TMI Blog2012 (4) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... agreed land was entered into between the parties. The accused company vide letter dated 14.08.2010 communicated to the complainant company / respondent no. 2, that an amount of ₹ 2458.39 Lacs shall be paid by the complainant company/ respondent no. 2 as External Development Charges to the Government Department on behalf of the accused company, which shall be repaid by the accused company along with 18% interest to the complainant company / respondent no. 2. It is alleged that, in lieu of part payment of the aforesaid liability of 2458.39 Lacs, post dated cheques bearing cheque no. 291473 dated 31.12.2010, cheque no. 291474 dated 31.12.2010, cheque no. 291477 dated 31.12.2010 and cheque no. 291476 dated 31.12.2010 of the amounts ₹ 500 Lacs, ₹ 500 Lacs, ₹ 229.195 Lacs and ₹ 74.196 Lacs respectively totalling to ₹ 13,03,39,100/-, were handed over by the accused company to the complainant company/ respondent no. 2 on 14.08.2010 itself. The cheques were presented for encashment on 07.01.2011. However, they were returned unpaid by the complainant company / respondent no.2's banker vide return memo dated 08.01.2011 stating the reason as payment sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that they had interacted and participated in various negotiations between the parties in regard to the land development project. Relying upon K. Srikanth Singh v. North East Securities, 2007 (9) SCALE 371, it is submitted that mere participation in the transaction does not infer that the director was responsible for the day-to-day affairs of the company. Vicarious liability has to be pleaded and proved and cannot be inferred. It is submitted that since there is no specific allegations, qua the petitioners, as to the role played by them in the subject matter, the requirements of section 141 of the Act are not satisfied. He relies upon N.K. Wahi v. Shekhar Singh Ors AIR 2007 SC 1454,, J.N Bhatia ors. v. State Anr, (2008) UITR 276 (Delhi) (PG 84) and Bikash Chakrborty v. Reliance Structures, Crl.MC 4110/2011 to substantiate his arguments. 5. Per Contra, the Ld. Senior Counsel for the complainant company/ respondent no. 2 submitted that the allegations in the complaint, stating that the petitioners were participants in the negotiations to the agreements between the parties, were not vague, so as to discard the petitioners from the ambit of section 141 of the Act. Such allegat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DLT 51 and Rallis India Ltd. V. Poduru Vidya Bhushan Ors Crl. Appeal No. 926 of 2007 (SC), it is further contended that the plea of the petitioners that they were not directors or not incharge of the day to day affairs of the company at the time of commission of the offence or the cheques were issued as security, cannot be raised before this court, but, can be raised before the Ld. MM. It is contended that, the powers of the Magistrate cannot be usurped by this court and it ought not to interfere with the trial by the Magistrate of the offence under Section 138 N.I. Act. 8. The learned counsel for the petitioner, in rebuttal, relying upon Harman Electronics Pvt. Ltd v. National Panasonic India Ltd. AIR 2009 SC 1168, submitted that an offence under section 138 of the Act is completed only if the Drawer fails to pay the cheque amount on the expiry of the statutory period in the demand notice and not on the day when the cheques were issued or matured. Since, at the time of commission of the offence, all the petitioners had ceased to be directors of the accused company, they are not liable. 9. I have heard the learned counsel for the petitioner, the learned senior counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied. (b) The answer to question posed in sub-para (b) has to be in negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for 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 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 conduct of its business. When that is so, holders of such positions in a company become liable under Section141 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, A person in the commercial world having a transaction with a Company is entitled to presume that the Directors of the Company are in charge of affairs of the Company. If any restrictions on their powers are placed by the memorandum or Articles of the Company, it is for the Directors to establish it at the trial. It is in that context that Section 141 of the Negotiable Instruments Act provides that when the offender is a Company, every person, who at the time when the offence was committed was in charge of and was responsible to the company for the conduct of the business of the Company, shall also be deemed to be guilty of the offence along with the Company. It appears to us that an allegation in the complaint that the named accused are Directors of the Company itself would usher in the element of their acting for and on behalf of the company and of their being in charge of the Company. A person normally having business or commercial dealings with a Company, would satisfy himself about its creditworthiness and reliability by looking at its promoters and Board of Directors and the nature and extent of its business and its memorandum or articles of association. Other than tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 141 of the Act are different from that of an offence under section 138 of the Act. Vicarious liability is created in special statutes like the present Act, by way of a legal fiction so as to make all persons responsible for the conduct of the company and responsible to the company to be held liable for an offence under section 138 of the Act. As observed above vicarious liability is inferred from the cause of the resultant offence. Therefore at this stage of summoning, it cannot be inferred that the petitioner no. 2 and 3 had no knowledge of the offence so as to give them immunity under the proviso to section 141 of the Act. 15. However, the case of petitioner no. 1 stands on a different footing as he had ceased to be a director in the accused company way back on 12.11.2009. Therefore, although petitioner no. 1 can be assumed to be privy to the transaction, he cannot be assumed to be privy to the issue or dishonour of the cheques as the cheques were issued in August, 2010 and dishonoured in January, 2011 which is after more than a year of his ceasing to be a director. The petitioner no. 1 is clearly covered under the proviso of section 141 of the Act which gives immunity to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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