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2007 DIGILAW 2881 (ALL)

NARUTTAM BAIHARWANI v. STATE OF UTTAR PRADESH

2007-11-30

M.K.MITTAL

body2007
JUDGMENT Honble M.K. Mittal, J.—The application has been filed for quashing the proceedings in Criminal Complaint Case No. 1372 of 2003, Sunil Chawla v. Naruttam Baiharwani and another, under Section 138 of Negotiable Instruments Act (hereinafter referred as Act) pending in the Court of Judicial Magistrate, Aligarh. 2. Heard Sri Dharmendra Singhal learned Counsel for the applicants and learned AGA. No one appeared for opposite party No. 2 inspite of sufficient service. 3. The brief facts of the case are that opposite party No. 2 filed a complaint in the Court of Judicial Magistrate, Aligarh alleging that he has a firm Chawala Settlement and the accused No. 1 has a firm Naruttam Motor and Engineering Works. The accused No. 1 Naruttam Baiharwani is the owner of the firm and accused No. 2 who is son of accused No. 1 is manager in the firm. The accused took Rs. One lakh on 20th July 2000 for their business and the complainant gave this amount through cheque No. 851494. The cheque was encashed by the accused persons. In lieu of this cheque, the accused gave a post dated cheque of Bank of Baroda for Rs. One lakh having No. 0700349 and date 5th April, 2003. The accused had assured that the cheque would be cashed when presented. The complainant presented this cheque in the bank on 9th April, 2003 but it was returned on 12th April, 2003 with the endorsement the account closed”. The complainant gave a legal notice through his Counsel dated 25th April, 2003 to accused persons separately and asked them to make the payment of his money within 15 days. Notices were served on the accused on 26th April, 2003 but no payment was made and then this complaint was filed on 4th June, 2003. 4. Learned Magistrate examined the complainant and his witness under Sections 200 and 202, Cr.P.C. and finding that a prima facie case was made out against the accused, directed to summon them by order dated 8th July, 2003. Feeling aggrieved, this application has been filed. 5. 4. Learned Magistrate examined the complainant and his witness under Sections 200 and 202, Cr.P.C. and finding that a prima facie case was made out against the accused, directed to summon them by order dated 8th July, 2003. Feeling aggrieved, this application has been filed. 5. Learned Counsel for the applicants has contended that according to the allegations as made by the complainant, the loan was taken for the business purpose and the cheque in question (Copy Annexure-1) also shows that it has been signed by Nirmal Baiharwani as Proprietor/Manager of the firm and therefore, the complainant should have impleaded the firm also as party and in absence of the firm the complaint is not maintainable and is liable to be quashed. Learned Counsel for the applicants has also contended that the complainant has not alleged in the complaint that the applicants were concerned with day-to-day business of the firm and on this ground also the complaint is liable to be quashed. Against it the learned AGA has contended that if the firm has not been impleaded as party the complaint cannot be dismissed and the case can proceed against the accused persons. He also contended that the applicants are Proprietors and Managers of the firm and are concerned with day-to-day business and the arguments as raised by the learned Counsel for the applicants are not tenable. 6. Section 141 of the Act reads as under : "141. He also contended that the applicants are Proprietors and Managers of the firm and are concerned with day-to-day business and the arguments as raised by the learned Counsel for the applicants are not tenable. 6. Section 141 of the Act reads as under : "141. Offences by companies.—(1) If the person committing an offence under Section 138 is a company, every person who, at the time the offence was committed, was in charge of, and 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 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 this 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 the other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.—For the purposes of this Section,— (a) “company” means any body corporate and includes a firm or other association of individuals; and (b) “director”, in relation to a firm, means a partner in the firm." 7. Thus according to Section 141 of the Act if the offence has been committed by the company it is also liable to be proceeded against and punished along with the director, manager, secretary or any other officer of the company whose connivance is proved and who was in charge of, and was responsible for the conduct of the business of the company. Although, it is desirable that company should also be impleaded as a party but if it is not done the same is not fatal for the case. 8. In case of Anil Hada v. Indian Acrylic Ltd., AIR 2000 SC 145 . It has been held by the Hon’ble Apex Court that : "Three categories of persons are brought within the purview of the penal liability through the legal fiction envisaged in Section 141. They are (1) the company which committed the offence, (2) everyone who was in charge of and was responsible for the business of the company, and (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." It has been further held that : "If the offence was committed by a company, it can be punished only if the company is prosecuted. But instead of prosecuting the company if a payee opts to prosecute only the persons falling within the second or third category the payee can succeed in the case only if he succeeds in showing that the offence was actually committed by the company. In such a prosecution the accused can show that the company has not committed the offence, though such company is not made an accused, and hence, the prosecuted accused is not liable to be punished. The provisions do not contain a condition that prosecution of the company is sine qua non for prosecution of the other persons who fall within the second and the third categories mentioned above. No doubt a finding that the offence was committed by the company is sine qua non for convicting those other persons. But if a company is not prosecuted due to any legal snag or otherwise, the other prosecuted persons cannot, on that score alone, escape from the penal liability created through the legal fiction envisaged in Section 141 of the Act." 9. Therefore, if the complainant has not impleaded the firm of the accused persons as party the same is not fatal for the case. 10. The next submission made by the learned Counsel for the accused persons is that the complainant has not pleaded in his complaint that the accused persons were responsible for the conduct of the business of the company or were in charge thereof. 10. The next submission made by the learned Counsel for the accused persons is that the complainant has not pleaded in his complaint that the accused persons were responsible for the conduct of the business of the company or were in charge thereof. Although no such plea has been taken in the affidavit filed along with application under Section 482, Cr.P.C. but it is necessary for the complainant to specifically mention this fact in the complaint. However the Managing Director, Joint Managing Director and the person who signs the cheque cannot take any benefit even if this fact has not been specifically pleaded and they are liable to face prosecution. 11. In case SMS Pharmaceuticals Ltd. v. Neeta Bhalla and another, 2005(53) ACC 503 (SC), the Hon’ble Apex Court while answering the reference held in para 19 that : (a) It is necessary 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 question posed in sub-para (b) has to be in 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 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 affirmative. The question notes that the Managing Director or Joint Managing Director would be admittedly in charge of the company and responsible to the company for conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. (c) The answer to question (c) has to be in affirmative. The question notes that the Managing Director or Joint Managing Director would be admittedly in charge of the company and responsible to the company for conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as Managing Director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141. 12. According to the complainant, the accused applicant No. 1 Naruttam Baiharwani is the owner of the firm. It has been alleged that he also manages the business of the firm. Regarding accused applicant No. 2 Nirmal Baiharwani it has been specifically averred that he is manager of the firm and has also signed the cheque in question. Therefore the complaint case in view of the above legal position cannot proceed against applicant No. 1. However, it can proceed against applicant No. 2. 13. Therefore, the application is to be partly allowed. 14. The application under Section 482, Cr.P.C. is partly allowed and the summoning order as against Naruttam Baiharwani is set aside. However the case shall proceed against Nirmal Baiharwani applicant No. 2. Learned trial Court is directed to expedite the hearing of the complaint case and to conclude the trial preferably within 3 months. In case the accused Nirmal Baiharwani tries to avoid or delays the hearing necessary coercive steps may be taken against him. ————