Rajasthan High Court - Jaipur
Dushyant A. Gadgil vs Smt. Shanta Godika on 17 April, 2002
Equivalent citations: II(2003)BC13, [2004]118COMPCAS318(RAJ), 2003(1)WLC539
JUDGMENT A.C. Goyal, J.
1. Both the petitions under Section 482, Cr.P.C. are being decided vide common order as point involved is common.
Brief facts giving rise to the petitions are that, complainant-respondent No. 1, Smt. Shanta and her husband Shri Tarachand filed separate complaints in the Court of Additional Chief Judicial Magistrate No. 3, Jaipur City, Jaipur against the accused petitioner and the other 10 accused-respondents with the averments that Shri Ashok Kumar Ajmera is the Chairman and Managing Director of the respondent No. 2 company, respondent Nos. 3 and 4, M.K. Agarwal and Kanti Kumar were authorised signatories of the company and respondent Nos. 4 to 11 were the Directors of this company. Two cheques each of Rs. 50,0007-in each case were issued in favour of both the complainants on behalf of respondents company under signatures of respondent Nos. 3 and 4. All the four cheques were returned unpaid for want of funds. These cheques were issued with knowledge and consent of all the Directors. The respondent Nos. 4 to 11, being Directors of the company were responsible to the company for the conduct of the business of the company. Notices were issued to all the accused-respondents but they did not arrange the payment of the cheques.
2. After making an inquiry under Section 200, Cr.P.C., the learned Magistrate took cognizance in both the cases under Section 138, the Negotiable Instruments Act, 1881 (in short 'the Act of 1881') vide order dated 23.8.1997. Thereafter, an application in each case was filed on behalf of the accused-petitioner making a prayer to dismiss the complaint against the petitioner. The learned Magistrate dismissed both the applications vide order dated 4.6.1998. Hence, these petitions.
3. I have heard learned Counsel for the parties and have perused the material available on the record. To appreciate the rival submissions, the provisions of Section 141 of the Act, 1881 are reproduced as under:
Offences by companies (1) If the person committing an offence under Section 138 is acompany, every person who, at the time the offence was committed, was incharge 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 accordingly :
Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his know ledge, or that he had exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in Sub-section (1), where any 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.
4. Learned Counsel for the petitioner contended that the petitioner being only the Director of the company is not liable for the criminal act committed by the company, as there is no evidence to show that the ace used petitioner was responsible to the company for the conduct of the business of the company. It was also contended that the accused-petitioner had resigned as Director, hence, the proceedings against the petitioner are to bequashed. Reliance has been placed upon B. Lakshmi v. M/s. Trishul Coal Services & Transporters and Ors., I (1998) BC 435=IV (1997) CCR 349= 1997 Crl. L.J. 3616. It was held by Hon'ble Andhra Pradesh High Court that if the offence under Section 138 of the Act, 1881 is committed by the company, every person who was in- charge and responsible for the affairs and conduct of the business of the company at the time when the alleged offence was committed is also responsible and in case if there is fto allegation in the complaint that the petitioner was incharge and responsible for the conduct of the business of the company, the proceedings against the petitioner are liable to be quashed. Similar view was taken in Sushil Singla and Anr. v. Haripal Singh, I (1994) BC 584=1994 Crl. L.J. 464 NOC (P&H.); Smt. Sharda Agarwal and Ors. v. Additional Chief Metropolitan Magistrate II, Kanpur and Anr., I (1992) CCR 703=1992 Crl. L.J. 1442 (Allahabad High Court); and D. Chandra Reddy v. Gowrisetti Prabhakar and Ors., II (2000) BC 358=2000 Crl. L.J. 2526 (Andhra Pradesh High Court). Learned Counsel for the petitioner has referred the prospectus of the respondent company and contended that the names of the key personnel of this company have been shown and the accused-petitioner is not one of them. It was also contended that continuance of criminal proceedings against the accused-petitioners would amount to abuse of the process of the Court, hence, the proceedings should be quashed against the petitioner to secure the ends of justice. Learned Counsel for the complainant-respondent contended that it is specifically pleaded in the complaints that all the Directors including the petitioner were responsible to the company for the conduct of the business of the company and the offence was committed with the knowledge and consent of all the Directors and it may be the defence of the accused-petitioner to prove that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. Learned Counsel for the complainant further contended that notices were issued to all the respondents including the petitioner but no action was taken by them including the accused petitioner. Reliance is placed upon Smt. M. Sivakami v. Bharat Ginning and Oil Mill Factory and Anr., II (2000) BC 148=11 (2000) CCR 599=2000 Crl. L.J. 1043 (Gujarat High Court), wherein it was held that in a complaint under Section 138 of the Act, 1881, to escape from the liability, the Director of the company must prove that offence was committed without her knowledge or that she had exercised all due diligence to prevent the commission of such offence and it is a question of evidence. In Anil Hada v. Indian Acrylic Ltd., X (1999) SLT 1=IV (1999) CCR 285 (SC)=II (1999) BC 138 (SC)=2001 SCC (Cri.) 174, Hon'ble the Apex Court held that three categories of persons are brought within the purview of the penal liability through the legal fiction envisaged in Section 141 of the Act, 1881. They are, (1) the company which committed the offence; (2) everyone who was incharge of and was, responsible for the business of the company; and (3) any other person who is a Director or a Manager or a Secretary or Officer of the company, with whose connivance or due to whose neglect the company has committed the offence.
5. I have given thoughtful consideration to the rival submissions. There can be no dispute on this legal aspect that the High Court can quash the proceedings under Section 482, Cr.P.C. to prevent the abuse of the process of the Court or to secure the ends of justice. Similarly, this legal position is also undisputed that to make a Director of the company to be liable for the offence under Section 138 of the Act, it is necessary to allege in the complaint that such Director was incharge and responsible for the conduct of the business of the company at the time of commission of the offence. But in both the instant cases, there are specific allegations in the complaints that all the Directors of the company were responsible for the conduct of the business of the company and further the notices were issued to the company, its Managing Director, Authorised Signatories and all the Directors but they did not arrange for the payment. In view of these specific allegations, the contention of learned Counsel for the accused-petitioner cannot be accepted that the accused- petitioner was having no concern with day-to-day business of the company. It is also significant to mention here that the Hon'ble the Gujarat High Court has clearly held that the Director may escape the liability if he proves that offence was committed without his or her knowledge or that he or she exercised all due diligence to prevent the commission of such offence and it is question of evidence.
In view of this judgment, the accused-petitioner would have every opportunity to prove that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of this offence. In view of the judgment of Hon'ble the Apex Court also, the proceedings against the accused-petitioner cannot be quashed at all and, thus, there is no merit in both the petitions. Consequently, both the petitions are hereby dismissed.
Records of the Trial Court shall be sent back within a week from today with a copy of this order.