TMI Blog2018 (12) TMI 1986X X X X Extracts X X X X X X X X Extracts X X X X ..... n 141 of the Negotiable Instruments Act, there must be a specific averment against the Director to show as to how and in what manner the Director was responsible for the conduct of the business of the Company. This composition has been reiterated by the Hon'ble Supreme Court consistently. This Court is not in agreement with the submission made by the learned counsel for the respondent. If it is enough to mechanically repeat the requirement under Section 141 [1] of the Negotiable Instruments Act, any number of Directors can be made as an accused in a complaint filed under Section 138 of the Negotiable Instruments Act. This will lead to a situation where the Directors who have nothing to do with the day-to-day affairs of the Company, Nominee Directors etc., being made to face a criminal complaint just because there is a repetition of the words found under Section 141 [1] of the Negotiable Instruments Act. This may lead to an abuse of process of Court and any person who is shown as a Director will be made to undergo the ordeal of trial. The allegations made in the complaint does not satisfy the requirements of Section 141 of the Negotiable Instruments Act, and the requireme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany and have also been shown as Nominee Directors. Therefore, the learned counsel would submit that there is a dispute regarding the fact as to whether these petitioners were incharge and responsible for the day-to-day affairs of the Company, and the same cannot be gone into by this Court in exercise of its jurisdiction under 482 of Cr.P.C. The learned counsel would submit that what is permitted to be looked into by this Court while exercising its jurisdiction under Section 482 of Cr.P.C is only incontrovertible or unimpeachable evidence which is beyond suspicion or doubt. In order to substantiate this submission, the learned counsel for the respondent relied upon the judgment of the Hon'ble Supreme Court in Gunmala Sales Private Limited. Vs. Anu Mehta and Others reported in [2015 1 SCC 103]. 6. The learned counsel for the respondent, in reply to the 2nd submission made by the learned counsel for the petitioners, would submit that necessary allegation has been made in the complaint against these petitioners and it satisfies the requirements of Section 141 of the Negotiable Instruments Act, and therefore it is for the petitioners to establish before the Court below, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fairs of the above said company. It is submitted that the accused 2 to 6 control, manage and administer the first accused company. Further, the sole beneficiaries of the transaction with the complainant are the people accused herein and hence they ought to be proceeded against in the present case . 8. The question is whether the above allegations satisfies the requirements of Section 141 of the Negotiable Instruments Act. For this purpose, it will be relevant to rely upon the judgments cited by the learned counsel for the petitioners. 9. The first judgment that has been relied upon by the learned counsel for the petitioners is [2010 3 SCC P 330]. The relevant portions are extracted hereunder: 20. Section 141 of the Act has been interpreted by this Court in various decisions. As to the scope of Section 141 of the Act, a three-Judge Bench of this Court considered the following questions which had been referred to it by a two-Judge Bench of this Court in SMS Pharmaceuticals vs. Neeta Bhalla : (SCC pp. 93-94 para 1) (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made 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 the question posed in sub-para (b) has to be in the 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 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 respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transaction. There should be clear and unambiguous allegation as to how the Directors are in-charge and responsible for the conduct of the business of the company. The description should be clear. It is true that precise words from the provisions of the Act need not be reproduced and the court can always come to a conclusion in facts of each case. But still, in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable. 27. The said issue again came up for consideration before a three-Judge Bench of this Court recently in Ramraj Singh vs. State of M.P. Anr. (2009) 6 SCC 729. In this case, the earlier decisions were also considered in detail. Following the decisions of SMS Pharmaceuticals' case (supra), Sabhita Ramamurthy's case (supra), Saroj Kumar Poddar's case (supra) and N.K. Wahi's case (supra) this Court held that it is necessary to specifically aver in a complaint under Section 141 that at the time when the offence was committed, the person accused was incharge of, and responsible for the conduct of the business of the company. Furthermore, it held that vicarious liability can be attributed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the requirements under Section 141(1) will be of no assistance, but there should be necessary averments in the complaint as to how and in what manner the accused was guilty of consent and connivance or negligence and therefore, responsible under sub section (2) of Section 141 of the Act. 39. From the above discussion, the following principles emerge : (i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. (ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. (iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make accused therein vicariously liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly monitors the executive activity. To fasten vicarious liability under Section 141 of the Act on a person, at the material time that person shall have been at the helm of affairs of the Company, one who actively looks after the day-to-day activities of the Company and particularly responsible for the conduct of its business. Simply because a person is a Director of a Company, does not make him liable under the N.I. Act. Every person connected with the Company will not fall into the ambit of the provision. Time and again, it has been asserted by this Court that only those persons who were in charge of and responsible for the conduct of the business of the Company at the time of commission of an offence will be liable for criminal action. A Director, 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 for an offence under Section 141 of the N.I. Act. In National Small Industries Corporation (supra) this Court observed: Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of or was responsible to the Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes especially where such statutes create vicarious liability. 10. To fasten vicarious liability under Section 141 of the Act on a person, the law is well settled by this Court in a catena of cases that the complainant should specifically show as to how and in what manner the accused was responsible. Simply because a person is a Director of defaulter Company, does not make him liable under the Act. Time and again, it has been asserted by this Court that only the person who was at the helm of affairs of the Company and in charge of and responsible for the conduct of the business at the time of commission of an offence will be liable for criminal action [see : Pooja Ravinder Devidasani v. State of Maharashtra (2014) 16 SCC 1 : AIR 2015 SC 675]. 11. In other words, the law laid down by this Court is that for making a Director of a Company liable for the offences committed by the Company under Section 141 of the Act, there must be specific averments against the Director showing as to how and in what manner the Director was responsible for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Magistrate is legally justified in not issuing process. But here we are concerned with the question as to what should be the approach of a High Court when it is dealing with a petition filed under Section 482 of the Code for quashing such a complaint against a Director. If this averment is there, must the High Court dismiss the petition as a rule observing that the trial must go on? Is the High Court precluded from looking into other circumstances if any? Inherent power under Section 482 of the Code is to be invoked to prevent abuse of the process of any court or otherwise to secure ends of justice. Can such fetters be put on the High Court s inherent powers? We do not think so. 29. SMS Pharma-(1), undoubtedly, says that it is necessary to specifically aver in the complaint that the Director was in charge of and responsible for the conduct of the company s business at the relevant time when the offence was committed. It says that this is a basic requirement. And as we have already noted, this averment is for the purpose of persuading the Magistrate to issue process. If we revisit SMS Pharma-(1), we find that after referring to the various provisions of the Companies Act it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 complaint despite the basic averment. It may come across some unimpeachable evidence or acceptable circumstances which may in its opinion lead to a conclusion that the Director could never have been in charge of and responsible for the conduct of the business of the company at the relevant time and therefore making him stand the trial would be abuse of the process of court as no offence is made out against him. 34. We may summarize our conclusions as follows: 34.1. Once in a complaint filed under Section 138 read with Section 141 of the NI Act the basic averment is made that the Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h case. The High Court at that stage does not conduct a mini trial or roving inquiry, but, nothing prevents it from taking unimpeachable evidence or totally acceptable circumstances into account which may lead it to conclude that no trial is necessary qua a particular Director. 14. The other judgments which have been cited by the learned counsel for the respondent, also more or less borders, around the same conclusion arrived at by the Hon'ble Supreme Court in Gunmala Sales Private Limited. Vs. Anu Mehta and Others referred supra. 15. This Court is not in agreement with the submission made by the learned counsel for the respondent. If it is enough to mechanically repeat the requirement under Section 141 [1] of the Negotiable Instruments Act, any number of Directors can be made as an accused in a complaint filed under Section 138 of the Negotiable Instruments Act. This will lead to a situation where the Directors who have nothing to do with the day-to-day affairs of the Company, Nominee Directors etc., being made to face a criminal complaint just because there is a repetition of the words found under Section 141 [1] of the Negotiable Instruments Act. This may lead to an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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