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The vicarious liability of Director/secretary/manager/other officers of a company under Section 141 of the NI Act has to be understood in the light of the statutory language employed in Section 141(1) and Section 141(2) of the NI Act. At any rate, the individual role of a Director is exclusively in the realm of internal management of a company and at the initial stage of a complaint, it would be unreasonable to expect a complainant to elaborate the specific role played by a Director in the transactions forming the subject matter of the complaint. In the present case, the appellant has pleaded that “the accused 2, 3, 4 and 5 are the directors of accused 1 and were at the time when the offence committed in charge of and were responsible for the conduct and day to day business of the said accused-company”.” The High Court on a complete misconstruction of legal position enunciated by this Court in various judgments, quashed the complaint on the ground that “nothing has been stated as to what part was played by the Directors petitioners and how they were responsible regarding the finances of the company, issuance of cheques and control over the funds of the company.” In this connection, it is necessary to turn to K.K. Ahuja v. V.K. Arora and anr.[1] where this Court has referred to relevant provisions of the Companies Act and observed that in case of a Director, Secretary or Manager [as defined in Section 2(24) of the Companies Act], or a person referred to in Clauses (e) and (f) of Section 5 of the 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) of the NI Act and no further averment would be necessary in the complaint though some particulars would be desirable. In SMS Pharmaceuticals Limited v. Neeta Bhalla and anr.[2] (“SMS Pharma-(1)”), this Court has observed that the requirement of Section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of the Director in such cases. Reference may also be made to Mannalal Chamaria v. State of West Bengal[3], A.K. Singhania v. Gujarat State Fertilizer Company Ltd.[4], Rallis India Limited v. Poduru Vidya Bhushan and ors.[5], Paresh P. Rajda v. State of Maharashtra and anr.[6], Malwa Cotton and Spinning Mills Ltd. v. Virsa Singh Sidhu and ors.[7] and N. Rangachari v. Bharat Sanchar Nigam Ltd.[8]

15. The reference having been answered in SMS Pharma-(1) individual cases were directed to be listed before an appropriate Bench for disposal according to law. Pursuant to this order the appeal was placed before a two-Judge Bench of this Court. The two-Judge Bench of this Court in SMS Pharmaceuticals Ltd. (2) v. Neeta Bhalla[16] (“SMS Pharma-(2)”) noted that the High Court had quashed the complaint against respondent 1 holding that the allegations contained in the complaint as against respondent are vague and indefinite. The two-Judge Bench observed that on a plain reading of the averments made in the complaint it was satisfied that the statutory requirements as contemplated under Section 141 of the NI Act were not satisfied, and, therefore, the High Court judgment cannot be faulted. It must be noted that when the attention of this Court was drawn to observations made in Saroj Kumar Poddar that the complaint must not only contain averments justifying the requirements of Section 141 of the NI Act but must also show as to how and in what manner the appellant therein was responsible for the conduct of the business of the company or otherwise responsible to it in regard to its functioning, this Court observed that a plain reading of the said judgment would show that no such general law was laid down therein and the observations were made in the context of the said case as it was dealing with the contention that although no direct averment was made as against the appellant therein fulfilling the requirements of Section 141 of the NI Act, but, there were other averments which would show that the appellant therein was liable therefor.

25. In Mannalal Chamaria, this Court reiterated the above observations and observed that in the averments made before it there was no specific or even a general allegation made against the appellants. This Court, therefore, dismissed the complaint filed against the appellants under Section 138 of the NI Act.

26. It is clear from a perusal of the above decisions that SMS Pharma- (1), which is a three-Judge Bench decision, still holds the field. In all subsequent decisions, two-Judge Benches of this Court have followed SMS Pharma-(1). No doubt that there is a slight deviation in N. Rangachari in favour of the complainant, but, even in that decision, the two-Judge Bench accepts that SMS Pharma-(1) has a binding force. In SMS Pharma-(1), KK Ahuja and National Small Industries Ltd. this Court summarized its conclusions. We are concerned in this case with Directors who are not signatories to the cheques. So far as Directors who are not signatories to the cheques or who are not Managing Directors or Joint Managing Directors are concerned, it is clear from the conclusions drawn in the above- mentioned cases that it is necessary to aver in the complaint filed under Section 138 read with Section 141 of the NI Act that at the relevant time when the offence was committed, the Directors were in charge of and were responsible for the conduct of the business of the company. This is a basic requirement. There is no deemed liability of such Directors.

28. SMS Pharma-(1), undoubtedly, says that it is necessary to specifically aver in the complaint that the Director was in charge of and responsible for the conduct of the company’s business at the relevant time when the offence was committed. It says that this is a basic requirement. And as we have already noted, this averment is for the purpose of persuading the Magistrate to issue process. If we revisit SMS Pharma-(1), we find that after referring to the various provisions of the Companies Act it is observed that those provisions show that what a Board of Directors is empowered to do in relation to a particular company depends upon the roles and functions assigned to Directors as per the memorandum and articles of association of the company. There is nothing which suggests that simply by being a Director in a company, one is supposed to discharge particular functions on behalf of a company. As a Director he may be attending meetings of the Board of Directors of the company where usually they decide policy matters and guide the course of business of a company. It may be that a Board of Directors may appoint sub-committees consisting of one or two Directors out of the Board of the company who may be made responsible for the day-to-day functions of the company. This Court further observed that what emerges from this is that the role of a Director in a company is a question of fact depending on the peculiar facts in each case and that there is no universal rule that a Director of a company is in charge of its everyday affairs. What follows from this is that it cannot be concluded from SMS Pharma-(1) that the basic requirement stated therein is sufficient in all cases and whenever such an averment is there, the High Court must dismiss the petition filed praying for quashing the process. It must be remembered that the core of a criminal case are its facts and in factual matters there are no fixed formulae required to be followed by a court unless it is dealing with an entirely procedural matter. We do not want to discuss ‘the doctrine of Indoor Management’ on which submissions have been advanced. Suffice it to say, that just as the complainant is entitled to presume in view of provisions of the Companies Act that the Director was concerned with the issuance of the cheque, the Director is entitled to contend that he was not concerned with the issuance of cheque for a variety of reasons. It is for the High Court to consider these submissions. The High Court may in a given case on an overall reading of a complaint and having come across some unimpeachable evidence or glaring circumstances come to a conclusion that the petition deserves to be allowed despite the presence of the basic averment. That is the reason why in some cases, after referring to SMS Pharma-(1), but considering overall circumstances of the case, this Court has found that the basic averment was insufficient, that something more was needed and has quashed the complaint.