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Madhya Pradesh High Court · body

2007 DIGILAW 578 (MP)

Sunita v. State of M. P.

2007-05-15

S.C.VYAS

body2007
ORDER 1. By these petitions, petitioner prays for quashment of criminal proceedings of Criminal Case No. 889 of 2003 and 2094 of 2003 pending in the Court of Judicial Magistrate First Class, Indore against her under sections 138 and 141 of Negotiable Instruments Act (hereinafter shall be referred as the 'Act'). 2. For deciding these petitions, facts of Criminal Case No. 889 of 2003 are only required to be stated in short; Respondent No.2 Manoj Agrawal herein, filed a private complaint before the trial Court wherein it has been alleged that some amount of commission was due and outstanding against M/s. Everest Flavours Ltd. a company incorporated under the Companies Act having its registered office at Mumbai. Two cheques of Rs. 1.50 crores were handed over to the complainant by accused Nos. 1 and 3 after amicable settlement with regard to outstanding amount. The aforesaid cheques were signed by accused Nos. 1 and 3 i.e. the company and Anand Ladsariya. The account of Company was being operated by accused Nos. 2 and 3 Radhakishan and Anand. Cheques were presented in the bank and the same were dishonoured with an endorsement of account closed. Thereafter notice was sent to the accused persons demanding the amount of cheques, instead no amount was paid, the complaint was filed. 3. As against the present petitioner, in para 1 of the complaint, it has been averted that she was Director of the company and conduct day to day business and affairs of the company is responsible for the act of the company. 4. Present petitioner filed an application under sections 204 and 245 of the Criminal Procedure Code (hereinafter referred to as the 'Code') before the trial Court, copy of which has been annexed in the petitioner marked as Annexure P-2. In the said application it has been mentioned that petitioner had already resigned the company/accused No.1 in the year 1995 and was ceased to act as Director since 1st December 1995 and since then she had no post in the company. The cheques were issued on 10.2.2003 and on this date she was not Director of the company. Therefore, criminal proceedings initiated against her are liable to be quashed. The cheques were issued on 10.2.2003 and on this date she was not Director of the company. Therefore, criminal proceedings initiated against her are liable to be quashed. Photo copy of form No. 32 issued by Registrar of Companies State of Maharashtra and certified by Chartered Accountant was also filed before the trial Court along with an application which is marked as Annexure A-3. The application was considered and allowed by the trial Court and petitioner was discharged. 5. The said order was challenged by respondent by filing a revision. The same was decided' and allowed by XIth ASJ vide order dated 12.4.2005 passed in Criminal Revision No. 741 of 2004 holding that after taking cognizance against the present petitioner trial Court has no jurisdiction to review its own order. Feeling aggrieved by this impugned order, petitioner has approached this Court. 6. Contention raised by learned counsel for petitioner is that in private complaint filed by respondent complainant, it has nowhere been averted that present petitioner was in-charge or responsible for the conduct of the business of the company at the time of commission of alleged offence and therefore she cannot be prosecuted. In this regard learned counsel placed heavy reliance on a judgment of SMS Pharmaceuticals v. Neeta Bhalla and another [ AIR 2005 SC 3512 ] and Sara) Kumar Poddar v. State (NCT of Delhi) and another [2007 AIR SCW 656]. 7. Per contra, learned counsel appearing for respondent complainant Ms. Seema Sharma submitted that cognizance had already been taken against the present petitioner and the proceedings of criminal case are in progress and she appeared before the trial Court. It has also been argued that there is sufficient material to show that she was also in-charge and responsible for the conduct of business of the company and for the aforesaid purpose attention has been drawn towards the fact that amount of cheque was in fact the amount of commission payable to the complainant which was outstanding for the last so many years when he served in the company of the present petitioner and therefore she is liable for the payment of the cheque amount. 8. 8. In the complaint reference of present petitioner is given in para 1 only wherein along with other Directors, it has been stated against her also that she is one of the Directors and conduct day to day work of the company and is responsible for the affairs of the company. Except mentioning these facts, nothing has been averted in the complaint against her. The document Annexure A-3 containing particulars of appointments of Directors and Managers and changes amongst them shows that present petitioner submitted her resignation since 1st December 1995 Certificate issued by Chartered Accountant and copy of which has been filed as Annexure A-4 also certifies that petitioner had already resigned the company w.e.f. 1.12.1995 and was never appointed as Director of the company till the date of issuance of certificate dated 7.2.2004. As per averments of the complaint cheques in question were issued in the month of February 2003 and on that day present petitioner was neither director nor in no way in-charge or responsible to the company for the conduct of business of the same and therefore she cannot be deemed to be guilty for commission of offence under section 138 with the help of section 141 of the Act. 9. This question came up for consideration before three Judges Bench of apex Court in SMS Pharmaceuticals (supra) wherein upon consideration of large number of decisions it was opined in para 12 -- "While analyzing section 141 of the Act, it Will be seen that it operates in cases where an offence under section 138 is committed by a company. The key words which occur in the section are "every person". These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words, "who, at the time of 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 etc." What is required is that the persons who are sought to be made criminally liable under section 141 should be at the time the offence was committed, in-charge of and resonsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in-charge of and responsible for conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a Director of a Company, 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 under the provision. The liability arises from being in-charge of and responsible for conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Conversely, a person not holding any office or designation in a Company may be liable if he satisfies the main requirement of being in-charge of and responsible for conduct of business of a Company at the relevant time. Liability depends on the role one plays in the affair of a Company and not on designation or status. If being a Director or Manager or Secretary was enough to cast criminal liability, the section would have said so. Instead of "every person" the section would have said "every Director, Manager or Secretary in a company is liable' .......etc.: The legislature is aware that it is a case of criminal liability which means a serious consequence so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action". 10. In the matter of Saroj Kumar Poddar (supra) again taking note of above referred case and in Sabitha Ramamurthy and another v. RBS Channabasavaradhya [ 2006 (9) Scale 212 ] it has been held that a person would be vicariously liable for commission of an offence on the part of a company only in the event the conditions precedent laid down therefore in section 141 of the Act stand satisfied. For the aforementioned purpose, a strict construction would be necessary. 11. Therefore, the law on the point is very clear. For the aforementioned purpose, a strict construction would be necessary. 11. Therefore, the law on the point is very clear. The person who is not in-charge of and was responsible to the company for the conduct of the business of the company at the time of commission of the offence cannot be deemed to be guilty of the offence under sections 138 and 141 of the Act. 12. From the averments of the petition and the documents which have submitted by petitioner, it is clear that she was not the Director of the company at the time of commission of the alleged offence and therefore cannot be held to be in-charge or responsible for the conduct of the business of the company and therefore her prosecution is not sustainable. 13. In view of the aforesaid discussions, both these petitions succeed and hereby allowed. The criminal proceedings initiated so far as present petitioner is concerned, are hereby quashed. A copy of the order be retained in connected petition.