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TMI Blog2010 (12) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... d person, is also one of the directors. The chairman-cum-director has placed orders on behalf of the company for supplying of medicines to the tune of Rs. 39,70,994. Based on the request, the medicines were supplied, but the amount was not paid. Cheques were issued by the chairman-cum-director on behalf of the company. On presentation of the cheque, they returned for the reason "funds insufficient". 4. The respondent issued statutory notices to the company as well as to the directors. Though they have received the notices they failed to repay the amount. Hence the respondent has initiated section 138 proceedings against the company as well as the directors. 5. The petitioner, who is one of the directors, has come forward with the present application to quash the entire proceedings on the sole ground that the petitioner was not in charge and was not responsible for the conduct of the day-to-day business of the company and the complainant has failed to specifically aver that the petitioner was in charge of and was responsible for the business of the company. 6. Mr. Rajnish Pathiyil, learned counsel for the petitioner would draw our attention to section 141 of the Negotiable Instru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non bailable warrant was issued to the accused and on July 9, 2008, PW1 was examined in chief and the accused did not participate in the proceedings. Only on December 2, 2009, PW1 was cross examined and the matter is pending without any progress. Learned counsel submitted that only thereafter examination of witnesses was effected and the accused was questioned under section 313 of the Code of Criminal Procedure, 1973 and at this stage, the petitioner has come forward with the present application only to drag on the proceedings. 10. Learned senior counsel also submitted that in the statutory notice itself, a clear averment was made against the petitioner that she was in charge of and responsible to the affairs of the company and the same averment was also made in the complaint. Learned counsel relied on a decision reported in Amar Chand Agarwalla v. Shanti Bose [1973] 4 SCC 10 according to which, in a case, where several prosecution witnesses have been examined and cross examined and only two prosecution witnesses and court witnesses remained to be examined and at that stage, when a petition to quash the proceedings was moved, the court held : "the proper course to be adopted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cases where an offence under section 138 is committed by a company. The key words which occur in the section are 'every person'. These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words : '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, etc.'." 14. It is well-settled that the liability of a director of a company arises when he is in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Section 141 of the Act provides for a constructive liability. Therefore, it requires strict compliance with the provision. In the matters of post dated cheques which were presented on later dates, the relevant time of the commission of the offence is very important. For constituting an offence under section 138 of the Act, the following ingredients are to be satisfied : (a)a cheque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of section 141. Even a non director can be liable under section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial." 18. Therefore it is well-settled that merely by being a director of a company, one cannot be deemed to be in charge of and responsible for the conduct of its business to make the person liable under section 141 of the Act. 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. If this has to be averred as a fact, then there is no deemed liability of a director in such case. 19. Section 141 of the Act provides for a constructive liability. For constituting an offence under section 138 of the Act : (a)a cheque must be drawn ; (b)it must be presented and returned unpaid ; (c)a notice for payment shall be served ; (d)there must be a failure to make payment w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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