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2005 DIGILAW 370 (KER)

A. Shahnaz v. State of Kerala

2005-06-14

M.SASIDHARAN NAMBIAR

body2005
Judgment :- Accused 3 to 10 in S.T.No.1609/04 on the file of Chief Judicial Magistrate, Ernakulam are seeking an order under Section 482 of Code of Criminal Procedure to quash the complaint and the proceedings initiated against them by second respondent/complainant. Exhibit P1 is the complaint. The allegation in the compliant is that 10 accused committed offence under section 138 of Negotiable. Instruments Act. First accused is the company and second accused the Managing Director. Petitioners are impleaded on the allegation that they are managing the day-to-day affairs of the company and therefore responsible for the conduct of the business of the company and hence liable for the offence under section 138 of Negotiable Instruments Act. Petitioners would contend that they have nothing to do with the Company and they are not Directors and they are not responsible for the conduct of the business of the company and the complaint is only an abuse of process of the court and therefore under article 227 of the Constitution of India, the complaint as against the petitioners is to be quashed. 2. Heard learned counsel appearing for the petitioners and the learned counsel appearing for the second respondent. 3. Learned counsel appearing for the petitioners had taken me through Exhibit P1 complaint as well as Exhibit P2 notice issued under section 138(b) of Negotiable Instruments Act against 16 persons including the 10 petitioners intimating the dishonour of the cheques and demanding the amount covered by the cheques and Exhibit P3 memorandum of association of the Company. Learned Counsel would argue that Exhibit P3 memorandum of association of the Company only shows that the third accused/first petitioner was a share holder who was one of the directors and petitioners 2 to 8 are not in any way connected with the Company and therefore compliant as against them is not maintainable. Learned Counsel would argue that even though there is allegation in the complaint that petitioners are managing the entire day-to-day affairs of the company, there is no allegation that they were managing the day-to-day affairs of the company at time when the cheque was issued or when the offence was allegedly committed and therefore even if the allegations in the complaint is accepted, petitioners 2 to 8 cannot be proceeded against. 4. 4. Learned counsel appearing the second respondent argued that as there is sufficient allegation that petitioners are responsible for the affairs of the company as provided under section 141 of N.I. Act, the balance is for evidence at the time of trial and the complaint as against them cannot be quashed. 5. The question of impleading all the Directors of the Company irrespective of the question whether they are responsible for the day-to-day affairs of the company in an offence under section 138 of N.I.Act was considered by the Apex Court. In K.P.G. Niar v. Jindal Menthol India Ltd.(2000(2) SCC (Crl.)1038) and after analyzing section 141 of Negotiable Instruments Act is was held: “8. From a perusal of Section 141, it is evidence that in a case where a company committed offence under Section 138 then not only the company but also every person who at the time when the offence was committed, was in charge of an was responsible to the company for the conduct of the business of the company shall be deemed to be guilty of the offence and liable to be proceeded against and punished accordingly. It follows that a person other than the company can be proceeded against under those provisions only if that person was in charge of and was responsible to the company for the conduct of its business.” Apex Court in Katta Sujatha v. Fertilizers and Chemicals Travancore Ltd. and another ((2002) 7 SCC 655) has considered this question in detail. It was held: 4. ……. However, one thing is clear that the appellant was in no way involved in any of the transactions referred to in the compliant and it was not stated that she was in charge of the business and was responsible for the conduct of the business of the firm in terms of Section 141 of the Act nor was there any other allegation made against appellant that she had connived with any other partner in the matter of issue of cheque. In these circumstances the High Court ought to have examined the matter from this angle but on the other hand, the High Court merely stated that all the accused are not only in charge but are responsible for the conduct of the business of the firm. In these circumstances the High Court ought to have examined the matter from this angle but on the other hand, the High Court merely stated that all the accused are not only in charge but are responsible for the conduct of the business of the firm. Indeed the same question has come up before this Court for examination in State of Karnataka v. Pratap Chand wherein the question as who is a “person in charge” of the business of a firm in the context of Section 18-A, Drugs and Cosmetics Act, 1940 was considered by this Court. This Court explained the meaning by observing that the term “person in charge” must mean that the person should be in overall control of the day-to-day business of the company of firm. The person should (sic may) be a party to the policy being followed by a company and yet not be in charge of the business of the company or may be in charge of but not in overall charge or may be in charge of only some part of the business. 5. In short the partner of a firm is liable to be convicted for an offence committed by the firm if he was in charge of and was responsible to the firm for the conduct of the business of the firm or if it is proved that the offence was committed with the consent or connivance of, or was attributable to any neglect on the part of the partner concerned.” The effect of absence of a plea in the complaint in the light of Section 141 of Negotiable Instruments Act was considered by the Apex Court in Monaban Ketanbhai Shah. V. State of Gujarat ((2004) 7 SCC 15). It was held: 6….. Section 141 does not make all partners liable for the offence. The criminal liability has been fastened on those who, at the time of the commission of the offence, were in charge of and were responsible to the firm for the conduct of the business of the firm. These may be sleeping partners who are not required to take any part in the business of the firm: they may be ladies and others who may not know anything about the business of the firm. The primary responsibility is on the complainant to make necessary averments in the compliant so as to make the accused vicariously liable. These may be sleeping partners who are not required to take any part in the business of the firm: they may be ladies and others who may not know anything about the business of the firm. The primary responsibility is on the complainant to make necessary averments in the compliant so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every partner knows about the transaction. The obligation of the appellants to prove that at the time the offence was committed they were not in charge of and were not responsible to the firm for the conduct of the business of the firm, would arise only when first the complainant makes necessary averments in the compliant and establishes that fact.” Apex Court in Pepsi Foods Ltd. v. Special Judicial Magistrate (AIR 1998 SC 128) has considered the question of quashing of the complaint under section 482 of Cr.P.C. and Article 227 of the Constitution of India as follows: 28. Summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the compliant to have the criminal law set into motion. The order of the Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and would that be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time or recording of preliminary evidence before summoning of the accused. Magistrate has to carefully scrutinize, the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence prima facie committed by all or any of the accused. 29. Magistrate has to carefully scrutinize, the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence prima facie committed by all or any of the accused. 29. No doubt the Magistrate can discharge the accused at any stage of the trial if he considers the charge to be groundless, but that does not mean that the accused cannot approach the High Court under S.482 of the Code or Art. 227 of the Constitution to have the proceeding quashed against him when the compliant does not make out any case against him and still he must undergo the agony of a criminal trial.” The relevant allegation in paragraph 3 of the compliant reads; …..Accused Nos.3 to 10 are Managing the entire day to day affairs of the company. Therefore all the accused are in charge and responsible for the conduct of the business of the company at the time of the alleged commission of offence.” As rightly pointed out by the learned counsel appearing for the petitioners there is no allegation that respondents 3 to 10 who are the so called persons managing the entire day-to-day affairs of the company were managing at the time when the cheque was issued or at the time when the cheque was dishonoured or at the time when the payment was not made consequent to the intimation regarding the dishonour of the cheque and demanding the amount covered by the cheque. Therefore, even if the allegations in the complaint is accepted, they do not constitute the ingredient to constitute and offence under Section 138 of N.I. Act as against petitioners 2 to 8. The position of the first petitioner would be, different in view of Exhibit P3 memorandum of association which shows that she is one of the Directors of the Company. Therefore the Proceedings as against petitioners 2 to 8 is quashed. The liability of the other accused is to be decided in the light of the evidence let in the case.