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2008 DIGILAW 1398 (MAD)

N. Maheswaran v. Unique Traders

2008-04-25

S.PALANIVELU

body2008
Judgment :- This Petition has been filed under Section 482 of the Code of Criminal Procedure praying to call for the records in C.C.No.384 of 2006 on the file of the learned Judicial Magistrate No.II, at Virudhunagar and quash the same. 2. The petitioner is the 12th accused in the complaint in C.C.No.384 of 2006 on the file of Judicial Magistrate No.II, Virudhunagar, which has been taken on file on the strength of a private complaint laid by this respondent under Section 138 of the Negotiable Instruments Act. (hereinafter referred to as the Act) It is stated in the complaint that in the respondent company 2 to 12 accused are managing and they are taking part in day-to-day affairs of the company. They obtained Polythene film rolls from the respondent on loan basis and towards a balance of Rs.1,81,747/- the accused have given a cheque dated 04.05.2006 drawn on the Indian Bank, Bhavani Branch. The complainant deposited the cheque in his bank, namely, City Union Bank, Virudhunagar, but the same was dishonoured on the ground of “insufficient funds” on 21.09.2006. 3. On 10.10.2006, the complainant sent a statutory notice to the accused, but it was not complied with. The main contention of the petitioner is that he is one of the directors of the company at the time of the alleged transaction and he is in no way connected with the commission of offence. He further submitted that there is no specific averment in the complaint to attract the provisions under Section 138 of the Act to make him criminally liable under Section 141 of the said Act. 4. Learned counsel for the petitioner Mr. M.N. Shanmuga Selvam would vehemently contend that there is no specific averment with reference to the petitioner in the complaint to the effect that he was responsible for the business transaction in the first accused company and in the absence of which, the petitioner could not be fastened with any criminal liability under Section 141 of the Act. 5. Conversely, the learned counsel appearing for the respondent N. Dilipkumar would argue that the complaint contains specific allegations with regard to the role played by accused 2 to 12, fulfilling the requirements of the provisions concerned and by no stretch of imagination, it could be stated that the petitioner is not at all criminally liable. 6. 5. Conversely, the learned counsel appearing for the respondent N. Dilipkumar would argue that the complaint contains specific allegations with regard to the role played by accused 2 to 12, fulfilling the requirements of the provisions concerned and by no stretch of imagination, it could be stated that the petitioner is not at all criminally liable. 6. The learned counsel for the petitioner drew the attention of this Court to a judgment of the Apex Court rendered by a Full Bench reported in (2005 (5) CTC 65), S.M.S. Pharmaceuticals Ltd Vs. Neeta Bhalla and another, in which it is held that the complainant must disclose necessary facts regarding liability of the official, and it is necessary to specifically aver in the complaint under Section 142 that at the time of commission of offence, the accused was in charge of and responsible for conduct of business of company and in the absence of such averment, the complaint has to be dismissed at the threshold. It is further observed therein that there is no universal rule that the director of a company is in charge of its every day affairs and the director of company may not know anything about the day-to-day functioning of the company and that it is not necessary that director of a company should discharge particular function in a company. 7. The crux of the matter has been discussed in paragraph 20 of the said decision after a line of decisions of the Court were dealt with. It goes thus:- “20. In view of the above discussion, our answers to the questions posed in the Reference are as under: (a) It is necessary to specifically aver in a complaint under Section 141, that at the time offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averments 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. 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.” 8. The above said decision has been followed in two subsequent cases of the Supreme Court. One has been relied upon by the petitioner’s side and another by the respondent’s side. The learned counsel for the petitioner also placed reliance upon a case reported in Saroj Kumar Poddar Vs. State (NCT of Delhi) and another, (2007 (1) CTC 529), in which it is held that a person would be vicariously liable for a commission of offence on the part of the company or firm only if all the conditions precedent laid down therefor under Section 141 of the Act stand, satisfied and for the afore-mentioned principles, a strict construction would be necessary. It is also observed in paragraph No.14 as follows:- “.... He, as noticed hereinbefore, had resigned from the Directorship of the Company. It may be true that as to exactly on what date the said resignation was accepted by the Company is not known, but, even otherwise, there is no averment in the complaint petitions as to how and in what manner the appellant was responsible for the conduct of the business of the company or otherwise responsible to it in regard to its functioning. He had not issued any cheque. How he is responsible for dishonour of the cheque has not been stated. The allegations made in paragraph 3, thus, in our opinion do not satisfy the requirements of Section 141 of the Act.” 9. He had not issued any cheque. How he is responsible for dishonour of the cheque has not been stated. The allegations made in paragraph 3, thus, in our opinion do not satisfy the requirements of Section 141 of the Act.” 9. Armed with the above said authority, the learned counsel for the petitioner argued that as per the requirement of law, it is expected in a complaint that what type of role was specifically played by the petitioner in the transaction, which is significantly absent and since it is missing in the complaint, it is liable to be quashed, as far as the petitioner is concerned. 10. Per contra, the learned counsel for the respondent garnered support from the decision of the Supreme Court in (2007) 5 Supreme Court Cases 108), N. Rangachari V Bharat Sanchar Nigam Ltd, in which it is observed that when a complaint clearly alleges that named directors were in charge of and responsible to the company for the conduct of its business, the refusal to quash the complaint under Section 482 of Cr.P.C. could be justified and that the question whether the particular director was holding responsibility or taking charge in day-to-day affairs during the relevant period can only be considered, on appreciation of oral evidence during the trial and on this account thereby, there could be no quashment of complaint. The operative portion of the said judgment is as under:- “...21.A person normally having business or commercial dealings with a company, would satisfy himself about its creditworthiness and reliability by looking at its promoters and Board of Directors and the nature and extent of its business and its memorandum or articles of association. Other than that, he may not be aware of the arrangements within the company in regard to its management, daily routine, etc. Therefore, when a cheque issued to him by the company is dishonoured, he is expected only to be aware generally of who are in charge of the affairs of the company. It is not reasonable to expect him to know whether the person who signed the cheque was instructed to do so or whether he has been deprived of his authority to do so when he actually signed the cheque. Those are matters peculiarly within the knowledge of the company and those in charge of it. It is not reasonable to expect him to know whether the person who signed the cheque was instructed to do so or whether he has been deprived of his authority to do so when he actually signed the cheque. Those are matters peculiarly within the knowledge of the company and those in charge of it. So, all that a payee of a cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in charge of its affairs. The Directors are prima facie in that position.” 11. In the both the above said decisions of the Supreme court, the judgment in the case of S.M.S. Pharmaceuticals Ltd as adverted to supra has been referred and followed. An advertence to Sections 138 and 141 of the Negotiable Instruments Act would establish that if the requirements of those provisions are fulfilled while reading the allegations in the complaint, then the burden of proof stands shifted to the Board of Directors or the officers in charge of the company that they are liable to be prosecuted and penalized. 12. As far as the facts of the present case are concerned, it is stated that the petitioner resigned from the directorship on 16.01.2006, of course, even prior to the date of issuance of the cheque on 04.05.2006. But, it is alleged in the complaint that as on 08.06.2006, an outstanding of Rs.8,28,155/-was balance payable by the first accused company to the complainant. It shows that fairly for a particular period, the business transaction was going on between both the parties. So, even if the petitioner resigned from directorship as early as on 16.01.2006, still he could not escape from the criminal liability provided that he was not at all responsible for the day-to-day affairs of the company during the currency of the transaction. 13. It is settled law that the complaint should contain specific allegations with regard to the accused intended to be fastened with liability and he had been in charge of the business affairs of the company during the relevant period. In the complaint, it is generally stated that accused 2 to 12 were Managers and have been taking part in day-to-day affairs of the company. 14. In the complaint, it is generally stated that accused 2 to 12 were Managers and have been taking part in day-to-day affairs of the company. 14. As far as Sections 138 and 141 of the Act are concerned, the terms found therein i.e., every person connected with the affairs of the company, it is no doubt that the complaint is with regard to the narration of the role played by each director or the officers of the company in its day-to-day affairs. But it could not be denied that a specific mention is not available in the complaint with regard to the personnel who are in actual charge of the company. It is required to put the averment to the effect that the particular person has been taking active part in the day-to-day affairs of the company during the relevant point of time. It is also expected by law that the complaint must reveal necessary facts to make a person liable for an offence. All the facts needed by the law to be proved, only on appreciation of oral evidence on record by the trial Court. In case, there was no allegations with reference to the role played by either of the directors or the person who is managing the company, then it could be held that the complaint does not fulfil the requirements. 15. Per contra, when necessary averments as found in the present complaint are seen wherein it had been stated that the directors are taking part in the day-to-day affairs of the company, it is sufficient to satisfy the requirement of the law. In this connection, it is for the person aggrieved to agitate before the trial Court and let in evidence to establish that even though he was a director during the relevant period, he was not at all responsible for the day-to-day affairs of the company at the period, during which the transaction was made. 16. In this regard, the decision in N. Rangachari’s case aforenoted is followed. If the petitioner feels that he is aggrieved by the act of the complainant, he may very well agitate it before the trial Court and ought to establish that he was not at all responsible for the liability. 17. In the light of the observations above mentioned, the petition has to face dismissal. In fine, the petition is dismissed. Consequently, connected M.P.is closed. 17. In the light of the observations above mentioned, the petition has to face dismissal. In fine, the petition is dismissed. Consequently, connected M.P.is closed. The trial Court will not get influenced by any of the observations contained in this order.