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TMI Blog2010 (2) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... 008 is filed against the judgment and order dated 24-5-2007 passed by the High Court of Delhi in Criminal Revision Petition No. 163 of 2005, whereby the High Court quashed the summoning order passed by the trial Court against respondent No. 1 - Dev Sarin under section 138 read with section 141 of the Act. 4. Since all these appeals are identical and same legal issues arise, they are being disposed of by this common judgment. 5. The appellant - National Small Industries Corporation Ltd. had filed 12 criminal complaints under section 138 read with sections 141 and 142 of the Act against M/s. Jay Rapid Roller Limited, a Company incorporated under the Companies Act, its Managing Director - Shri Sukhbir Singh Paintal, and its Director - Shri Harmeet Singh Paintal. It is the claim of the appellant that so as to make the Managing Director and Director of the Company liable to be prosecuted under the provisions of the Act, they had specifically averred in the complaint that all the accused persons approached it for financing of bill integrated market support programme. It was also stated that the accused persons had issued cheques which were dishonoured on presentation against which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he complaint under section 138 read with section 141 of the Act against the Director of a Company before he can be subjected to criminal proceedings. 8. Heard learned counsel for the appellants as well as the learned ASG and senior counsel for the respondents. 9. Section 138 of the Act refers about penalty in case of dishonour of cheque for insufficiency of funds in the account. We are more concerned about section 141 dealing with offences by companies which reads as under:- "141. Offences by companies.-(1) If the person committing an offence under section 138 is a company, every person who, at the time 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 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 knowledge, or that he had exercised all due diligence to prevent the commission of such offence: Provided further that where a person is nominated as a Director of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent No. 1 was in-charge of or was responsible to the accused company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability. A company may have a number of Directors and to make any or all the Directors as accused in a complaint merely on the basis of a statement that they are in-charge of and responsible for the conduct of the business of the company without anything more is not a sufficient or adequate fulfilment of the requirements under section 141. 11. In a catena of decisions, this Court has held that for making Directors liable for the offences committed by the company under section 141 of the Act, there must be specific averments against the Directors, showing as to how and in what manner the Directors were responsible for the conduct of the business of the company. 12. In the light of the above provision and the language used therein, let us, at the foremost, examine the complaint filed by National Small Industries Corporation Limited a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the absence of such averments the signatory of the cheque and or the managing directors or joint managing director who admittedly would be in-charge of the company and responsible to the company for conduct of its business could be proceeded against." (p. 99) While considering the above questions, this Court held as under: "18. To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under section 141 of the Act is sought to be fastened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of section 141 has to be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s who are in-charge of and responsible for the conduct of the business of the company at the time of the offence and the persons who are merely holding the post in a company and are not in-charge of and responsible for the conduct of the business of the company. Further, in order to fasten the vicarious liability in accordance with section 141, the averment as to the role of the concerned Directors should be specific. The description should be clear and there should be some unambiguous allegations as to how the concerned Directors were alleged to be in-charge of and was responsible for the conduct and affairs of the company. 15. In Sabitha Ramamurthy v. R.B.S. Channabasavaradhya [2006] 10 SCC 581, this Court while dealing with the same issue observed as under: "...It may be true that it is not necessary for the complainant to specifically reproduce the wordings of the section but what is required is a clear statement of fact so as to enable the court to arrive at a prima facie opinion that the accused are vicariously liable. Section 141 raises a legal fiction. By reason of the said provision, a person although is not personally liable for commission of such an offence would be vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d satisfied. For the aforementioned purpose, a strict construction would be necessary. 12. The purported averments which have been made in the complaint petitions so as to make the appellant vicariously liable for the offence committed by the company read as under : 'That the accused No. 1 is a public limited company incorporated and registered under the Companies Act, 1956, and, accused Nos. 2 to 8 are/were its directors at the relevant time and the said company is managed by the board of directors and they are responsible for and in-charge of the conduct and business of the company, accused No. 1. However, cheques referred to in the complaint have been signed by the accused Nos. 3 and 8 i.e., Shri K.K. Pilania and Shri N.K. Munjal for and on behalf of the accused company No.'1'. 13. Apart from the company and the appellant, as noticed hereinbefore, the managing director and all other directors were also made accused. The appellant did not issue any cheque. He, as noticed hereinbefore, had resigned from the directorship of the company. It may be true that as to exactly on what date the said resignation was accepted by the company is not known, but, even otherwise, there is no a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i's case (supra) this Court held that it is necessary to specifically aver in a complaint under section 141 that at the time when the offence was committed, the person accused was in-charge of, and responsible for the conduct of the business of the company. Furthermore, it held that vicarious liability can be attributed only if the requisite statements, which are required to be averred in the complaint petition, are made so as to make the accused/Director therein vicariously liable for the offence committed by the company. It was further held that before a person can be made vicariously liable, strict compliance of the statutory requirements would be insisted. Thus, the issue in the present case is no more res integra and has been squarely covered by the decisions of this Court referred above. It is submitted that the aforesaid decisions of this Court have become binding precedents. 19. In the case of second S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla [2007] 4 SCC 701, this Court has categorically held that there may be a large number of Directors but some of them may not assign themselves in the management of the day-to-day affairs of the company and thus are not responsible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a payee of cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in-charge of its affairs and the Directors are prima facie in that position. However, it is pertinent to note that in this case it was specifically mentioned in the complaint that (i) accused No. 2 was a director and in-charge of and responsible to the accused Company for the conduct of its business; and (ii) the response of accused No. 2 to the notice issued by BSNL that the said accused is no longer the Chairman or Director of the accused Company was false and by not keeping sufficient funds in their account and failing to pay the cheque amount on service of the notice, all the accused committed an offence. Therefore, this decision is clearly distinguishable on facts as in the said case necessary averments were made out in the complaint itself. Furthermore, this decision does not and could not have overruled the decisions in S.M.S. Pharmaceuticals Ltd.'s case (supra), Ramraj Singh's case (supra). Saroj Kumar Poddar's case (supra) and N.K. Wahi's case (supra) wherein it is clearly held that specific averments have to be made against the accused Director. 22. Learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, was in-charge of the business of the Company, as every Director need not be and is not in-charge of the business of the Company. . . ." In para 11, this Court has further recorded that : ". . . When conditions are prescribed for extending such constructive criminal liability to others, courts will insist upon strict literal compliance. There is no question of inferential or implied compliance. Therefore, a specific averment complying with the requirements of section 141 is imperative. . . ." Though the Court then said that an averment in the complaint that the accused is a Director and in-charge of and responsible for the conduct of the business may be sufficient but this would not take away from the requirement that an overall reading of the complaint has to be made to see whether the requirements of section 141 have been made out against the accused Director or not. Furthermore, this decision cannot be said to have overruled the various decisions of this Court. 24. Section 291 of the Companies Act provides that subject to the provisions of that Act, the Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guilty of consent and connivance or negligence and therefore, responsible under sub-section (2) of section 141 of the Act. 25. From the above discussion, the following principles emerge : (i)The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. (ii)Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in-charge of and were responsible for the conduct of the business of the company. (iii)Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make accused therein vicariously liable for offence committed by company along with averments in the petition containing that accused were in-charge of and responsible for the business of the company and by virtue of their position t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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