Gujarat High Court
Haresh V Virani vs State Of Gujarat & on 22 April, 2016
Author: N.V.Anjaria
Bench: N.V.Anjaria
R/SCR.A/2280/2012 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CRIMINAL APPLICATION NO. 2280 of 2012
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE N.V.ANJARIA
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ? Yes
2 To be referred to the Reporter or not ? Yes
3 Whether their Lordships wish to see the fair copy of
the judgment ? No
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of No
India or any order made thereunder ?
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HARESH V VIRANI....Applicant(s)
Versus
STATE OF GUJARAT & 1....Respondent(s)
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Appearance:
MR P P MAJMUDAR, ADVOCATE for the Applicant(s) No. 1
MR B T BRAHMBHATT, ADVOCATE for the Respondent(s) No. 2
MR MANAN MEHTA, LD. APP for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE N.V.ANJARIA
Date : 22/04/2016
CAV JUDGMENT
Whether the complaint under Section 138 of Page 1 of 22 HC-NIC Page 1 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT the Negotiable Instruments Act, 1882 filed against the petitioner-a Director of the company, contains the requisite averments so as to attract for him vicarious liability in the context of Section 141 of the Act, to be prosecuted as an accused and so as to justify continuation of criminal case against him is the centripetal issue. Answers to the above questions depend whether the complaint against the petitioner is liable to be quashed in exercise of powers under Section 482 of Code of Criminal Procedure, 1973.
2. A complaint under Section 138 read with Section 142 of the Negotiable Instruments Act, 1882 came to be filed by the complainant one Mitesh Harishbhai Doshi of Savex Computers Limited against one Netlink Infocom Private Limited-accused No.1, as well as against petitioner herein-accused No.2 who was the Director of the company, along with other accused Nos.3 to 5 who also were the Directors of the company. Pursuant to the said complaint, Criminal Case No.11694 of 2011 before the Court of learned Chief Judicial Magistrate, Ahmedabad Rural, Mirzapur was registered against the accused persons. It is in respect of this criminal complaint resulting into criminal case that the petitioner has prayed before this Court to exercise its inherent powers under Section 482 of the Code to quash the same.
3. It was stated in the complaint inter alia that the complainant was engaged in the business of computer components and allied goods, that accused No.1-a private limited company and accused Nos.2 to 5- Page 2 of 22 HC-NIC Page 2 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT the Directors of accused No.1-approached the complainant for purchase of Samsung TFT and Samsung DVDRW. A purchase order was issued and the goods were supplied. The following cheques issued by the accused were bounced with the endorsement 'insufficient funds' by the Bank on 30th June, 2011-(i) cheque bearing No.268375 dated 30th May, 2011 for Rs.04,85,005/- drawn on State Bank of India; (ii) cheque bearing No.268369 dated 20th May, 2011 for Rs.05,97,684/- drawn on State Bank of India and (iii) cheque bearing No.268376 dated 30th May, 2011 for Rs.05,18,158/- drawn on State Bank of India.
4. The main plank of submission of learned advocate for the petitioner Mr.P.P. Majmudar was that in the entire complaint, according to him, there was no allegation that the petitioner-accused was in charge of the affairs of the company at the relevant time. He submitted that essential and indispensible requirement to arraign a Director of a company as an accused in complaint for the offence of dishonour of cheque by the accused company, is that such Director must be shown to be connected with the affairs of the company at the relevant time and that such complaint must disclose so on the face of it and in so many words.
4.1 Learned advocate for the petitioner heavily relied on decision of the Apex Court in National Small Industries Corporation Limited Vs Harmit Singh Paintal [(2010) 3 SCC 330]. It was submitted that in the said decision principle is laid down that primary Page 3 of 22 HC-NIC Page 3 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT responsibility is on the complainant to make specific averments as are required under the law to make the accused vicariously liable, that only those Directors may be fastened with the criminal liability who at the time of the commission of offence were in charge and were responsible for the conduct of the business of the company. The averment is necessary, it was submitted, that the person sought to be made liable should be in charge of the business of the company at relevant time and there cannot be any deemed liability of a Director. With reference to the aforesaid principles, it was submitted that in the complaint in the case on hand, there are no averments which may suggest that petitioner in his capacity as Director was in charge of the affairs and was responsible for the conduct of accused No.1. It was submitted that since the complaint lacks the necessary and essential averment, no offence is made out therefrom and the petitioner is not liable to be tried as an accused. It was, therefore, prayed that the complaint may be quashed.
4.2 On the other hand, learned Additional Public Prosecutor took the Court through the complaint to submit that necessary averments are made. According to him, the petitioner is liable to be tried as an accused and no case is made out for quashing the complaint.
5. Section 138 of the Negotiable Instruments Act is a penal provision in respect of dishonour of cheques for insufficient funds. Section 141 deals with Page 4 of 22 HC-NIC Page 4 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT the offences by the companies which provides inter alia that if a person committing an offence under Section 138 is a company, every person who, at the time of 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. The first proviso to Section 141 says that if the accused proves that the offence was committed without his knowledge or that he had exercised due diligence to prevent the commission of offence, he will not be rendered liable to commission. The second proviso absolves a nominated Director of the company or a direct holding, and such Director would not be liable for prosecution. It is further provided that notwithstanding anything provided, if it is shown that offence is committed with consent or connivance, all such Directors and officers shall be deemed to be guilty for offence.
5.1 The Proviso to the Section suggest that in respect of the aspects which may be proved, ultimately the offence may be held to have been committed or not committed. It is open to a Director to establish and prove that he had no knowledge of the offence committed and that he had exercised all due diligence; in circumstances of such proof being elicited by such accused, he may not be held liable for punishment for offence. Similarly, the class of Directors mentioned in second proviso would not be liable for prosecution, however they may incur the liability if it is proved Page 5 of 22 HC-NIC Page 5 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT that the offence was committed with consent or connivance. Though these aspects are not arising in the facts of the present case, they are referred to with relevance as they explained the scope and purport of Section 141 of the Act while dealing with offences by the companies. The Section fastens the criminal liability which is in the nature of vicarious liability.
5.2 The connotation 'vicarious liability' conceptually means liability of one on behalf of the other. It is Latin term 'vice' which means 'in place of', that the word 'vicarious' which derive. Jurisprudentially, Salmond has explained the concept of 'vicarious liability' to mean that one person takes place of another so far as liability is concerned (see Salmond & Heuston on the Law of Torts, 18th Edition, Page 425). The expression 'vicarious liability' which signifies that person 'A' may incur liability to person 'C' because of wrongful act or negligence of person 'B'. This would mean that 'A' is vicariously liable for the wrong of 'B' to 'C'. This nature of liability ultimately traces its justification in rule of law. One of the basis for attracting this kind of liability is a wrong done or fault committed. Again, the commission of fault may be linked with the acts done in service or employment; or the fault may not have connection with actual act done in service but liability may arise by virtue of the very fact that a person holds a particular capacity vis-a-vis the other person to be unable to disown a liability for the act of the such other person. Such liability to be Page 6 of 22 HC-NIC Page 6 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT discharged by a person would be a vicarious liability.
5.3 As far as vicarious liability contemplated and flowing from Section 141 of the Negotiable Instruments Act is concerned, it is a liability of a Director to be prosecuted for the offence committed by the company. By virtue of the very fact that person holds the post as a Director and thus belongs to the class of persons who may, in normal circumstances be presumed to be associated with and in charge of the affairs of the company and conduct of the business of the company of which he is a Director, his liability would arise vicariously for the act or offence which may be alleged against the company. It is on this rational that the Supreme Court held that if the person is occupying post of Managing Director or Joint Managing Director, it is not even necessary to make an averment in the complaint that he is in charge of the affairs of the company, for, a Managing Director has to be presumed in law to be in such charge. If a person is a Director, then in his case, the essential averments would be necessary that he was in charge of the affairs of the company at the time of commission of offence.
5.4 Further, when the company is arraigned as an offender for the offence under the Negotiable Instruments Act, 1882, such company would be an impersonal entity and a non-human accused. The company is represented by its officers and Directors who are the real persons in charge of the affairs and in control of the business of the company. Therefore Page 7 of 22 HC-NIC Page 7 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT while judging vicarious liability of a Director or officer of the company and for construing the requirement of nature of averments in the complaint under Section 138 read with Section 141 of the Act, the aforesaid aspects bear a relevance.
6. Now going to the decision of National Small Industries Corporation (supra), relied on the relevant clause 13 in the complaint in the said case, was reproduced by the Apex Court in paragraph 13, to highlight as to what kind of averments were made against the accused Director in that case on the basis of which, by referring to different earlier decisions, the Supreme Court held that those were not sufficient averments to make out a case for criminal prosecution against the Director concerned.
"13. That the accused No. 1 is a Company/Firm and the accused Nos. 2 to 9 were in charge and were responsible to the accused No. 1 for the conduct of the business to the accused No. 1 at the time when offence was committed. Hence, the accused Nos. 2 to 9 in addition to the accused No. 1, are liable to be prosecuted and punished in accordance with law by this Hon'ble Court as provided by section 141 of the N.I. Act, 1881. Further the offence has been committed by the accused No. 1 with the consent and connivance of the accused Nos. 2 to 9." (Para 13) 6.1 It would be useful to survey various decisions of the Apex Court which were referred and relied on in National Small Industries Corporation Limited (supra), with specific context of the nature of averments made in the complaints concerned in those cases. SMS Pharmaceuticals Limited Vs Neeta Bhalla [(2005) 8 SCC 89] was a case upon reference made by two Judge Bench in which after holding that it is Page 8 of 22 HC-NIC Page 8 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT necessary to specifically aver in the complaint under Section 141 that at the time the offence was committed the accused person was in charge and responsible for the conduct of the business of the company and that such averment was essential, the Court thereafter sent the individual cases to be listed before the appropriate Bench. In Sarojkumar Poddar Vs State of NCT of Delhi [(2007) 3 SCC 693] as observed by the Supreme Court in paragraph 15, merely allegations were made that the cheques in question were presented before the Bank and they were dishonoured. These observations were obviously found to be insufficient by the Apex Court, and it was observed further that allegations to satisfy the requirement of Section 138 might have been made in the complaint but they principally related to the purported offence by the company and they were not sufficient to attract the liability of Director in terms of Section 141 of the Act.
6.2 N.K. Wahi Vs Shekhar Singh and others [(2007) 9 SCC 481] was an appeal preferred against the outcome of the trial. Speaking about the nature of allegations required in the complaint, the Supreme Court while restating the common principle that descriptions in the allegations should be clear, proceeded to observe that precise words from the provisions of the Act need not be reproduced and the Court can always come to a conclusion that in facts of each case. In Paresh P. Rajada Vs State of Maharashtra [(2008) 7 SCC 442], the Supreme Court held that the contents in the complaint showed that Page 9 of 22 HC-NIC Page 9 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT against the appellant-the Chairman of the accused company who was impleaded as co-accused, there were specific averments that he as accused No.2 "is responsible for the day-to-day affairs of accused 1 (company) and therefore he is liable to repay amount of dishonoured cheques". It was observed that at a stage where the trial had yet not started, it would be inappropriate to quash the proceedings against the accused.
6.3 In Everest Advertising (P) Limited Vs State Government of NCT, Delhi [(2007) 5 SCC 54] the Supreme Court dealing with the appeal before it, noticed the complaint to be categorically stating that the payments were made after meetings held by and between the representatives of the payee company and the representatives of the accused company including the Chairman and the Managing Director of the later. The Court held that in such circumstances the Chairman and Managing Director of the accused company could not plead ignorance of the entire transaction. In that case it was sought to be contended that the complaint contained a mechanical reproduction of the wordings of the Section, however it was ultimately shown that the averments against the accused stood proved and established at the conclusion at the trial.
6.4 In Ramrajsingh Vs State of Madhya Pradesh [(2009) 6 SCC 729] the Apex Court held on facts that the conviction recorded against the appellant of that case could not be maintained as there was no specific role attributed to him. The Court observed that the Page 10 of 22 HC-NIC Page 10 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT requirement of averments to be made in the complaint for making a person vicariously liable must be read conjointly and not disjunctively.
6.5 The Supreme Court in K.K. Ahuja Vs V.K. Vora [(2009) 10 SCC 48] delved into to discuss the scope of the phrase 'was in charge of, and was responsible to the company for the conduct of the business of the company'. It was observed, "Section 141 uses the words "was in charge of, and was responsible to the company for the conduct of the business of the company". (emphasis supplied) It is evident that a person who can be made vicariously liable under sub-section (1) of Section 141 is a person who is responsible to the company for the conduct of the business of the company and in addition is also in charge of the business of the company. There may be many Directors and secretaries who are not in charge of the business of the company at all. The meaning of the words "person in charge of the business of the company"
was considered by this Court in Girdhari Lal Gupta v. D.H. Mehta [(1971) 3 SCC 189)] followed in State of Karnataka v. Pratap Chand [(1981) 2 SCC 335] and Katta Sujatha v. Fertilizers & Chemicals Travancore Ltd. [(2002) 7 SCC 655] This Court held that the words refer to a person who is in overall control of the day-to-day business of the company."
(Para 22) 6.5.1 The Court ruled, "Therefore, if a person does not meet the first requirement, that is, being a person who is responsible to the company for the conduct of the business of the company, neither the question of his meeting the second requirement (being a person in charge of the business of the company), nor the question of such person being liable under sub-section (1) of Section 141 arises. To put it differently, to be vicariously liable under sub- section (1) of Section 141, a person should fulfil the "legal requirement" of being a person in law (under the statute governing companies) responsible to the company for the conduct of the business of the company and also fulfil the "factual requirement" of being a person in charge of the business of the company."
(Para 23) (emphasis supplied) Page 11 of 22 HC-NIC Page 11 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT 6.5.2 It was thereafter observed in paragraph 24 as under.
"Therefore, the averment in a complaint that an accused is a Director and that he is in charge of and is responsible to the company for the conduct of the business of the company, duly affirmed in the sworn statement, may be sufficient for the purpose of issuing summons to him. But if the accused is not one of the persons who falls under the category of "persons who are responsible to the company for the conduct of the business of the company" (listed in para 21 above), then merely by stating that "he was in charge of the business of the company" or by stating that "he was in charge of the day-to-day management of the company" or by stating that "he was in charge of, and was responsible to the company for the conduct of the business of the company", he cannot be made vicariously liable under Section 141(1) of the Act."
(emphasis supplied) (Para 24) 6.6 In yet another decision in N. Rangachari Vs Bharat Sanchar Nigam Limited [(2007) 5 SCC 108] the Supreme Court held that the High Court was right in not exercising jurisdiction under Section 482 of the Code of Criminal Procedure. It was observed that an advertence to Section 138 and Section 141 of the Negotiable Instruments Act shows that other elements of an offence under Section 138 being satisfied, the burden is on the Board of Directors or the officers in charge of the company to show that they are not liable to be convicted. It was further observed that any restriction on their powers or existence of any special circumstance which they may plead for holding themselves not liable as well as something which was peculiarly within their own knowledge, then it would be for them to establish at the trial such a restriction and/or to show that at the relevant time they were not in charge of affairs of the company.
Page 12 of 22HC-NIC Page 12 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT Reading the complaint as a whole, viewed the Apex Court, that it was a case where the contentions sought to be raised by the appellant can only be dealt with after commencement and in course of the trial. What was emphasized by the Apex Court in N. Rangachari (supra) was that the complaint is required to be read as a whole, stating thus, "In the case on hand, reading the complaint as a whole, it is clear that the allegations in the complaint are that at the time at which the two dishonoured cheques were issued by the Company, the appellant and another were the Directors of the Company and were in charge of the affairs of the Company. It is not proper to split hairs in reading the complaint so as to come to a conclusion that the allegations as a whole are not sufficient to show that at the relevant point of time the appellant and the other are not alleged to be persons in charge of the affairs of the Company. Obviously, the complaint refers to the point of time when the two cheques were issued, their presentment, dishonour and failure to pay in spite of notice of dishonour. We have no hesitation in overruling the argument in that behalf by the learned Senior Counsel for the appellant."
(para 26) 6.7 In the facts involved and what was laid down by the Court in Sarojkumar Poddar (supra), it was possible to read a suggestion that the averments against the Director must contain allegations of specifics as to how and in what manner the accused Director was responsible. The Apex Court, however, in Neeta Bhall (supra) stated that Sarojkumar Poddar (supra), as far as the aforesaid proposition of pleading about specific details on the role played by the accused director is concerned, stands on its own facts, and therefore on its own legs. In the following paragraph, the Supreme Court in Neeta Bhalla (supra) explained thus, Page 13 of 22 HC-NIC Page 13 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT "A faint suggestion was made that this Court in Saroj Kumar Poddar [(2007) 3 SCC 693] has laid down the law that the complaint petition not only must contain averments satisfying the requirements of Section 141 of the Act but must also show as to how and in what manner the appellant was responsible for the conduct of the business of the company or otherwise responsible to it in regard to its functioning. A plain reading of the said judgment would show that no such general law was laid down therein. The observations were made in the context of the said case as it was dealing with a contention that although no direct averment was made as against the appellant of the said case fulfilling the requirements of Section 141 of the Act but there were other averments which would show that the appellant therein was liable therefor."
(para 26) 6.8 A more recent decision in A.K. Singhania Vs Gujarat State Fertilizer Company Limited and another [(2013) 16 SCC 630] deserves a reference. The facts in the case of A.K. Singhania (supra) were inter alia that the complainant-Gujarat State Fertilizer Company Limited had filed several complaints under Section 138 of the Negotiable Instruments Act against Asslon Synthetics Limited-the accused company, its Chairman, Managing Director and other Directors including one A.K. Singhania who was accused No.7 and one Vikram Prakash-accused No.9, who both were also Directors of the company. Against the process/summons issued by the Magistrate, the above Directors-accused Nos.7 and 9- filed separate applications under Section 482, Cr.P.C. for quashing the prosecution against them. The High Court quashed the prosecution against Vikram Prakash- accused No.9 but dismissed the application of accused No.7-A.K. Singhania. The complainant aggrieved from the order passed in the case of accused No.9, approached the Supreme Court. Similarly, accused No.7 was aggrieved by the order declining to quash Page 14 of 22 HC-NIC Page 14 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT prosecution in his case also filed appeal before the Apex Court.
6.8.1 The Apex Court allowed the appeal of accused No.7-A.K. Singhania and dismissed the appeal of the complainant. The allegations which were relevant for decision were reproduced by the Supreme Court in paragraph 3 of the judgment. In paragraph 11.1, the Supreme Court noiticing the nature of such averments, observed that the allegation is that "all business and financial affairs of the accused company are decided, organized, administered by Accused Nos.1 to 5". It was further alleged that Accused Nos.1 to 5 do so with consultation of other Directors namely, Accused Nos.6 to 12. The complainant's submission was that accused Nos.1 to 13 are also responsible for all the transactions and business affairs, financial affairs and administration done on behalf of the accused company was negatived. The Supreme Court noticed that the averments made in the complaint nowhere suggested that accused Nos.7 and 9 at the time the offence was committed, were in-charge of and responsible for the conduct of the business of the company. According to the complainant itself, observed the Court, it was accused Nos.1 to 5 who were taking decisions. It was further held also that the allegation that in taking the decisions they used to consult these accused also would not mean that these two accused were at the time the offence was committed, were in-charge of and responsible for the conduct of business of the company. It was held that the allegations in the complaint, in sum and substance Page 15 of 22 HC-NIC Page 15 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT meant that business and financial affairs used to be decided, organized and administered by accused Nos.2 to 6. The allegations made did not bring about the basis that accused A.K. Singhania and Vikram Prakash were in charge and responsible to company for the conduct of its business. It was therefore in light of above facts held by the Apex Court that complaint lacked in essential averments.
7. The gist of the aforediscussed decisions by the Apex Court propounding the law on point is that the foundational requirement for holding the person criminally liable under Section 141 of the Negotiable Instruments Act, 1882 is that at the time the offence was committed, such person was in charge of and responsible to the company for the conduct of the business of the company. Every person associated with the company may not fall within the ambit of such class. Yet the aspect of class to which the person may belong is very much relevant.
7.1 If the averments in the complaint bear basic character of suggesting about the accused Director being in charge of the affairs of the company and responsible for the conduct of business of the company to attract his vicarious liability under Section 141 of the Act, such averments have to be treated as sufficient and compliant with the essential requirement. The rest would be in the nature of specifics and may be shown and established at the trial of criminal case. While construing the complaint as to whether it fulfills the essential requirements Page 16 of 22 HC-NIC Page 16 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT about the averments, a hair-splitting or in-depth analytical approach is not called for. Where the bare reading of the complaint and the averments conjointly treated, satisfy the foundational requirements in terms of Section 141, it would justify the continuation of prosecution against the accused Director.
7.2 The prosecution to hold a Director vicariously liable for the offences under Section 138 read with 141 and 142 of the Act would start with averment in the complaint to be compliant in description of basic ingredients of Section 141 and would end with conclusion of trial. In the trial, the evidence would adduce in context of and with reference to the averments in complaint to establish the essential ingredients. Therefore, it would be a legally unacceptable that the complaint must contain such specific averments to mention the details and specifics about the precise role played which are otherwise those details to be threshed out and can be proved only in course of trial by leading evidence. While judging on the sufficiency and adequacy of averments in competent while and for the purpose of exercising powers under Section 482 of the Cr.P.C. For quashing the complaint. it would be judicially imprudent not to bear in mind this fundamental conceptual distinction.
8. Given the aforesaid principles governing the reaching out to the contents of the complaint and the averments made therein which is subject matter of the Page 17 of 22 HC-NIC Page 17 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT present case, it would be seen hereinafter that the averments in the complaint under consideration stand in sharp contrast to the averments in the complaint which was dealt with by the Supreme Court in National Small Industries Corporation (supra) and also in A.K. Singhania (supra).
9. The complaint in the case on hand was attentively read and considered by the Court. It is averred in paragraph 2 that accused No.1 is a private limited company and accused No.2 to 5 are the Directors. It is further mentioned that accused Nos.2 to 5 are making day-to-day affairs of the accused No.1 company. In the next paragraph 3, it is stated, "that accused Nos.2 to 5 you had approached the complainant for purchase of Samsung TFT and Samsung DVDRW. The complainant say that accused Nos.2 to 5 had issued purchase orders verbally to my client from time to time." Thereafter having stated that the goods were supplied, it was further averred that ".... Accused Nos.2 to 5 on behalf of accused No.1 had received all the materials mentioned in the delivery challans....". It is averred that complainant called upon the accused Nos.2 to 5 along with accused No.1 by notice ".... to repay ..... accused failed to make payment.... the accused Nos.4 and 5 had give vague reply after receipt of notice."
9.1 From the averments in the complaint taken together, it comes out that the petitioner-accused No.2 along with other accused were the Directors of accused No.1. It is stated that the petitioner along Page 18 of 22 HC-NIC Page 18 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT with other accused Directors had approached the complainant for purchase of the goods in question and that accused No.2 was one of the Directors who had issued purchase orders. Goods were thereupon supplied. It averred in the complaint that the petitioner along with other accused Directors received the materials. These averments are suggestive of clear allegation that the petitioner was in charge of affairs of the company; it further suggests that he was a participant in the transaction which proceeded on behalf of the company. As far as the notice dated 08th July, 2011 is concerned, the statement is that accused Nos.4 and 5 gave reply, implying that petitioner-accused No.2 even did not care to reply to deny the statements and allegations in the notice.
9.2 In A.K. Singhania (supra), even as while holding on facts and considering the allegations in the complaint involved in that case, that they were liable to be quashed, the proposition of law laid down are beckon to judge the issue in the facts of the present case. The Apex Court stated and held, "From a plain reading of aforesaid provision it is evident that every person who at the time the offence was committed was in charge of and responsible to the company shall be deemed to be guilty of the offence under Section 138 of the Act. In the fact of it, will it be necessary to specifically state in the complaint that the person accused was in charge of and responsible for the conduct of the business of the company? In our opinion, in the case of offence by the company, to bring its Directors within the mischief of Section 138 of the Act, it shall be necessary to allege that they were in charge of and responsible to the conduct of the business of the company. It is a necessary ingredient which would be sufficient to proceed against such Directors. However, we may add that as no particular from form is prescribed, it may Page 19 of 22 HC-NIC Page 19 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT not be necessary to reproduce the words of the section. If reading of the complaint shows and the substance of accusation discloses necessary averments, that would be sufficient to proceed against such of the Directors and no particular form is necessary. However, it may not be necessary to allege and prove that, in fact, such of the Directors have any specific role in respect of the transaction leading to issuance of cheque. Section 141 of the Act makes the Directors in charge of and responsible to the company "for the conduct of the business of the company" within the mischief of Section 138 of the Act and not particular business for which the cheques was issued. We cannot read more that what has been mandated in Section 141 of the Act."
(para 14) (emphasis suspplied) 9.3 The aforesaid was held by the Apex Court after making reference to its own earlier decisions including National Small Industries Corporation (supra) as well as decisions in Neeta Bhalla (supra), N. Rangachari (supra), K.K. Ahuja (supra) and Harshendra Kumar D. (supra).
9.4 It is trite that any complaint is to be read in its totality. It is on the basis of the wholesome consideration of the complaint and conjoint reading of the relevant averment that the true nature, purport and effect of the statements and allegations therein are to be comprehended. It may be that the complaint may not bring out the desired element or essential ingredient from averments or statements placed concisely at one particular place. A complaint may contain the requisite allegations to bring out offence at different places and in that event, it is from the combined reading and total effect of the statements taken together, it has to be judged whether it incorporate the essential elements and averments. It is the substance, and not the form which is material.
Page 20 of 22HC-NIC Page 20 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT It is not one single averment but all the allegations taken together and read as a whole which matters.
10. From the complaint filed against petitioner No.1 as above, it emanates unequivocally that along with the other accused, petitioner was one of the Director in charge of the affairs of the company, that he had participated in placing the orders and he was one of the Directors who placed the orders; goods were received by the Directors including the petitioner. Therefore it cannot be gainsaid that there was a role attributable for the petitioner-accused in the entire transaction in respect of which the cheques were issued. Now what is the exact nature of role, how the alleged role was performed are the matters of specific details to be brought out in the evidence and material which may be adduced and produced in the trial. The averments and allegations in the complaint suggest and state about the factum, not only that the petitioner was in charge of the affairs of the company at the time of alleged offence, but also that he had his participation in the transaction. Therefore the essential requirements in the context of Section 141 of the Negotiable Instruments Act were satisfied. The averments in the complaint met with the requirement of basic pleadings which would attract the ingredients of Section 138 read with Section 141 of the Negotiable Instrument Act.
10.1 In view of the above, it is not possible to take a view that the complaint filed against the petitioner does not disclose offence or that it does Page 21 of 22 HC-NIC Page 21 of 22 Created On Thu Apr 28 01:18:22 IST 2016 R/SCR.A/2280/2012 CAV JUDGMENT not contain the essential averments not to arraign the petitioner as an accused. The complaint read as a whole and all the averments taken together can be said to be pointing out that the petitioner-Director was involved in the affairs of the company and his involvement was properly alleged in the particular transaction in question to make the complaint valid in terms of legal requirement. Therefore the prayer to quash and set aside the criminal complaint being Criminal Case No.1167 of 2011 cannot be granted and such prayer is hereby declined.
11. The petition is dismissed for the aforesaid reasons and discussion. Rule is discharged. Stay which was granted against the further proceedings is hereby vacated and the Court concerned is directed to proceed against the petitioner in Criminal Case No.1167 of 2011 in accordance with law and decide the same in light of evidence which may be led by the parties, and leaving open all contentions of all the parties in that regard.
(N.V.ANJARIA, J.) Anup Page 22 of 22 HC-NIC Page 22 of 22 Created On Thu Apr 28 01:18:22 IST 2016