TMI Blog2017 (10) TMI 457X X X X Extracts X X X X X X X X Extracts X X X X ..... before this court that the petitioner is the wife of the second accused who is the Managing Director and that she is also involved in the day to day affairs of the business no other averment has been made against her in the complaint. In view of Section 141 when there is no averment against the petitioner the proceedings against the petitioner is an abuse of process of law and is liable to be quashed. In the result, this Criminal Original Petition is allowed and the complaint as against the petitioner alone is quashed. - Crl. O. P. No. 25540 of 2010 and M. P. No. 1 and 2 of 2010 - - - Dated:- 8-9-2017 - A. D. Jagadish Chandira, J. For the Petitioner : M/s. V. T. Narendiran For the Respondent : R. Gunasekaran ORDER The petitioner/Accused No.3, the Director of the first Accused company has filed the present quash petition to quash the proceedings against her in C.C.No.1811 of 2010 on the file of II Metropolitan Magistrate, Egmore, Chennai for the offence punishable under Section 138 of Negotiable Instruments Act. 2. The main contention grounds raised by the petitioner is that the very complaint under Section 138 of the Negotiable Instruments Act is not mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of the complainant on the promise and assurance of the accused that the cheques would be honoured on presentation of the same in the Bank. But the said cheques were returned dishonoured from the Bank of Baroda, Vadapalani Branch where they were presented by the complainant on 3.9.2009 with the Bank Return Memo dt. 5.9.2009 with the remarks 'Insufficient Funds'. The complainant states that he had informed the accused about the dishonour of the said cheques and whereas the accused both requested him to re-present the said cheques in the Bank in the 1st week of October 2009 with the promise that they would arrange sufficient funds to honour the said cheques. 3.Accordingly, the complainant presented the above said two cheques bearing No.292198 dt. 26.7.2009 for ₹ 25,00,000/- and No.292199 dt. 26.8.2009 for ₹ 15,00,000/- both drawn on ICICI Bank Ltd., Purasawalkam Branch, Chennai-84 in his Bank i.e. Bank of Baroda, Vadapalani Branch, Chennai-26 for encashment, on 3-10-2009. But this time also the said cheques were returned dishonoured with the Bank Return Memo dt. 6.10.2009 with the Bank's remarks 'Refer to Drawyer'. 4.The complainant in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said notice. Explanation. For the purposes of this section, debt or other liability means a legally enforceable debt or other liability. 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 company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of 1881 (hereinafter referred to as the Act ). The relevant part of the provisions are quoted as under : Section 138 : Dishonour of cheque for insufficiency, etc., of funds in the account Where any cheque drawn by a persons on an account maintained by him with a banker for payment of any amount of money to another persons from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless (a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 141 of the Act, such a person is vicariously liable to be held guilty for the offence under Section 138 and punished accordingly. Section 138 is the charging section creating criminal liability in case of dishonour of a cheque and its main ingredients are : (i) Issuance of a cheque. (ii) Presentation of the cheque (iii) Dishonour of the cheque (iv) Service of statutory notice on the person sought to be made liable, and (v) Non-compliance or non-payment in pursuance of the notice within 15 days of the receipt of the notice. 10. While analysing Section 141 of the Act, it will be seen that it operates 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. What is required is that the persons who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volvement. 12. The conclusion is inevitable that the liability arises on account of conduct , act or omission on the part of a person and not merely on account of holding an office or a position in a company. Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the necessary facts which make a person liable. 13. The question of what should be averments in a criminal complaint has come up for consideration before various High Courts in the country as also before this Court. Secunderabad Health Care Ltd. and others v. Secunderabad Hospitals Pvt. Ltd. and others [1999 (96) C.C.(AP) 106] was a case under the Negotiable Instruments Act specifically dealing with Sections 138 and 141 thereof. The Andhra Pradesh High Court held that every Director of a company is not automatically vicariously liable for the offence committed by the company. Only such Directors or Director who were in charge of or responsible to the company for the conduct of business of the company at the material time when the offence was committed alone shall be deemed to be guilty of the offence. Further it was observed that the requirement of law is that there must b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision making every person in charge of and responsible to the company for conduct of its business liable for offence committed by a company. It was held that a person liable for criminal action under that provision should be a person in overall control of day-to-day affairs of the company or a firm. This was a case of a partner in a firm and it was held that a partner who was not in such overall control of the firm could not be held liable. In Municipal Corporation of Delhi v. Ram Kishan Rohtagi and others [1983 (1) SCC 1], the case was under the Prevention of Food Adulteration Act. It was first noticed that under Section 482 of the Criminal Procedure Code in a complaint, the order of a Magistrate issuing process against the accused can be quashed or set aside in a case where the allegation made in the complaint or the statements of the witnesses recorded in support of the same taken at their face value make out absolutely no case against the accused or the complaint does not disclose the essential ingredients of an offence which is arrived at against accused. This emphasises the need for proper averments in a complaint before a person can be tried for the offence alleged in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all have been at the helm of affairs of the Company, one who actively looks after the day-to-day activities of the Company and particularly responsible for the conduct of its business. Simply because a person is a Director of a Company, does not make him liable under the N.I. Act. Every person connected with the Company will not fall into the ambit of the provision. Time and again, it has been asserted by this Court that only those persons who were in charge of and responsible for the conduct of the business of the Company at the time of commission of an offence will be liable for criminal action. A Director, who was not in charge of and was not responsible for the conduct of the business of the Company at the relevant time, will not be liable for an offence under Section 141 of the N.I. Act. In National Small Industries Corporation (supra) this Court observed: Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the requisite statements, which are required to be averred in the complaint petition, are made so as to make the accused therein vicariously liable for the offence committed by the company. By verbatim reproducing the wording of the Section without a clear statement of fact supported by proper evidence, so as to make the accused vicariously liable, is a ground for quashing proceedings initiated against such person under Section 141 of the N.I. Act. 9. Heard the learned counsel for both sides and gone through the complaint. In the complaint other than the cause title depicting the petitioner as director and impleading her as the third accused no other averment has been made that she is a person who at the time of the commission of the offencce was incharge of and was responsible to the company for the conduct of the company as well as the company. 10. As per the dictum laid down by the three Judges Bench reported in (2005) 8 SCC 89 (S.M.S.Pharmaceuticals Ltd., vs. Neeta Bhalla) that absolutely when there is no averment in the complaint that the petitioner was in charge and responsible for the day to day affairs of the company, the essential requirements under Section 141 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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