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2006 DIGILAW 1634 (DEL)

AMIR ZAFAR v. STATE OF DELHI

2006-09-13

A.K.SIKRI

body2006
A. K. SIKRI, J. ( 1 ) THE petitioners in these two petitions are arraigned as accused Nos. 3 and 4 in the complaint filed by the respondent No. 2 herein under section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as 'the act' ). After recording the pre-summoning evidence, the learned trial Court passed order dated 25. 6. 1998 stating that prima facie case against the accused persons was made out and summons were issued against all the accused persons. It may be noted that the accused No. 1 is the company, namely, M/s. United Provinces Tannery Co. (Pvt.) Ltd. , accused No. 2 is the Managing Director of the said company and the accused Nos. 3 and 4 (who are the petitioners in these petitions) are the Directors of this company. It is a private limited company and the Managing Director as well as the two Directors are related to each other. The complaint is founded on the allegations that the complainant company had given financial assistance in the sum of Rs. 17,50,000/- to the accused No. 1 for the purchase of "dust Collection Unit". This amount was to be repaid, as per the agreement arrived at between the parties, in 36 monthly instalments of Rs. 73,000/- each starting from March 1996 to february 1999. It is further alleged that some of the cheques issued by the accused company had bounced back and the complainant requested the accused persons to pay the amount of the cheques. Though they promised to pay the amount by way of demand draft, instead of sending demand draft, a cheque bearing No. 679398 dated 21. 8. 1997 for a sum of Rs. 7,30,000/- drawn on Vijaya Bank, Delhi was given. This cheque was returned as dishonoured when presented for payment by the complainant. The complainant sent notices to all the accused persons but no reply was given nor payment was made and, therefore, aforesaid complaint was filed by the complainant. ( 2 ) THE petitioners seek quashing of the summoning orders primarily on the ground that the petitioners are not in-charge of or responsible for the affairs of the accused No. 1 company and merely because they are the Directors of the company is no ground to implicate them in the said proceedings. ( 2 ) THE petitioners seek quashing of the summoning orders primarily on the ground that the petitioners are not in-charge of or responsible for the affairs of the accused No. 1 company and merely because they are the Directors of the company is no ground to implicate them in the said proceedings. Submission is founded on the provisions of Sub-section (1) of Section 141 of the Act and referring to the judgment of the Supreme Court in S. M. S. Pharmaceuticals v. Neeta Bhalla, IV (2005) BC 425 (SC)=vii (2005) SLT 113=iv (2005) CCR 12 (SC)= (2005) 7 Scale 397 it is argued that in the absence of such averments in the complaint, the summoning order against the petitioners, as passed by the learned MM, was bad in law. ( 3 ) LEARNED Counsel for the respondent No. 2/complainant, on the other hand, submits that the case of the petitioners is covered under Section 141 (2) of the Act and as there was neglect on the part of the petitioners/directors and the alleged offence is committed with their consent or connivance, they are rightly impleaded as parties. He further submits that there are necessary averments in the complaint in this behalf and it is for the trial Court to decide this issue after the evidence is led by the parties and this Court should not exercise its extraordinary jurisdiction under section 482, Cr. P. C. ( 4 ) NO doubt, in S. M. S. Pharmaceuticals' case (supra) the Hon'ble Supreme court has categorically held that in order to implicate any person, it has to be shown that such a person was in-charge of and responsible for the affairs of the company in case the main offender is the company. However, that is the position which emerges from the reading of Sub-section (1) of Section 141 of the Act. Sub-section (2) of Section 141, which is a non obstante provision, is independent of Sub-section (1) of Section 141 and starts with the words 'notwithstanding anything contained in Sub-section (1)'. However, that is the position which emerges from the reading of Sub-section (1) of Section 141 of the Act. Sub-section (2) of Section 141, which is a non obstante provision, is independent of Sub-section (1) of Section 141 and starts with the words 'notwithstanding anything contained in Sub-section (1)'. It is specifically provided under Sub-section (2) that 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 against and punished accordingly. Thus, under the scheme of prosecution based on dishonour of cheques where the cheque is issued by and on behalf of the company, a conjoint reading of sub-section (1) and Sub-section (2) of Section 141 of the Act would show that apart from the company, the other person who can be held liable would be the person who is in-charge of and was responsible to the company for the conduct of the business of the company. Such other person can be any person who fits in the aforesaid description and need not necessarily be even an employee of the company. Apart from it, director, manager, secretary or other officer of the company with whose consent or connivance or neglect, the offence is committed, shall also be liable. This legal position is finally determined by the Supreme Court in the case of S. V. Muzumdar and Ors. v. Gujarat State Fertilizer Co. Ltd. and Anr. , III (2005) BC 1 (SC)=iv (2005) SLT 58=ii (2005) CCR 167 (SC)= (2005) 4 SCC 173 wherein the supreme Court observed as under: "10. The three categories of persons covered by Section 141 are as follows: (1) The company who committed the offence. (2) Everyone who was in charge of and was responsible for the business of the company. (3) Any other person who is a director or a manager or a secretary or officer of the company with whose connivance or due to whose neglect the company has committed the offence. (2) Everyone who was in charge of and was responsible for the business of the company. (3) Any other person who is a director or a manager or a secretary or officer of the company with whose connivance or due to whose neglect the company has committed the offence. " ( 5 ) PERUSAL of the complaint filed by the complainant would show that there are necessary allegations made against the petitioners in this behalf. It is mentioned in para 2 that all the accused persons had approached the complainant for financial assistance. It is also mentioned in para 7 that when the post-dated cheques towards installments were given and they got dishonoured, and demand letters dated 21. 5. 1997 and 7. 6. 1997 were sent for making payment, in reply the accused persons had promised to give a demand draft. Further, in para 10 a categorical averment is made to the effect that notice was duly served on all the accused persons. The AD card was received back duly signed by the accused persons but in spite of that they neither replied to the notice nor made the payment of the cheque amount. Once such averments are made and the defence of the petitioners is that there is no consent, neglect or connivance on their part, it would be a matter for the trial Court to examine and decide this issue on the basis of evidence led before it. This aspect is also clarified by the Supreme Court in S. V. Muzumdar (supra) in the following words: "11. Whether or not the evidence to be led would establish the accusations is a matter for trial. It needs no reiteration that proviso to Sub-section (1) of Section 141 enables the accused to prove his innocence by discharging the burden which lies on him. 12. Therefore, the High Court was justified in rejecting the petition filed by the appellants. The Larger Bench is considering issues referred to. The decision to be rendered by the Larger Bench obviously would govern the trial. As rightly submitted by the respondents in these appeals, there is no challenge to the validity of any provision and grievance essentially related to the prayer for dropping the proceedings. Therefore, we find no substance in the plea for tagging these matters with those pending before the larger Bench. As rightly submitted by the respondents in these appeals, there is no challenge to the validity of any provision and grievance essentially related to the prayer for dropping the proceedings. Therefore, we find no substance in the plea for tagging these matters with those pending before the larger Bench. " ( 6 ) I, therefore, do not find any merit in these petitions, which are accordingly dismissed. ( 7 ) AT this stage, learned Counsel for the petitioners submits that petitioner smt. Khurshida Bano, who is a resident of Kanpur (UP), is more than 70 years of age and is suffering from various ailments. It is prayed that she be exempted from her personal appearance through Counsel before the trial Court. Though this is disputed by learned Counsel for the respondent No, 2, having regard to the advanced age of Smt. Khurshida Bano, the fact that she is a resident of Kanpur (UP) and the nature of proceedings which are under Section 138 of the Act, I am of the view that Smt. Khurshida Bano be granted exemption from personal appearance through Counsel before the trial Court. It is pointed out by learned Counsel for the respondent No. 2/complainant that she has not appeared even once before the trial court and has not even obtained bail so far. She shall appear on the next date of hearing and shall obtain bail by furnishing necessary bail bonds, sureties, etc. , whereafter a general exemption shall be granted to her for appearing through counsel before the trial Court. It is, however, subject to the condition that she shall not dispute her identity at any subsequent stage. ( 8 ) PETITIONS and the application stand disposed of.. Petitions and Application disposed of.