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TMI Blog2021 (2) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... t power under section 482 of the Code and the extraordinary jurisdiction under section 227 of the Constitution of India. 4. The submission of the learned counsel Mrs. R.P. Jog rests on the premise that it is incontrovertible that the accused was not in charge of the affairs of the firm or responsible to the firm for the day to day conduct of the business, and therefore, the vicarious principle underlying the provisions of section 141 of the Act, do not come into play. The edifice of the submission that the accused was not in charge of the affairs of the firm is constructed on a document dated 9.1.2013 which purports to be a partnership deed incorporating a recital that the accused shall only be a working partner. Before I advert to the factual matrix, it would be apposite to note the submission of the learned counsel Mr. R.P. Goenka, who appears on behalf of the respondent 1, who shall be referred to as the complainant, hereinafter. Mr. R.P. Goenka submits that the complaint specifically asserts that the accused was in charge of the affairs of the firm and indeed the averments in the complaint travel a step ahead, in the sense, that the averment further is that the accused is equa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Khandelwal and has deposited an amount of Rs. 1,00,000/- (Rs. One Lac) by cheque no. 000001 drawn on The Akola Janta Comm. Co. operative Bank ltd. Akola with the accused no.1 firm. That the said cheque given by the complainant has been duly honored and the accused have received its amount. That the accused no. 2 Bharat for and on behalf of accused no. 1 firm and also accused no. 3 to 5 have acknowledged the receipt of the said amount by executing a deposit receipt dated 14.10.2016 in favour of the complainant. That the accused have agreed to refund the said deposit amount at any time, as and when demanded by the complainant. That at that time and on that date, all the accused no. 2 to 5 were present there". "7. That the accused no. 2 to 5 were and are in charge of and responsible for the business of the accused no. 1 firm and all the accused are having complete knowledge and information about the depositing of the amount by the complainant wih the accused no. 1 firm and issuance of the cheque which is the subject matter of this complaint in favour of the complainant for the refund of deposit amount. The accused no. 2 to 5 are also having knowledge that the said cheque has been di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of an admission by the complainant of the partnership deed on which the accused is relying. 10. Mrs. R.P. Jog invites my attention to a complaint in which the complainant placed on record copy of the partnership deed. I noted the name of the complainant which is Mr. Dilip Goenka and asked Mrs. R.P. Jog to explain as to how Mr. Dilip Goenka filing the partnership deed in a complaint lodged by him personally, can be construed as an admission of the complainant herein that such a partnership deed does exists and correctly reflects the factual scenario. I was amazed by the response which is that Mr. Dilip Goenka who filed on record the partnership deed in his personal capacity as the complainant, also appears as counsel for the complainant in the present matter. In the interest of observing restraint, I say nothing more. Indeed the response is noted only as a courtesy to the learned counsel. 11. In the midst of dictation, only in order to satisfy my conscience, I again asked Mrs. R.P. Jog whether there is any incontrovertible material suggesting that the complainant has admitted the contents of the partnership deed dated 9.1.2013 and in response Mrs. R.P. Jog submits that she has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 15. Several decisions of the Apex Court have followed SMS Pharmaceuticals to hold that an averment that the partner was in charge of and responsible for the conduct of the business of the firm is a basic requirement which persuades the learned Magistrate to issue process. An illustrative reference may be made to Gunmala Sales Private Limited and others..vs..Navkar Infra Projects Private Limited an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque, the Director is entitled to contend that he was not concerned with the issuance of cheque for a variety of reasons. It is for the High Court to consider these submissions. The High Court may in a given case on an overall reading of a complaint and having come across some unimpeachable evidence or glaring circumstances come to a conclusion that the petition deserves to be allowed despite the presence of the basic averment. That is the reason why in some cases, after referring to SMS Pharma-(1), but considering overall circumstances of the case, this Court has found that the basic averment was insufficient, that something more was needed and has quashed the complaint." "30. When a petition is filed for quashing the process, in a given case, on an overall reading of the complaint, the High Court may find that the basic averment is sufficient, that it makes out a case against the Director; that there is nothing to suggest that the substratum of the allegation against the Director is destroyed rendering the basic averment insufficient and that since offence is made out against him, his further role can be brought out in the trial. In another case, the High Court may quash the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad thus: "17. The law as laid down in S.M.S.Pharmaceuticals Ltd.'s case (supra) has been consistently followed and as late as in 2007, this Court in the case of N.K. Wahi's case, while considering the question of vicarious liability of a Director of a Company, reiterated the sentiments expressed in S.M.S. Pharmaceuticals Ltd.'s case (supra) that merely being a Director would not make a person liable for an offence that may have been committed by the Company. For launching a prosecution against the Directors of a Company under Section 138 read with Section 141 of the 1881 Act, there had to be a specific allegation in the complaint in regard to the part played by them in the transaction in question. It was also laid down that the allegations had to be clear and unambiguous showing that the Directors were in charge of and responsible for the business of the Company. This was done to discourage frivolous litigation and to prevent abuse of the process of Court and from embarking on a fishing expedition to try and unearth material against the Director concerned. 20. Central Bank of India takes the case of the accused no further. The enunciation is that for launching a prosecut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further there was no allegation against them in terms of Section 141 of the Act and as such they should not have been made parties. Learned Metropolitan Magistrate dismissed the application holding that whether the applicants in the aforesaid petitions were Directors at the relevant point of time or not is to be decided on evidence. 3. It was further held that the company is a juristic person and works through persons responsible for carrying out its activities and, therefore, they have been rightly impleaded as parties. Respondents filed applications invoking Section 482 of the Code of Criminal Procedure, 1973 (in short the 'Code'). The High Court held that the preliminary evidence does not establish that the respondents were either in-charge or were responsible to the companies for the conduct of business. In the absence of any such evidence or assertion, it was held that the learned Metropolitan Magistrate was not justified in issuing summons to the respondents". 4. In support of the appeals, learned counsel for the appellant submitted that there was clear material to show that respondents were either Directors or persons in-charge of the business of the company. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on the factors canvassed in the foregoing paragraphs, we would delineate the following steps to determine the veracity of a prayer for quashing, raised by an accused by invoking the power vested in the High Court under Section 482 of the Code of Criminal Procedure.:- (i) Step one, whether the material relied upon by the accused is sound, reasonable, and indubitable, i.e., the material is of sterling and impeccable quality? (ii) Step two, whether the material relied upon by the accused, would rule out the assertions contained in the charges levelled against the accused, i.e., the material is sufficient to reject and overrule the factual assertions contained in the complaint, i.e., the material is such, as would persuade a reasonable person to dismiss and condemn the factual basis of the accusations as false. (iii) Step three, whether the material relied upon by the accused, has not been refuted by the prosecution/complainant; and/or the material is such, that it cannot be justifiably refuted by the prosecution/complainant? (iv) Step four, whether proceeding with the trial would result in an abuse of process of the court, and would not serve the ends of justice? If the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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