TMI Blog2020 (11) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings, but the order was ex-parte. In case the complainant chooses not to appear and contest the petition, despite being served, Court can proceed ex-parte and hear the Accused in a petition filed under Section 482 Cr.P.C. for quashing - Record indicates that Respondent has been duly served, and has due intimation of the listing of the petition, but has chosen not to contest the petition, despite ample opportunities to defend. In the circumstances the Respondent is proceeded ex-parte and the petition is heard on merits. There is force in the contention of counsel for the Petitioner that since the Petitioner had resigned on 15.06.2016 and was no longer responsible for the conduct of business of Accused No. 1 Company, on the date of the commission of the alleged offence, she cannot be arrayed as an Accused in the proceedings emanating out of the complaint referred to above. Form No. DIR-11 clearly evidences the resignation of the Petitioner on 15.06.2016 and the cheque in question is admittedly issued on 28.10.2016, which is post her resignation. It cannot therefore be said that the Petitioner was in-charge of and responsible for the conduct of day to day business/affairs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... que was allegedly issued in favour of the complainant. All that is mentioned is towards the discharge of part of legal debts/liability cheque was issued. There are no specific allegations or averments against the Petitioner regarding her alleged role either in the transaction or in the conduct of business of the Company. It is settled that mere designation of an officer in a Company is not enough to make the officer vicariously liable. The absence of an averment as to the transaction / specific role of the Petitioner, in my opinion, is fatal to the case of the complainant. It is relevant to note at this stage that it is not the case of the complainant that even after resigning as a CEO of accused No. 1 the Petitioner continued to be associated with the Company or was occupying any such position which made her in-charge and responsible for the conduct of its business. Vicarious liability has been imputed to the Petitioner solely on account of her being the CEO of accused No. 1. It is also not the case of the complainant that the cheque in question was dishonoured or the notice of demand was not complied with due to connivance of or with the consent of the Petitioner. The compla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred a Criminal Revision bearing CR No.114/2019 on 28.02.2019, challenging the summoning order. On 25.03.2019 the Sessions Court issued notice to the Respondent and the Petitioner took repeated steps to effect service on the Respondent through his counsel before the Trial Court. However, none appeared on behalf of the Respondent. Vide order dated 04.12.2019 the Sessions Court dismissed the Revision petition and the Petitioner approached this Court. 4. It needs to be mentioned that vide order dated 08.06.2020 this Court after capturing the controversy involved issued notice to the Respondent, returnable on 06.07.2020. When the petition was listed on 06.07.2020 counsel for the Petitioner submitted that she had served the Respondent through the electronic mode and sought time to place on record an affidavit to that effect. Report of the Registry regarding service on the Respondent through other permissible modes was not on record and the Registry was directed to place the same on record. When the petition was listed on 16.07.2020, the Report of the Registry, placed on record, indicated that the Respondent had been served through e-mail. Counsel for the Petitioner also submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under Section 138 NIA proceeded ex-parte against the complainant, when the complainant chose to be unrepresented, despite being duly served. 8. Following these judgements, it is clear that in case the complainant chooses not to appear and contest the petition, despite being served, Court can proceed ex-parte and hear the Accused in a petition filed under Section 482 Cr.P.C. for quashing. 9. Record indicates that Respondent has been duly served, and has due intimation of the listing of the petition, but has chosen not to contest the petition, despite ample opportunities to defend. In the circumstances the Respondent is proceeded ex-parte and the petition is heard on merits. 10. Learned counsel for the Petitioner contends that the Petitioner had resigned from Accused No. 1 Company with effect from 15.06.2016, whereas the cheque in question was issued on 28.10.2016 and was dishonoured on presentation on 29.10.2016. The legal notice of demand was sent by the Respondent allegedly on 02.11.2016. In support of the resignation of the Petitioner, counsel has drawn the attention of the Court to Form No. DIR-11 issued under Proviso to Section 168(1) of the Companies Act, 2013 and R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . State Ors. 2019 SCC OnLine Del 9329. 13. To elaborate the argument, it is submitted that the Courts have repeatedly affirmed that mere fact of being a Director is not enough and there must be specific allegations to make out a case against the Accused under Sections 138 and 141 of NIA. This according to the counsel has been so observed in the judgements in S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla Ors. (2005) 8 SCC 89 and Sudeep Jain vs. M/s. ECE Industries Ltd. 2013 SCC OnLine Del 1804. 14. Last but not the least learned counsel also argues that the complainant is a Company and a separate legal entity from its Directors. Ms. Sahiba points out to a Notification dated 08.08.2018 issued by the Office of Registrar of Companies published under Section 248(5) of the Companies Act, 2013 wherein a list of Companies has been published, which have been struck off from the Register of the Companies, as they stand dissolved. She draws the attention of the Court to seriatim 2033 where the name of the Respondent figures. The argument is that once the complainant Company has been dissolved, further prosecution cannot be continued as the complainant is no longer in existence. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, 69[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. 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 know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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. (c) The answer to Question (c) has to be in the affirmative. The question notes that the managing director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141. 20. The same view was reiterated by the Supreme Court in National Small Industries Corp. Ltd. v. Harmeet Singh Paintal, 2010 (2) SCALE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, they are liable to be proceeded with. (vi) If accused is a Director or an Officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint. (vii) 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. This has to be averred as a fact as there is no deemed liability of a Director in such cases. 22. In this context relevant it would be to quote a few passages from the judgement of this Court in Sudeep Jain (supra) as under:- 9. The prime objective of this Court is to remind all the Metropolitan Magistrates in Delhi to carefully scrutinize all the complaint cases being filed under Section 138 r/w 141 of the Negotiable Instruments Act, 1881 against the accused companies at the pre-summoning stage and make sure that notice be directed only to those directors or employees of the company who satisfy the principles laid down in the aforesaid judgments. Summons must be issued only after giving due consideration to the allegations and the materials placed on record by the complainant. Undeniably, as per the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accused Company; b. Particulars of the dishonoured cheque/cheques; Person/Company in whose favour the cheque/cheques were issued Drawer of the cheque/cheques Date of issuance of cheque/cheques Name of the drawer bank, its location Name of the drawee bank, its location Cheque No./Nos. Signatory of the cheque/cheques c. Reasons due to which the cheque/cheques were dishonoured; d. Name and Designation of the persons sought to be vicariously liable for the commission of the offence by the accused Company and their exact role as to how and in what manner they were responsible for the commission of the alleged offence; e. Particulars of the legal notice and status of its service; f. Particulars of reply to the legal notice, if any. 23. Recently a Co-ordinate Bench of this Court in Alibaba Nabibasha (supra) following the judgements referred to above quashed the complaint pending before the Trial Court under Section 138 of the NIA including the summons and held as under:- 20. It is also settled law that mere repetition of the phraseology of Section 141 of NI Act that the accused is Incharge and respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xx xxx 24. Thus, what follows is that more bald allegation that a particular person (or a Director) was responsible for the conduct of the business of the company would not be sufficient. That would be reproduction of the language of Sub-section (1) of Section 141 and would be without any consequence and it is also necessary for the complainant to satisfy how the petitioner was so responsible and on what basis such an allegation is made in the complaint. xxx xxx xxx 32. It can, therefore, be safely concluded that the view, which is now accepted by the Supreme Court, is that more repetition of the phraseology contained in Section 141 of the NI Act, i.e. the accused is in charge of and responsible for the conduct of the day-to-day affairs of the company , may not be sufficient and something more is to be alleged to show as to how he was so responsible. xxx xxx xxx In this petition specific averment is made by the petitioner that he was neither a Director of the company nor at all incharge of the company nor involved in day-to-day running of the company at the time of commission of the alleged offence in February and March, 1999 when the cheques were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Additionally, in the judgement of Kamal Goyal (supra) on which reliance has been placed, this Court has held as under: 12. In the case before the Hon'ble Supreme Court, the respondent No. 1 had resigned from the Directorship of the Company under intimation to the complainant and in these circumstances, the Hon'ble Supreme Court was of the view that a person who had resigned with the knowledge of the complainant in the year 1996, could not be a person in charge of the Company in the year 1999 when the cheque was dishonoured as he had no say in the matter that the cheque is honoured and he could not have asked the Company to pay the amount. In my view even if resignation was not given by the petitioner under intimation to the complainant, that would not make any difference, once the Court relying upon certified copy of Form 32 accepts his plea that he was not a director of the Company, on the date the offence under Section 138 of Negotiable Instruments Act was committed. He having resigned from the directorship much prior to even presentation of the cheque for encashment, he cannot be vicariously liable for the offence committed by the Company, unless it is alleged an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may allude to the judgement of Co-ordinate Bench of this Court in Shivam Minerals (supra), the relevant portion of which is as follows:- 9. In the instant case, to assert the necessary ingredients of existing debt or liability, it is required to be averred in a complaint of Section 138 of NI Act, as to what is the factual basis to show existing debt or liability. All that has been said in the complaints in question and the pre-summoning evidence is as under:- 3. That complainant and accused were known to each other and both parties had substantial business transactions and in lieu of the business correspondence and financial transactions complainant company had sent payments to accused persons through RTGS and in discharge of part liability towards complainant co. you accused no. 3 being the Director of accused no. 1 and in connivance, consent and knowledge of accused no. 2, 4 and 5 issued the following cheques in favour of my client as under:- CHEQUE NO. DATED AMOUNT DRAWN ON 018110 18-10-13 ₹ 10000000/- IDBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ple to have faith in the efficacy of banking transactions and use of cheques as negotiable instruments. To balance, a penal provision was enacted to ensure that the drawer of a cheque does not misuse the provisions and honours his commitment. The issue herein concerns the criminal liability arising out of dishonour of a cheque. Normally the criminal liability is not vicarious i.e. one cannot be held criminally liable for the act of another. Section 141 of NIA is however an exception where the offence under Section 138 is committed by a Company but the liability extends to the officers of the Company, subject to fulfillment of the conditions under Section 141, as a caveat. Since it is a criminal liability, the conditions have been enacted to ensure that the person who is sought to be made vicariously liable for the alleged offence of the Company has a definite role to play in the incriminating act and as a corollary a person who has no role to play cannot be proceeded against, only on account of his being an officer of the Company. Through several judicial pronouncements it has been enunciated that it must be clearly averred in the complaint made against any person that he/she, at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Board of Directors. A perusal of these provisions shows that what a Board of Directors is empowered to do in relation to a particular company depends upon the roles and functions assigned to directors as per the memorandum and articles of association of the company. There is nothing which suggests that simply by being a director in a company, one is supposed to discharge particular functions on behalf of a company. It happens that a person may be a director in a company but he may not know anything about the day-to-day functioning of the company. As a director he may be attending meetings of the Board of Directors of the company where usually they decide policy matters and guide the course of business of a company. It may be that a Board of Directors may appoint sub-committees consisting of one or two directors out of the Board of the company who may be made responsible for the day-to-day functions of the company. These are matters which form part of resolutions of the Board of Directors of a company. Nothing is oral. What emerges from this is that the role of a director in a company is a question of fact depending on the peculiar facts in each case. There is no universal r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 are sought to be made criminally liable under Section 141 should be, at the time the offence was committed, in charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for the conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a director of a company 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 under the provision. The liability arises from being in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents 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. v. Secunderabad Hospitals (P) Ltd. [(1999) 96 Comp Cas 106 (AP) ] 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 director or directors 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: (Comp Cas p. 112) There must be clear, unambiguous and specific allegations against the persons who are impleaded as accused that they were in charge of and responsible to the company in the conduct of its business at the material time when the offence was committed. 14. The same High Court in V. Sudheer Reddy v. State of A.P. [(2000) 107 Comp Cas 107 (AP)] held that: (Comp Cas p. 110) The purpose of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artnership. It was found that no allegations were contained in the complaint regarding the fact that the accused was a partner in charge of and was responsible to the firm for the conduct of business of the firm nor was there any allegation that the offence was made with the consent and connivance or that it was attributable to any neglect on the part of the accused. It was held that no case was made out against the accused who was a partner and the complaint was quashed. The latest in the line is the judgment of this Court in Monaben Ketanbhai Shah v. State of Gujarat [(2004) 7 SCC 15 : 2004 SCC (Cri) 1857]. It was observed as under: (SCC p. 17, para 4) 4. It is not necessary to reproduce the language of Section 141 verbatim in the complaint since the complaint is required to be read as a whole. If the substance of the allegations made in the complaint fulfil the requirements of Section 141, the complaint has to proceed and is required to be tried with. It is also true that in construing a complaint a hyper-technical approach should not be adopted so as to quash the same. The laudable object of preventing bouncing of cheques and sustaining the credibility of commercial tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore any criminal liability can be fastened. In the background of these judgements I may now examine the complaint in the present case, which is the genesis of the present proceedings. 29. Perusal of the complaint shows that the allegation of issuing the cheque is against accused No.1 from the account maintained by accused No. 1 and allegations of signing are against accused No. 2, as authorized signatory of accused No.1. The allegation against accused No. 5, who is the Petitioner herein, is that an assurance was given to the complainant that the cheque shall be honoured on presentation. Petitioner is stated to be the CEO of accused No.1 Company and the wife of accused No.2. It is averred that the cheque was issued with her consent and knowledge and she attended meetings with the official of the complainant and responsible for the business of the Company. What is significant is that in the entire complaint there is not even a whisper of the alleged transaction, pursuant to which the cheque was allegedly issued in favour of the complainant. All that is mentioned is towards the discharge of part of legal debts/liability cheque was issued. There are no specific allegations or av ..... X X X X Extracts X X X X X X X X Extracts X X X X
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