by the respondents and the extent of their liability. It is clearly mentioned that Rani Kishan Bajaj is the chairman and R.P.Nayotia is the Managing Director and respondents 7 to 11 are the directors of the Mill and were in charge of and responsible for the conduct of its business at the lime of commission of the offence whereas in other case the complainant has merely drawn a presumption, without any averment. In the instant case, a clear averment has been-made regarding the actual role played by the respondents and the extent of their liability. In this view of the matter it cannot be said that part 5 of the complaint is vague and does not implicate respondents 1 to 11.
Thus it is apparent that mere extraction of the section in the complaint would not suffice, and further vague allegations or assumptions, would not lead any where. The complaint must prima facie disclose, that there was any act committed by the Directors, from which a reasonable inference can be drawn of there vicarious liability, looked at from any angle, on [he averments available in the complaint, the pending prosecution cannot be maintained, in so far as it concerns petitioners 2 to 6 and 8 to 14. It maybe, that the petitioners 1 and 7 may have to be represented by some person in charge of the respective companies. On that score it would not be fair to sustain the prosecution against petitioners 2 to 6 and 8 to 14."
In the fact situation above, I am inclined to conclude there is no material that the petitioners have played any part in the issue of the cheque or gave instructions to the Bank to disclose the same and, therefore, the proceedings against the petitioners before the trial court have to be quashed.
6. In the result, the petition is allowed in respect of petitioners, who are accused 2 to 8 before the trial court and the prosecution against them shall stand quashed. The learned Magistrate, shall proceed with the trial of the case against accused Nos.1,9 and 10 and finish the same as expeditiously as possible. Consequently, the connected miscellaneous petitions are closed.