TMI Blog2017 (2) TMI 1287X X X X Extracts X X X X X X X X Extracts X X X X ..... all, in a case where the accused is residing at a place beyond the area in which he exercises his jurisdiction'. There is a vital purpose or objective behind this amendment, namely, to ward off false complaints against such persons residing at a far off places in order to save them from unnecessary harassment. Thus, the amended provisions casts an obligation on the Magistrate to conduct inquiry or direct investigation before issuing the process, so that false complaints are filtered and rejected. In the present case the opposite party no.2 has not complied the provisions of Section 141 of Negotiable Instruments Act. An essential requirement of Section 141 of the Negotiable Instruments Act has not been made wherein it was necessary to specifically aver in the complaint that at the time the offence was committed the present accused was incharge of, and responsible for the conduct of business of the company. The requirement of Section 141 is that the person sought to be made liable should be incharge of and responsible for the conduct of the business of the company at the relevant time. Necessary averments ought to be contained in a complaint before a person can be subjected to cri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public limited company, through its authorized representative Shri K.K. Jindal, Manager (Marketing Accounts) of the company. It is alleged that the accused no.2 to 4, i.e., Vivek Kumar (non-petitioner), Vimla Devi (petitioner no.1), Munni Devi (petitioner no.2) are carrying on business in partnership under the firm name and style M/s. Vinod Kumar and Company (accused no.1) having its registered office at Farrukhabad. On the request of the accused persons opposite party no.2 appointed accused no.2 to 4 as wholesale dealer in their partnership firm M/s. Vinod Kumar and company for the sale of fertilizers under the brand name of SHAKTIMAN for the Tehsil Kannauj District Farrukhabad. Accused no.2 to 4 through their firm M/s Vinod Kumar and Company requested the opposite party no.2 to supply the stock of fertilizers measuring about 1819.450 metric tons amounting to ₹ 90,10,374/- and after adjusting all the payments and other expenses an amount of ₹ 5,35,621.67 became overdue upon the firm. Accused no.2 to 4 through their firm accused no.1 issued a cheque no.929974 from Account No.2009 in Bank of India, Farrukhabad Branch for an amount of ₹ 535621.16. Cheque was duly pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case, be also passed. Which was withdrawn by the learned counsel for the petitioner and the petition was dismissed as withdrawn vide order of this Court dated 04.01.2017. 7. Learned counsel for the petitioners submits that the petition is filed only on behalf of Vimla Devi and Munni Devi. Learned counsel has mainly pressed his arguments on Section 141 of Negotiable Instruments Act. It is submitted that so far as petitioners are concerned there is an assertion in para 2 of the complaint only which reads as under. (2) That the accused nos.2 to 4 are carrying on business in partnership under the firm name and style of M/s.Vinod Kumar and Company (accused no.1), which is having its registered Officer at Lohia Shopping Complex, near City Hospital, Awas Vikas, District Farrukhabad. 8. It is further submitted that the petitioners are the sleeping partners, they have not signed the cheque. It is further submitted that even in the para no.4 of the complaint no assertion has been made regarding petitioners that they are the active partners of the firm. It is submitted that the cheque in question was signed by Vivek Kumar in the capacity of the partner for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in it is stated that the blank cheque was obtained by the opposite party no.2 which is misused. It is further submitted that the petitioners are partners of a partnership firm wherein all the partners have joint liability. It is a question of fact as to whether who is a partner or not ? Who is a sleeping partner ? These all are question of fact which could not be looked into in a petition under Section 482 CrPC. Learned counsel has placed reliance upon Rallis India Limited vs. Poduru Vidya Bhushan and Others, (2011) 13 SCC 88. 12. It is further submitted that the case law of SMS Pharma (supra) has no bearing upon the petitioner's case. 13. Learned counsel has placed reliance upon Bacha F. Guzdar, Bombay vs. Commissioner of Income Tax, Bombay, (1995) 1 SCR 876. Learned counsel relied upon para 9 and submits that there is distinction between the company and partnership firm. Reliance has also been placed upon HMT Watches Limited vs. M.A. Abida and Another, Criminal Appeal No.471 of 2015 (Arising out of SLP (Crl) No.5295 of 2014) wherein it was held that factual intricacies could not be seen in a petition under Section 482 CrPC. Learned counsel has further placed reliance up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CrPC. Section 245 relates to the cases instituted otherwise on police report in warrant cases. Complaint under Section 138 Negotiable Instruments Act is not to be tried as case as a trial of the warrant cases instituted otherwise than on a police report, hence, the trial is to proceed as per procedure prescribed by law for summary cases. Accordingly Section 245 CrPC will not be attracted and the learned Magistrate has rightly dismissed the application under Section 245 CrPC. 17. Admittedly, a petition no.1603/07 was filed by Vinod Kumar, Vivek Kumar, Smt. Vimla Devi and Smt. Munni Devi for a prayer of quashing the enitre proceedings of case no. 866/05 under Section 138 Negotiable Instruments Act, pending before Special Judicial Magistrate (Pollution) Lucknow along with a prayer to quash the order dated 10.5.2007 wherein it was ordered that the accused is not present, hence, process be issued for attendance. When both the petitions came up for hearing on 04.01.2017, the learned counsel for the petitioner withdrew the petition no.1603/07 wherein the learned counsel for the opposite party did not raise any objection. It is noteworthy that the petition no. 234/08 was pending at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ending at the time of withdrawal with a different relief, hence, case law of Sarguja Transport Service (supra) could not help the opposite party no.2 to hold that present petition is not maintainable. Present petition is maintainable. 19. Learned counsel for the petitioner has mainly challenged the impugned order of summoning of the petitioners on the basis of Section 141 Negotiable Instruments Act. Section 141 Negotiable Instruments Act 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 of 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 compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice. Explanation.- For the purposes of this section, debt or other liability means a legally enforceable debt or other liability. 21. Learned counsel for the petitioners has placed reliance upon a Three Judges' Bench judgment of the Hon'ble Apex Court in SMS Pharmaceuticals Limited Vs. Neeta Bhalla, (2005) 8 SCC 89 which was referred by the Hon'ble Apex Court in Darga Ram vs. State of Rajasthan, (2015) 2 SCC 775. It was held in SMS Pharmaceuticals in para 5 that :- 5. Section 203 of the Code empowers a Magistrate to dismiss a complaint without even issuing a process. It uses the words after considering and the Magistrate is of opinion that there is no sufficient ground for proceeding . These words suggest that the Magistrate has to apply his mind to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct investigation before issuing the process, so that false complaints are filtered and rejected. 23. Referring the case law in Vijay Dhanuka vs. Najima Mamtaj (2014) 14 SCC 638; it was held :- 11. Section 202 of the Code, inter alia, contemplates postponement of the issue of the process in a case where the accused is residing at a place beyond the area in which he exercises his jurisdiction and thereafter to either inquire into the case by himself or direct an investigation to be made by a police officer or by such other person as he thinks fit. In the face of it, what needs our determination is as to whether in a case where the accused is residing at a place beyond the area in which the Magistrate exercises his jurisdiction, inquiry is mandatory or not. 12. The words and shall, in a case where the accused is residing at a place beyond the area in which he exercises his jurisdiction were inserted by Section 19 of the Code of Criminal Procedure (Amendment) Act (Central Act 25 of 2005) w.e.f. 23.6.2006. The aforesaid amendment, in the opinion of the legislature, was essential as false complaints are filed against persons residing at far off places in order to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious matter. 22. The steps taken by the Magistrate under Section 190(1)(a) CrPC followed by Section 204 CrPC should reflect that the Magistrate has applied his mind to the facts and the statements and he is satisfied that there is ground for proceeding further in the matter by asking the person against whom the violation of law is alleged, to appear before the court. The satisfaction on the ground for proceeding would mean that the facts alleged in the complaint would constitute an offence, and when considered along with the statements recorded, would prima facie, make the accused answerable before the court. No doubt, no formal order or a speaking order is required to be passed at that stage. The Code of Criminal Procedure requires speaking order to be passed under Section 203 CrPC when the complaint is dismissed and that too the reasons need to be stated only briefly. In other words, the Magistrate is not to act as a post office in taking cognizance of each and every complaint filed before him and issue process as a matter of course. There must be sufficient indication in the order passed by the Magistrate that he is satisfied that the allegations in the complaint constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd only with a view to take cognizance of the offence, or in other words, to find out whether prima facie case has been made out for summoning the accused persons. At this stage, the Magistrate is not required to consider the defence version or materials or arguments nor is he required to evaluate the merits of the materials or evidence of the complainant, because the Magistrate must not undertake the exercise to find out at this stage whether the materials will lead to conviction or not. (Para 8) At the stage of framing of charge an individual accused may seek discharge if he or she can show that the materials are absolutely insufficient for framing of the charge against that particular accused. But such exercise is required only at a later stage and not at the stage of taking cognizance and summoning the accused on the basis of prima facie case. Even at the stage of framing of charge, the sufficiency of materials for the purpose of conviction is not the requirement and a prayer for discharge can be allowed only if the court finds that the materials are wholly insufficient for the purpose of trial. Even when there are materials raising strong suspicion against an accused, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsible for the conduct of the business of the company at the relevant time, will not be liable under the provision. The liability arises from being in charge of and responsible for the conduct of 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. Conversely a person not holding any office or designation in a company may be liable if he satisfies the main requirement of being in charge of and responsible for the conduct of business of a company at the relevant time. Liability depends on the role one plays in the affairs of a company and not on designation or status. If being a director or manager or secretary was enough to cast criminal liability, the section would have said so. Instead of every person the section would have said every director, manager or secretary in a company is liable ...., etc, The legislature is aware that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce under Section 138 of the Negotiable Instruments Act unless it is shown that he was involved in the day-to-day affairs of the company and was responsible to the company. Further, it was held that allegations in this behalf have to be made in a complaint before process can be issued against a person in a complaint. To the same effect is the judgment of the Madras High Court in R. Kannan v. Kotak Mahindra Finance Ltd. (2003) 115 Comp Cas 321 (Mad). In Lok Housing and Constructions Ltd. v. Raghupati Leasing and Finance Ltd., (2003) 115 Comp Cas 957 (Del) the Delhi High Court noticed that there were clear averments about the fact that accused 2 to 12 were officers incharge of and responsible to the company in the conduct of the day to day business at the time of commission of the offence. Therefore, the Court refused to quash the complaint. In Sunil Kumar Chhaparia vs. Dakka Eshwaraiah (2002) 108 Comp Cas 687 (AP) the Andhra Pradesh High Court noted that there was a consensus of judicial opinion that : (Comp Cas p. 691) [A] director of a company cannot be prosecuted for an offence under Section 138 of the Act in the absence of a specific allegation in the complaint that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emed to be in charge of and responsible to the company for the conduct of its business. 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 a director in such cases. 30. Explanation attached to Section 141 (2) includes a firm or other association of individuals within the meaning of company . It is further provided that Director in relation to a firm means a partner in the firm. 31. In para 7 of Sabitha Ramamurthy v. R.B.S. Channabasavaradhya (supra) it was held that :- 7. A bare perusal of the complaint petitions demonstrates that the statutory requirements contained in Section 141 of the Negotiable Instruments Act had not been complied with. 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time and were looking after day to day affairs of the partnership firm. 35. In this case also the Hon'ble Apex Court has dealt with the day to day affairs of the partnership firm theory. Further in Pooja Ravinder Devidasani vs. State of Maharashtra and Another, AIR 2015 SC 675, it was held in para 17 that :- There is no dispute that the appellant, who was wife of the Managing Director, was appointed as a Director of the Company - M/S Elite International Pvt. Ltd. On Ist July, 2004 and had also executed a Letter of Guarantee on 19the January, 2005. The cheques in question were issued during April, 2008 to September, 2008. So far as the dishonor of Cheques is concerned, admittedly the cheques were not signed by the appellant. There is also no dispute that the appellant was not the Managing Director but only a non-executive Director of the Company. Non-executive Director is no doubt a custodian of the governance of the Company but does not involve in the day to day affairs of the running of its business and only monitors the executive activity. To fasten vicarious liability under Section 141 of the Act on a person, at the material time that person shall have been at the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. An essential requirement of Section 141 of the Negotiable Instruments Act has not been made wherein it was necessary to specifically aver in the complaint that at the time the offence was committed the present accused was incharge of, and responsible for the conduct of business of the company. The requirement of Section 141 is that the person sought to be made liable should be incharge of and responsible for the conduct of the business of the company at the relevant time. Necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A clear case should be spelled out in the complaint against the person sought to be made liable. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. Merely being described as a Director in a company is not to satisfy the requirement of Section 141 of Negotiable Instruments Act. Since no compliance of Section 141 of Negotiable Instruments Act has been made by the opposite party no.2, hence, the complaint itself is not maintainable under the law. 38. Learned counsel for the opposite party has placed reliance upon HMT Watches Ltd. vs. M.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sharma and Others (Supra) Hon'ble the Apex Court has relied upon the law laid down in State of Haryana v. Bhajan Lal (Supra) wherein it was held that though it may not be possible to lay down any precise, clearly defined, sufficiently channelised and inflexible guidelines or rigid formulae or to give an exhaustive list of myriad kinds of cases wherein power under Section 482 of the Code for quashing of the FIR should be exercised, there are circumstances where the court may be justified in exercising such jurisdiction. These are, where the FIR does not prima facie constitute any offence, does not disclose a cognizable offence justifying investigation by the police; where the allegations are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused; where there is an expressed legal bar engrafted in any of the provisions of the Code; and where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is mentioned in paragraph 14 of the petition that petition no.1603 of 2007 is pending before this Court, hence, it cannot be said that the petitioner have not filed the petition with clean hands. It is submitted that in that petition Vinod Kumar has arrayed as a petitioner showing himself to be a partner of the firm while Vinod Kumar is not a partner. In this regard it is noteworthy that petition no.1603/2007 has been dismissed as withdrawn, hence, this ambiguity could not help the opposite parties. What have been stated earlier it is clear that the opposite party no.2 has not complied the provisions of Section 141 Negotiable Instruments Act, so far as petitioner no.1 and 2 are concerned. In the absence of such assertions in view of the law laid down by the Hon'ble Apex Court in the case of SMS Pharmaceuticals Limited (supra) this Court is of the view that the complaint, so far as it relates to the petitioners, as well as the cognizance order is bad in law and is liable to be quashed. 44. Accordingly petition is allowed. Complaint case no.866 of 2005 pending before Special Judicial Magistrate (Pollution) CBI, Lucknow Indo Gulf Fertilizers Limited vs. M/s Vinod Kumar and ..... 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