Punjab-Haryana High Court
Shri Krishan Garg vs Smt.Rajni Jain And Others on 21 February, 2014
Author: Inderjit Singh
Bench: Inderjit Singh
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
CRM No.M-39329 of 2012 (O&M)
Date of Decision: February 21, 2014
Shri Krishan Garg
...Petitioner
VERSUS
Smt.Rajni Jain and others
...Respondents
CORAM: HON'BLE MR. JUSTICE INDERJIT SINGH
Present: Mr.Vikram Singh, Advocate
for the petitioner.
Mr.Arihant Jain, Advocate
for respondent Nos. 1, 2 and 4 to 6.
Mr.Bijender Dhankar, Advocate
for respondent No.3.
****
INDERJIT SINGH, J.
Petitioner Krishan Garg has filed this petition against Smt.Rajni Jain and others under Section 482 Cr.P.C. for quashing of criminal complaint filed under Section 138 and 141 of the Negotiable Instruments Act, 1881 pending before learned Sub Divisional Judicial Magistrate, Safidon and the summoning order dated 21.07.2012 passed by above-said Court.
Notice of motion was issued in this case and learned counsel for respondent appeared and contested this petition.
Learned counsel for the petitioner has argued only on one point that present petitioner has been named as accused in the complaint only on the averment that he is Director of R.K.S.K. Gulati Vineet 2014.03.07 14:20 I attest to the accuracy and integrity of this document Chandigarh CRM No.M-39329 of 2012 -2- Overseas Pvt. Ltd., Rice Mill i.e. accused No.1-company. He argued that petitioner has been signing the cheques. The present respondent has not placed on record any purchase order nor any specific averment has been made in the complaint regarding his role. The present petitioner has not purchased the paddy nor he stopped the payment of the cheque in question. Therefore, he argued that the present complaint should be quashed.
On the other hand, learned counsel for the respondent argued that firstly it is a disputed fact whether the petitioner was responsible for managing and conducting day-to-day affairs of the company, which fact is to be proved before the trial Court by producing evidence and he further argued that in the complaint itself, it has been written that accused No.2 to 4 are active Directors of the Company i.e. accused No.1 and have been actively involved in the purchase, previous payments and issuance of the cheques. All the Directors accused No.2 to 4 were incharge of and responsible to manage and conduct day-to-day affairs of the company and thus all of them along with company are liable. Learned counsel for the respondent further contended that even in the petition, it is nowhere written that present petitioner is not managing and conducting day-to- day affairs of the company. Rather, the averment shows that there was resolution between the Directors of the Company that all the cheques which are to be issued in future, will be signed by all the Directors of the Company, which averment itself shows that present petitioner is actively managing and conducting day-to-day affairs of Gulati Vineet 2014.03.07 14:20 I attest to the accuracy and integrity of this document Chandigarh CRM No.M-39329 of 2012 -3- the company.
I have heard learned counsel for the parties and have gone through the record.
Learned counsel for the petitioner has cited judgment passed by the Hon'ble Supreme Court in K.K.Ahuja vs. V.K.Vohra, 2009 (3) R.C.R. (Criminal) 571. I have gone through this citation. In this case, in para Nos. 20, 21 and 22, it is held as under:-
"20. The position under section 141 of the Act can be summarized thus :
(i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix `Managing' to the word `Director' makes it clear that they were in charge of and are responsible to the company, for the conduct of the business of the company.
(ii) In the case of a director or an officer of the company who signed the cheque on behalf of the company, there is no need to make a specific averment that he was in charge of and was responsible to the company, for the conduct of the business of the company or make any specific allegation about consent, connivance or negligence. The very fact that the dishonoured cheque was signed by him on behalf of the company, would give rise to responsibility under sub-section (2) of Section 141.
(iii) In the case of a Director, Secretary or Manager (as defined in Sec. 2(24) of the Companies Act) or a person referred to in clauses (e) and (f) of section 5 of Companies Act, an averment in the complaint that he was in charge of, and was responsible to the company, for the conduct of the business of the company is necessary to bring the case under section 141(1). No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable Gulati Vineet 2014.03.07 14:20 I attest to the accuracy and integrity of this document Chandigarh CRM No.M-39329 of 2012 -4- under section 141(2) by making necessary averments relating to consent and connivance or negligence, in the complaint, to bring the matter under that sub-section.
(iv) Other Officers of a company can not be made liable under sub-section (1) of section 141. Other officers of a company can be made liable only under sub-
section (2) of Section 141, be averring in the complaint their position and duties in the company and their role in regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligence.
21. If a mere reproduction of the wording of section 141 (1) in the complaint is sufficient to make a person liable to face prosecution, virtually every officer/employee of a company without exception could be impleaded as accused by merely making an averment that at the time when the offence was committed they were in charge of and were responsible to the company for the conduct and business of the company. This would mean that if a company had 100 branches and the cheque issued from one branch was dishonoured, the officers of all the 100 branches could be made accused by simply making an allegation that they were in charge of and were responsible to the company for the conduct of the business of the company. That would be absurd and not intended under the Act. As the trauma, harassment and hardship of a criminal proceedings in such cases, may be more serious than the ultimate punishment, it is not proper to subject all and sundry to be impleaded as accused in a complaint against a company, even when the requirements of section 138 read and section 141 of the Act are not fulfilled.
22. A Deputy General Manger is not a person who is responsible to the company for the conduct of the business of the company. He does not fall under any of the categories (a) to (g) listed in section 5 of the Companies Act (extracted in para 14 above).
Therefore the question whether he was in charge of the business of the company or not, is irrelevant. He cannot be made vicariously liable under Section 141 (1) of the Act. If he has to be made liable under Section 141(2), the necessary averments relating to consent/connivance/negligence should have been made. In this case, no such averment is made.
Gulati Vineet2014.03.07 14:20 I attest to the accuracy and integrity of this document Chandigarh CRM No.M-39329 of 2012 -5- Hence the first respondent, who was the Deputy General Manger, could not be prosecuted either under sub-section (1) or under sub- section (2) of Section 141 of the Act."
In para No.14 of the above-said judgment, it is held as under:-
"A combined reading of Sections 5 and 291 of Companies Act, 1956 with the definitions in clauses (24), (26), (30), (31), (45) of section 2 of that Act would show that the following persons are considered to be the persons who are responsible to the company for the conduct of the business of the company:-
(a) the managing director/s;
(b) the whole-time director/s;
(c) the manager;
(d) the secretary;
(e) any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act;
(f) any person charged by the Board with the responsibility of complying with that provision (and who has given his consent in that behalf to the Board); and
(g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors.
It follows that other employees of the company, cannot be said to be persons who are responsible to the company, for the conduct of the business of the company." Therefore, from the law laid down by the Hon'ble Supreme Court in above case, it is clear that whole time Director is mainly responsible for managing and conducting day-to-day affairs.
In view of the above discussion, it is clear that whole time Director of the Company is responsible to the company and for conduct of the business of the company.
In National Small Industries Corporation Limited vs. Gulati Vineet 2014.03.07 14:20 I attest to the accuracy and integrity of this document Chandigarh CRM No.M-39329 of 2012 -6- Harmeet Singh Paintal and another, 2010 (3) SCC 330, it is held that Director of the accused company, who was not incharge of or responsible for the conduct of its business at the time of commission of offence, held, not so liable. Learned counsel for the petitioner further cited judgment passed by the Hon'ble Supreme Court in Central Bank of India vs. Asian Global Ltd. and others, AIR 2010 SCC 2835 and judgment passed by Hon'ble Delhi High Court in Swastik Polyvinyls (P) Ltd. vs. B.M.Gupta and others, 2014 Delhi Law Times 131. In view of the above citations, it is clear that Director of the Company, who is conducting business of the company and incharge of the conduct of the business, is liable. The perusal of the petition filed by the present petitioner shows that petitioner himself has averred that as per averments in the complaint Ram Saroop was having three sons namely Ram Karan (co-accused) Shri Krishan (petitioner) and Shri Niwas (co-accused). It is stated that the family was jointly running Rice Mill for the last several years. Initially the business was being run by the firm M/s Ram Sarup Sunil Kumar, Safidon. All three sons of Ram Sarup were partners in the said firm. The business was being run properly. In April 2008, the partnership firm was converted into a limited company and R.K.S.K. Overseas Pvt. Ltd. was incorporated. Again, in the said company, there were three Directors i.e. Ram Karan and Shri Niwas (both co-accused) and Shri Krishan (petitioner). The perusal of the averments in the petition nowhere shows that present petitioner is not conducting business of the company or not dealing with day-to-day affairs of the company or Gulati Vineet 2014.03.07 14:20 I attest to the accuracy and integrity of this document Chandigarh CRM No.M-39329 of 2012 -7- not incharge of the conduct of the business of the company. Rather, it is also the averment in the present petition that now the company has passed resolution that in future all the three Directors will sign the cheques, which fact also shows that present petitioner is incharge of the conduct of the business of the company and also conducting day- to-day affairs with other Directors. So, no benefit can be given to the present petitioner. So, the judgments cited by learned counsel for the petitioner having distinguished facts will not apply in the present case and no benefit can be given to the present petitioner on the basis of those cited judgments. In the complaint, which is Annexure P-1, a specific averment has been made that all the Directors accused No.2 to 4 were incharge of and responsible for managing and conducting day-to-day affairs of the company i.e. accused No.1 and thus all of them along with their company are liable to be prosecuted under Section 138 of the Negotiable Instruments Act, 1881.
No other point has been argued in the present case. Therefore, from the above discussion, I do not find any ground to quash the complaint, summoning order and subsequent proceedings. Accordingly, finding no merit, the present petition stands dismissed.
February 21, 2014 (INDERJIT SINGH)
Vgulati JUDGE
Gulati Vineet
2014.03.07 14:20
I attest to the accuracy and
integrity of this document
Chandigarh