Ashok Muthanna and Others v. Wipro Finance Limited
2000-12-15
M.KARPAGAVINAYAGAM
body2000
DigiLaw.ai
Judgment :- M. KARPAGAVINAYAGAM, J. Wipro Finance Limited, Chennai, filed two complaints against Fidelity Industries Ltd., Chennai, and its directors and authorised signatory arraying them as A-1 to A-6 for the offences under sections 138 and 141 of the Negotiable Instruments Act, 1881. On receipt of summons petitioners Nos. 1 to 4 who are accused Nos. 2 to 5 have filed these two petitions under section 482 of the Criminal Procedure Code, praying to quash the entire proceedings in those two complaints, on the following grounds : (i) V. G. Subbaraman, the second petitioner (A-3), retired on March 28, 1998, itself, as evidenced by Form No. 32 issued by the Registrar of Companies. Hence, he is not responsible for the issuance of the cheque on January 23, 1999, and the non-payment of the cheque amount after its dishonour and as such, the proceedings under section 138 of the Act are not valid in law in so far as he is concerned. (ii) Though in the complaint, there is allegation against the petitioners that they are in charge of and responsible for the conduct of the business of the company (A-1) no overt act or specific allegation has been attributed to those petitioners. The cheque has been signed and issued only by the sixth accused, who is the authorised signatory. Therefore, other accused, namely, those petitioners, cannot be held responsible for the offence under section 138 of the Act. On these two grounds, I heard the arguments of learned counsel on either side.
The cheque has been signed and issued only by the sixth accused, who is the authorised signatory. Therefore, other accused, namely, those petitioners, cannot be held responsible for the offence under section 138 of the Act. On these two grounds, I heard the arguments of learned counsel on either side. In regard to the first point in relation to the second petitioner V. G. Subbaraman (A-3), I find merit in the contention of learned counsel for the petitioners, inasmuch as Form No. 32 issued by the Registrar of Companies, which has been produced before this court and the same has not been disputed by counsel for the respondent/complainant, would reveal that the said second petitioner retired on March 28, 1998, itself and as such he did not function as a director either on the date when the cheques were issued (i.e.) on January 23, 1999, or when the cause of action arose for non-payment of the cheque amount on receipt of the statutory notice on July 10, 1999.Though the said document does not form part of the complaint and other records accompanied with the complaint, this can be taken into consideration by this court, since the contents of the said document, which is a public document, are not disputed by learned counsel for the respondent. As held by the Supreme Court in Satish Mehra v. Delhi Administration 1996 3 Crimes 85 (SC) the court is within its powers to consider even materials which the accused may produce even before the commencement of trial for the purpose of deciding whether the accused could be discharged, when those documents are not in dispute. In the present case, as noted above, the document Form No. 32 would reveal that the second petitioner was not the director who was in charge of and responsible for the affairs of the company during the relevant period and as such, the proceedings as against the second petitioner are liable to be quashed and accordingly, quashed. In view of the number of decisions cited by learned counsel for the petitioners in respect of the second point, we shall deal with the said point in detail. While dealing with the said point, it would be appropriate to refer to the allegations against the petitioners as contained in the complaint.
In view of the number of decisions cited by learned counsel for the petitioners in respect of the second point, we shall deal with the said point in detail. While dealing with the said point, it would be appropriate to refer to the allegations against the petitioners as contained in the complaint. Paragraph 10 of the complaint would provide the relevant words : "The said cheques were issued by the first accused herein, as per the instructions of accused Nos. 2 to 6 herein who are the managing director, directors and authorised signatory, in charge of the day-to-day affairs of the first accused-company. The said cheque was signed by the sixth accused in his capacity as the authorised signatory of the first accused-company herein." According to counsel for the petitioner the mere words that" they are in charge of and responsible for the day-to-day affairs of the company" would not be sufficient to make all the directors as accused especially in this case, the sixth accused alone in his capacity as authorised signatory has signed and issued the cheques.The authorities for substantiating the said ground cited by counsel for the petitioners are as follows : (1) Parmeet Singh Sawhney v. Dinesh Verma; (2) Sham Sunder v. State of Haryana; (3) P. Jeyanthi v. State 1990 LW (Crl.) 398; (4) P. Vasantha v. K. R. Muthiah 1991 LW (Crl.) 178; (5) A. K. Jain v. State of Sikkim 1992 Crl. LJ 839; (6) R. Banerjee v. H. D. Dubey 1993 LW (Crl.) 4; (7) Sudesh Kumar Sharma v. K. S. Selvamani 1994 1 LW (Crl.) 337; (8) J. K. Industries Ltd. v. Chief Inspector of Factories and Boilers (9) State of Haryana v. Brij Lal Mittal; (10) Col. R. S. Agarwal v. Ashok Leyland Ltd. 1998 1 LW (Crl.) 24; (11) Modern Denim Ltd. v. Lucas TVS Ltd. 1999 (III) CTC 143 ; (12) G. Sagar Suri v. State of U. P. (13) K. P. G. Nair v. Jindal Menthol India Ltd. 2000 (IV) CTC 432; The guidelines given in these decisions are as follows : (i) The partners of the firm, who at the time of commission of offence were responsible for the conduct of the business of the firm, could alone be prosecuted. Mere reproduction of the expression in the relevant section in the complaint does not meet the requirement of law.
Mere reproduction of the expression in the relevant section in the complaint does not meet the requirement of law. (ii) More often it is common that some of the partners of a firm may not even be knowing of what is going on day-to-day in the firm. There may be partners, better known as sleeping partners, who are not required to take part in the business of the firm. It does not make all the partners liable whether they do business or not. The requisite condition is that the partner was responsible for carrying on the business and was during the relevant time in charge of the business in the absence of any such proof no partner could be convicted.(iii) There may be ladies and minors who were admitted to the benefits of partnership. They may not know anything about the business of the firm. It would be a travesty of justice to prosecute all the partners and ask them to prove under the proviso to sub-section (1) of section 141 of the Negotiable Instruments Act that the offence was committed without their knowledge. The obligation for the accused to prove under the proviso that the offence took place without his knowledge or that he exercised all due diligence to prevent such offence arises only when the prosecution establishes the requisite condition that the partner was responsible for carrying on the business during the relevant time. The mere fact that the petitioner was a partner of the company would not be sufficient to mulct the said person with criminal liability. (iv) Merely extracting the words of the section in the complaint is not sufficient to find the accused guilty. The expression "a person in charge and responsible for the conduct of the affairs of the company" must mean that the person should be in overall control of the day-to-day business of the firm. (v) In a case arising out of the Food Adulteration Act, where a person has been nominated under sub-section (2) of section 17 he alone can be proceeded against and punished for the crime in question. It is only where no such person has been nominated that every person who at the time the offence was committed was in charge of and was responsible to the company for the conduct of its business can be proceeded against and punished.
It is only where no such person has been nominated that every person who at the time the offence was committed was in charge of and was responsible to the company for the conduct of its business can be proceeded against and punished. (vi) In the case of a company, the ultimate control of the affairs of a factory where the company is the owner of the factory always vests with the company, through its board of directors. The manager or any other employee of whatever status, can be nominated by the board of directors to have immediate or day-to-day or even supervisory control over the affairs of the factory. There is a vast difference between a person having the ultimate control of the affairs of the factory and the one who has immediate or day-to-day control over the affairs of the factory.(vii) The vicarious liability of a person for being prosecuted for an offence committed under the Act by a company arises if at the material time, he was in charge of and was also responsible to the company for the conduct of its business. Simply because a person is a director of the company, it does not mean that he fulfils the requirements so as to make him liable. (viii) To bring persons within the purview of section 138 of the Negotiable Instruments Act, there must be some specific averment against those persons to take cognizance of the offence by the learned magistrate with respect to the persons. On that basis, the specific allegation that the directors or partners of the company are in charge of and responsible to the company for the conduct of the business of the said company is necessary to maintain the complaint against those directors or partners. (ix) The words of section 141(1) of the Negotiable Instruments Act need not be incorporated in a complaint as magic words, but the substance of the allegations read as a whole should answer and fulfil the requirements of the ingredients of the said provision, namely, section 141(1) for being proceeded against for an offence which he is alleged to have committed.
If those words may not be the exact reproduction of section 141(1) would convey the meaning that if the persons concerned were in charge of and was responsible to the company for the conduct of the business when the offence was committed then those persons other than the company can also be proceeded against. In the light of these guidelines, we shall look into the allegations of the complaint in order to verify whether the requirements of section 141(1) of the Act have been satisfied. As noted above, it is mentioned in the complaint that accused Nos. 2 to 6 (including the petitioners (A-2 to A-5) instructed the authorised signatory (A-6) on behalf of the company (A-1) to issue the said cheques and during the relevant period, they were in charge of the day-to-day affairs of the first accused-company. It is also mentioned in the complaint that the statutory notice was sent to the accused on July 10, 1999, and despite receipt of the notice, they have not made any payment whatsoever towards the amount covered by the said cheque. Thus, it is clear that the allegations in the complaint would reveal that the cheques were issued by A-6 being the authorised signatory of the company only at the instructions of the petitioners, who were in charge of the day-to-day affairs of the first accused-company on behalf of the company. Therefore, it cannot be said that there are no necessary averments in the complaint.It is contended by learned counsel for the petitioners that mere reproduction of the words used in the section is not sufficient. But, in this case, it is not only stated that the petitioners were in charge of and responsible for the day-to-day affairs of the company but also stated that only on the instructions given by the petitioners, the cheques were issued by A-6 on behalf of the company. Therefore, as per the complaint, they had also taken a vital role in the act of issuance of the cheques. Similarly, as mentioned in the complaint, despite receipt of the statutory notice on July 10, 1999, they have not paid any amount within the stipulated period. These things would show that the petitioners, who are in charge of the day-to-day affairs of the company are responsible for these acts also.
Similarly, as mentioned in the complaint, despite receipt of the statutory notice on July 10, 1999, they have not paid any amount within the stipulated period. These things would show that the petitioners, who are in charge of the day-to-day affairs of the company are responsible for these acts also. All the decisions cited by learned counsel for the petitioners rendered by this court as well as the apex court would deal with the situation where the accused came before the court either after conviction or after acquittal. Under those circumstances, the courts would hold that mere words used in the section are not sufficient in the absence of any material to prove the same. The decision in R. Banerjee v. H. D. Dubey 1993 LW (Crl.) 4 would, however, observe that when a person on behalf of the company has been nominated under section 17(1) of the Food Adulteration Act, he alone can be prosecuted and not other directors even though they were in charge of and responsible for the affairs of the company. But, such a contingency sub-section as contained in section 17(1) or section 17(2) of the Prevention of Food Adulteration Act is not available in section 141(1) or 141(2) of the Negotiable Instruments Act. Therefore, the contention that when the authorised signatory who issued the cheque was made an accused, the other directors cannot be prosecuted has to be rejected.In view of the above discussion, I am of the view that there are sufficient allegations in the complaint so as to maintain the complaint as against the petitioners. Therefore, the arguments advanced by learned counsel for the petitioners cannot be accepted to be a valid one. Therefore, the said submission is liable to be rejected and accordingly, the petitions are dismissed as far as petitioners Nos. 1, 3 and 4 are concerned. Since, as contained in the earlier paragraphs no proceedings will lie as against the second petitioner, V. G. Subbaraman (A-3); the proceedings as against him alone are quashed. So the petitions as far as petitioners Nos. 1, 3 and 4 are concerned are dismissed and the petitions as far as the second petitioner is concerned are allowed.