TMI Blog2007 (4) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... me they were not incharge of the affairs of the company. Reading the complaint as a whole, we are satisfied that it is a case where the contentions sought to be raised by the appellant can only be dealt with after the conclusion of the trial. Appeal dismissed. - Writ Petition (crl.) 592 of 2007 - - - Dated:- 19-4-2007 - TARUN CHATTERJEE AND P.K. BALASUBRAMANYAN, JJ. JUDGMENT 1. Leave granted. 2. Heard both sides. 3. On behalf of the Data Access (India) Limited, two cheques were issued to the respondent \026 Bharat Sanchar Nigam Limited (hereinafter referred to as, "B.S.N.L."). The cheques were dated 31.8.2004. The cheques were duly presented by the B.S.N.L. but were dishonoured for insufficiency of funds. B.S.N.L. thereupon issued requisite notices calling upon the Data Access (India) Limited to pay the amounts due under the cheques. The payments not having been made, B.S.N.L. filed a compliant under Section 138 of the Negotiable Instruments Act. 4. In the complaint, B.S.N.L. alleged that the cheques were issued to it by the Data Access (India) Limited in discharge of a pre-existing liability based on the business transactions between the companies. The appellant he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es who were invested with substantial powers of management of the Company and as such the Managing directors were involved in the day to day affairs of the Company and not himself, who had only acted for a short period as Honorary Chairman. The complaint did not contain adequate averments to justify initiation of a criminal proceeding against him and hence the complaint was liable to be quashed. 6. On behalf of B.S.N.L., it was contended that the Petition under Section 482 of the Code of Criminal Procedure was not maintainable and that the questions sought to be raised by the appellant were questions that had to be decided at the trial. The complaint disclosed sufficient materials justifying the commencement of the proceedings against Data Access (India) Limited and the other two accused including the appellant. The appellant who was the Chairman of the Data Access (India) Limited was incharge of and responsible to the Company for the conduct of its business, and no occasion had arisen for quashing the complaint. The question whether a person is incharge of and responsible for the conduct of the business of the Company, is to be adjudged during the trial on the basis of the mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions are intended to ensure that a person who is sought to be made vicariously liable for an offence of which the principal accused is the Company, had a role to play in relation to the incriminating act and further that such a person should know what is attributed to him to make him liable. In other words, persons who had nothing to do with the matter need not be roped in. A company being a juristic person, all its deeds and functions are result of acts of others. Therefore, officers of a Company who are responsible for acts done in the name of the Company are sought to be made personally liable for acts which result in criminal action being taken against the Company. It makes every person who at the time the offence was committed, was incharge of and was responsible to the Company for the conduct of business of the Company, as well as the Company, liable for the offence. The proviso to the sub-section contains an escape route for persons who are able to prove that the offence was committed without their knowledge or that they had exercised all due diligence to prevent commission of the offence." After referring to a number of earlier decisions, this Court summed up the legal p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the complaint against the appellant did not contain sufficient averments to justify the issue of process to the appellant and therefore the complaint ought to be quashed. Learned counsel also relied heavily on the decision in Saroj Kumar Poddar Vs. State (NCT of Delhi) Anr. [2007 (2) SCALE 36], wherein two learned judges of this Court held that the complaint in that case did not satisfy the requirements of Section 138 read with Section 141 of the Negotiable Instruments Act. Learned counsel referred us to paragraphs 13 to 18 of that decision with particular reference to the allegations in the complaint in that case and submitted that in the case on hand also, the complaint was along the same lines and read in the context of that decision, it must be held that no adequate material was disclosed for proceeding against the appellant on the complaint. 10. Learned counsel for B.S.N.L., on the other hand, submitted that the complaint contained adequate averments justifying the initiation of prosecution against the appellant for the offence under Section 138 of the Negotiable Instruments Act and the High Court was right in refusing to quash the complaint under Section 482 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for inserting the Chapter was: "to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds in the accounts or for the reason that it exceeds the arrangements made by the drawer, with adequate safeguards to prevent harassment of honest drawers" While Section 138 made a person criminally liable on dishonour of a cheque for insufficiency of funds or the circumstances referred to in the Section and on the conditions mentioned therein, Section 141 laid down a special provision in respect of issuance of cheques by companies and commission of offences by companies under Section 138 of the Negotiable Instruments Act. Therein, it was provided that if the person committing an offence under Section 138 of the Act was 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. The scope of Section 141 has been authoritatively discussed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to manage and are exclusively responsible for that management." Therefore, a person in the commercial world having a transaction with a company is entitled to presume that the directors of the company are incharge of the affairs of the company. If any restrictions on their powers are placed by the memorandum or articles of the company, it is for the directors to establish it at the trial. It is in that context that Section 141 of the Negotiable Instruments Act provides that when the offender is a company, every person, who at the time when the offence was committed was incharge of and was responsible to the company for the conduct of the business of the company, shall also be deemed to be guilty of the offence along with the company. It appears to us that an allegation in the complaint that the named accused are directors of the company itself would usher in the element of their acting for and on behalf of the company and of their being incharge of the company. In Gower and Davies Principles of Modern Company Law (Seventh Edition), the theory behind the idea of identification is traced as follows: "It is possible to find in the cases varying formulations of the under-lying pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court noticed that: "The laudable object of preventing bouncing of cheques and sustaining the credibility of commercial transactions resulting in enactment of Sections 138 and 141 has to be borne in mind." 16. In the light of the ratio in S.M.S. Pharmaceuticals Ltd. (supra) what is to be looked into is whether in the complaint, in addition to asserting that the appellant and another are the directors of the company, it is further alleged that they are incharge of and responsible to the company for the conduct of the business of the company. We find that such an allegation is clearly made in the complaint which we have quoted above. Learned Senior Counsel for the appellant argued that in Saroj Kumar Poddar case (supra), this Court had found the complaint unsustainable only for the reason that there was no specific averment that at the time of issuance of the cheque that was dishonoured, the persons named in the complaint were incharge of the affairs of the company. With great respect, we see no warrant for assuming such a position in the context of the binding ratio in S.M.S. Pharmaceuticals Ltd. (supra) and in view of the position of the Directors in a company as explained ab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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