TMI Blog2005 (7) TMI 728X X X X Extracts X X X X X X X X Extracts X X X X ..... ed No. 2, 3 and 4 who were Directors of the company had failed to make payment. It is alleged that the accused No. 2 to 4 are the Directors of the company and are in charge of the working of the company and actively involved in the activities of accused No. 1 company. The Chief Metropolitan Magistrate found on the basis of averments made in the complaint as well as on the basis of documents and material placed before it that all the accused were responsible for the alleged offence u/s. 138 of the Act. Accordingly he summoned all of them. The ground on which the order is challenged is that at the relevant time, the petitioners were no more the Directors of the company as they had resigned much before the date of the cheque. In addition it is submitted that there were not sufficient allegations in the complaint to prosecute the petitioners for the offence of the accused No. 1 company. 2. So far as the question of the petitioners having resigned as Directors on the relevant date is concerned, suffice it to say that the same is a question of fact and has to be gone into during trial. This court in exercise of power under Section 482 of the Code of Criminal Procedure (in short Cr.P.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onnivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.- For the purposes of this section,- (a) company means any body corporate and includes a firm or other association of individuals; and (b) director , in relation to a firm, means a partner in the firm: 5. The question that arises is whether a person by virtue of his simply being the Director of a company will become responsible for an offence of dishonour of cheque issued by the company. It can be said that the company is run by the Board of Directors and, therefore, every person who is a Director of the accused company is liable for the offence under Section 141(1) of the Act. It can be seen that the Supreme Court in the case of M/s. Ashok Leyland Finance Ltd. vs. R.S. Aggarwal Ors. reported as 2003 (10) SCALE 1000 made the following observations: It is settled law, and no authority is required for the proposition, that in the case of a Company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pratap Chand reported in (1981) 2 SCC 335, and Anil Hada v. Indian Acrylic Ltd., reported in (2000) 1 SCC 1. It was held that as the complaint did not state that the accused was in charge of and responsible for the conduct of business of the company and as the complaint did not attribute any particular act to the accused the complaint could not be allowed to proceed. This Court quashed the complaint........ 8. The Supreme Court in the case of Katta Sujatha (Supra) has laid down that not all the Directors of a company will be responsible for the conduct of the business of the company for the purpose of the provisions of Sections 138 to 141 of the Act. This has been so held despite the general law that a company is governed by the Board of Directors. Apart from being the Director of a company the accused Director also need to have been involved either in the management of the specific part of the business of the company relating to the offence or he should be in actual overall control of the business and not merely a member of the Board of Directors and responsible for the conduct of the business of the company by virtue of his being Director of the company only. Therefore, the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of each case. After all while analysing common sense cannot be left in cold storage. But still in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable. (emphasis supplied) 11. The Supreme Court in the case of Ashok Leyland (Supra) disagreeing with the proposition of Katta Sujatha (supra) referred to a larger bench three questions which are as under: a) whether for purposes of Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the allegation read as a whole fulfil the requirements of the said Section and it is not necessary to specifically state in the complaint that the person accused was in charge of, or responsible for, the conduct of the business of the company. b) Whether a Director of a company would be deemed to be in charge of, and responsible to, the Company for conduct of the business of the company and, therefore, deemed to be guilty of the offence unless he proves to the contrary. c) Even if it is held that specific averments are necessary, whether in the absence of such averments the signatory of the cheque and or the Managing Directors or Joint M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for the overall policy formations while some Directors may also be responsible for the conduct of the day-to-day affairs. Even for those who are responsible for the conduct of the day-to-day affairs of the business of the company, some may be responsible for some aspects while others may be responsible for the other aspects of the business. Therefore, unless the complainant says that the particular Director who is accused by him is responsible for the offence being a Director responsible for the aspect of the business relating to the offence In question by specifying how he is so responsible and on what basis such allegation is being made, the court cannot summon him for the offence under Section 138 of the Act. The complainant clearly depends on nothing other than the plain allegations made in the complaint which is reproduced above. The allegations are simply bald allegations and repetition of the language of Section 141(1) of the Act without giving any basis on which such allegations are made. In view of the law laid down by the Supreme Court as mentioned above there is no escape from the conclusion that the petitioners, Raminder Kaur Narula Joginder Singh, could not have be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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