TMI Blog2022 (11) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... duct of the business of the company. This Court has been firm with the stand that if the complainant fails to make specific averments against the company in the complaint for the commission of an offence under Section 138 of NI Act, the same cannot be rectified by taking recourse to general principles of criminal jurisprudence. Needless to say, the provisions of Section 141 impose vicarious liability by deeming fiction which pre-supposes and requires the commission of the offence by the company or firm. Therefore, unless the company or firm has committed the offence as a principal accused, the persons mentioned in sub-Section (1) and (2) would not be liable to be convicted on the basis of the principles of vicarious liablity - in view of the fact that neither any effort was made by the petitioner at any stage of the proceedings to arraign the company as an accused nor any such circumstances or reason has been pointed out to enable the Court to exercise the power conferred by proviso to Section 142, to condone the delay for not making the complaint within the prescribed period of limitation. There are no hesitation in holding that no error has been committed by the High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturing and sales of various types of chemicals. Both of them were having business dealings and Ravi Organics Limited was having a running account with the appellant. Respondent No. 2 is alleged to have issued an account payee cheque for a sum of Rs. 10 Lakhs payable at Union Bank of India, Muzaffarnagar, in favor of the Appellant towards discharge of its liability for supply of materials made by the appellant. When the appellant presented the cheque before the banker, it was dishonored on 24.12.2012. The Appellant, thereafter, sent a legal notice dated 01.01.2013 to Respondent No. 2 through registered post, which, though, was served, however, there was no response from Respondent No.2. 5. Despite service of notice, when neither there was any response from the accused nor payment was made, appellant filed four criminal complaints against Respondent no. 2 for the offence punishable under Section 138 Negotiable Instruments Act, 1881 (hereinafter referred to as NI Act ) on the allegations that the account payee cheque bearing no. 802276 of Union Bank of India, Muzaffarnagar, for a sum of Rs.10 lakhs dated 20.11.2012 issued by the respondent no. 2 towards the outstanding bills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted above and side by side the necessary averment required to be made in the complaint satisfying the requirements of Section 141 of the Act are also lacking to maintain prosecution as held in the decisions cited above. In this view of the matter, complaint itself is bad in law and the entire proceedings in pursuance thereof, including the summoning order dated 18.3.2013 passed by Addl. Chief Judicial Magistrate, Court No.2, Muzaffar Nagar in Criminal Case No.162 of 2013, Pawan Kumar Goel Vs. Devendra Kumar Garg, under Section 138 N.I. Act, P.S. Civil Lines, District Muzaffar Nagar as well as order dated 2.12.2013 passed by Addl. Sessions Judge, Court No.7, Muzaffarnagar in Criminal Revision No. 212 of 2013, Devendra Kumar Garg Vs. Pawan Kumar Goel, is nothing but an abuse of process of the court and is liable to be quashed. 9. We have heard Mr. Anubhav Kumar, learned counsel appearing on behalf of the Appellant and Mr. Vishwa Pal Singh, learned counsel appearing on behalf of the Respondents. 10. Mr. Anubhav Kumar, learned counsel for the appellant submitted that the cheque issued by Respondent No. 2 towards payment of outstanding dues of supply of material due to the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not making specific averments in respect of the commission of offence by the company as required under the Act, cannot be said to be curable. 11.2 Reliance in support of the contention was placed by the learned counsel for the respondent on the decisions of this Court in the case of Aneeta Hada (Supra), SMS Pharmaceuticals Ltd. (Supra), and Himanshu Vs. B. Shivamurthy Another (2019) 3 SCC 797. 12. Two main issues which falls for our consideration in this appeal are :- (1) Whether a director of a company would be liable for prosecution under Section 138 of NI Act without the company being arraigned as an accused. (2) Whether a complaint under Section 138 of NI Act would be liable to be proceeded against the director of the company without their being any averments in the complaint that the director arrayed as an accused was in charge of and responsible for the conduct and business of the company. 13. Before delving into the merits of the contention raised, it is important to analyze the cardinal provision which establishes the criminal liability upon the defaulter for dishonour of cheque i.e., Section 138 of NI Act. Section 138 of the NI Act reads as under: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance 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 ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the company for the conduct of business of the company, was not in charge of the conduct of the business of the company, then he can be made liable only if the offence was committed with his consent or connivance or as a result of his negligence. 17. The criminal liability for the offence by a company under section 138, is fastened vicariously on the persons referred to in sub-section (1) of section 141 by virtue of a legal fiction. Penal statutes are to be construed strictly. Penal statutes providing constructive vicarious liability should be construed much more strictly. When conditions are prescribed for extending such constructive criminal liability to others, courts will insist upon strict literal compliance. There is no question of inferential or implied compliance. Therefore, a specific averment complying with the requirements of section 141 is imperative. As pointed out in K. Srikanth Singh vs. North East Securities Ltd - 2007 (12) SCC 788, the mere fact that at some point of time, an officer of a company had played some role in the financial affairs of the company, will not be sufficient to attract the constructive liability under section 141 of the Act. 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 to actio 18. To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of Section 141 has to be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within Section 141, he would issue the process. We have seen that merely being described as a director in a company is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- 11. In the present case, the record before the Court indicates that the cheque was drawn by the appellant for Lakshmi Cement and Ceramics Industries Ltd., as its Director. A notice of demand was served only on the appellant. The complaint was lodged only against the appellant without arraigning the company as an accused. 12. The provisions of Section 141 postulate that if the person committing an offence under Section 138 is a company, 4 (2018) 13 SC 663 every person, who at the time when the offence was committed was in charge of or 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. 13. In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of a written complaint made by the payee of a cheque. Obviously such complaints must contain the factual allegations constituting each of the ingredients of the offence under Section 138. Those ingredients are: (1) that a person drew a cheque on an account maintained by him with the banker; (2) that such cheque when presented to the bank is returned by the bank unpaid; (3) that such a cheque was presented to the bank within a period of six months from the date it was drawn or within the period of its validity whichever is earlier; (4) that the payee demanded in writing from the drawer of the cheque the payment of the amount of money due under the cheque to payee; and (5) such a notice of payment is made within a period of 30 days from the date of the receipt of the information by the payee from the bank regarding the return of the cheque as unpaid. It is obvious from the scheme of Section 138 that each one of the ingredients flows from a document which evidences the existence of such an ingredient. The only other ingredient which is required to be proved to establish the commission of an offence under Section 138 is that in spite of the demand notice referred to ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use for not filing the complaint against Dakshin within the period prescribed under the Act is not examined by either of the courts below. As rightly pointed out, the application, which is the subject-matter of the instant appeal purportedly filed invoking Section 319 CrPC, is only a device by which the respondent seeks to initiate prosecution against Dakshin beyond the period of limitation stipulated under the Act. 23. In view of the above, arguments advanced by learned counsel for the appellant that an additional accused can be impleaded subsequent to the filing of the complaint merits no consideration, once the limitation prescribed for taking cognizance of the offence under Section 142 of NI Act has expired. More particularly, in view of the fact that neither any effort was made by the petitioner at any stage of the proceedings to arraign the company as an accused nor any such circumstances or reason has been pointed out to enable the Court to exercise the power conferred by proviso to Section 142, to condone the delay for not making the complaint within the prescribed period of limitation. 24. Reliance placed by learned counsel for the appellant on the decisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys, it will be cleared, complainant believed the defendant. 5. On 21.12.2012, Complainant produced the said cheque in his bank State Bank of Patiala, Court Road, Muzaffarnagar for encashment in favour of his A/c No. 55042570994. On 24.12.2012, he was informed by his bank that the cheque amount exceeds arrangement made on 22.12.2012 by defendant s bank i.e., Union Bank of India and thus, the said cheque was dishonoured. 6. Upon dishonouring the cheque (with the remarks of Exceeds arrangement), complainant issued a registered notice through his advocate to the defendant at his above given address which was received by defendnat on 01.01.2013 but even after lapse of 15 days, defendant has not made the above payment to complainant so far. 7. Defendant-accused deliberately gave the above cheque with intent to grab complainant s money which has been dishonoured in the bank; thus, defendant-accused is guilty of committing offence under Negotiable Instruments Act. Therefore, you are requested to summon the accused and punish him with the directions to pay the complainant the double of the above cheque amount under provisions of N.I. Act. Complainant shall remain obliged t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 charge of and responsible for 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 conduct of business of a Company at the relevant time. Liability dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Nair Vs. Jindal Menthol India Ltd. (2001) 10 SCC 218, which was also a case under the Negotiable Instruments Act. In the said case, it was found that the allegations in the complaint did not in express words or with reference to the allegations contained therein make out a case that at the time of commission of the offence, the appellant was in charge of and was responsible to the company for the conduct of its business. It was held that requirement of Section 141 was not met and the complaint against the accused was quashed. 30. After analyzing the aforesaid and various other pronouncements, the three-Judge Bench in paragraph 18 of the reports, observed as under :- 18. To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a persons can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a Company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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