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2008 DIGILAW 738 (MAD)

G. Baskaran v. S. Mohammed Ali Jinnah

2008-02-28

S.PALANIVELU

body2008
Judgment :- The petitioner is accused No.2 in the complaint laid by the respondents before the Judicial Magistrate No.III, Madurai in STC No.3064 of 2004. Totally there are four accused. The 3rd and 4th accused are the Directors of the first accused establishment. In the complaint it is alleged that the present petitioner was introduced to the complainant by one Kareem of Kajimar Street, Madurai who was also engaged in the business. The said Kareem died on 24.05.2002. The petitioner had received a sum of Rs.3,00,000/- (Rupees three lakhs only) on 25.03.2002 as emergent loan on behalf of the first accused establishment, Pandian Hotel (Private) Limited, Madurai for their business purpose and evidencing the same the petitioner issued a cheque drawn on Canara Bank, Madurai dated 30.12.2002 in the capacity of Manager of the first respondent establishment. The complainant presented the Cheque for collection through his bank, viz., Indian Overseas Bank, Madurai District Court extension counter on 22.05.2003. But it was dishonoured due to closure of the Bank account. Thereafter, a statutory notice was issued and then complaint came to be laid. 2. The petitioner has come forward before this Court for quashing the proceedings in the above criminal case by stating that he was terminated from service of the first accused Company as early as on 19.07.2000 as evident from the Form-32 issued by the Assistant Registrar of Companies. It is stated therein that the petitioner was terminated from service on 19.07.2000. It is his further contention that since the petitioner was not serving as Manager on the date of issuing the cheque, he is not at all liable for the debt and that he was not holding any responsibility in the Company for conduct of business. 3. Earlier, before this Court, the 1st, 3rd and 4th accused filed Crl.O.P(MD)No.10795 of 2004 against the 6th respondent for a relief of quashing of the criminal proceedings against them since both the 3rd and 4th accused are Directors of the Company and the 1st accused Company is represented by its Managing Director. After hearing the matter, this Court on 02.08.2007 passed the orders quashing the proceedings as far as the 4th respondent is concerned. The 3rd accused died pending the above said proceedings. The request for quashment as regards the first accused Company was rejected. 4. After hearing the matter, this Court on 02.08.2007 passed the orders quashing the proceedings as far as the 4th respondent is concerned. The 3rd accused died pending the above said proceedings. The request for quashment as regards the first accused Company was rejected. 4. In the backdrop of the above said circumstances, the petitioner has now come forward with a plea that on the date of issuance of the cheque he was not at all holding any post in the first accused Company much less a position as Manager and hence, the cheque is non-est in the eye of law with reference to his liability. The learned counsel for the petitioner would strenuously contend that when the statute mandates that the responsibility has to be fixed on an individual, who is in actual incharge of the affairs of the Company and even if any person is to be made liable it must be on the principles of vicarious liability and in the case on hand, there is no such circumstance available, as the petitioner is not at all vicariously liable also. To base his contention, he gathered support from the decisions of the Honourable Supreme Court of India. Before entering into the discussion, it is profitable to have extraction of Section 141 of Negotiable Instruments Act, 1881, which deals with the fixing of liability about the persons in various capacities. Section 141 reads as follows:- “141. To base his contention, he gathered support from the decisions of the Honourable Supreme Court of India. Before entering into the discussion, it is profitable to have extraction of Section 141 of Negotiable Instruments Act, 1881, which deals with the fixing of liability about the persons in various capacities. Section 141 reads as follows:- “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 incharge 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 his 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 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” 5. The learned counsel relied upon the decision reported in Sabitha Ramamurthy and another Vs. R.B.S. Channabasavaradhya (2006 4 CTC 684) (S.C) wherein Their Lordships have categorically held that “by reason of the above said provision, a person although is not personally liable for commission of such an offence would be vicariously liable therefor. The learned counsel relied upon the decision reported in Sabitha Ramamurthy and another Vs. R.B.S. Channabasavaradhya (2006 4 CTC 684) (S.C) wherein Their Lordships have categorically held that “by reason of the above said provision, a person although is not personally liable for commission of such an offence would be vicariously liable therefor. Such vicarious liability can be inferred so far as a company registered or incorporated under the Companies Act, 1956 is concerned only if the requisite statements, which are required be averred in the Complaint Petition, are made so as to make the accused therein vicariously liable for the offence committed by the company”. 6. He has also placed reliance upon another decision of the Apex Court in Saroj Kumar Poddar Vs. State (NCT of Delhi) and another reported in (2007 (1) CTC 529) in which it is observed that “with a view to make a Director of a Company vicariously liable for the acts of the Company, it was obligatory on the part of the complainant to make specific allegations as are required in law”. In the said decision an earlier decision, S.M.S. Pharmaceuticals Limited Vs. Neeta Bhalla and another reported in (2005 5 CTC 65): 2005(8) SCC 89 has been referred to in which it has been observed that, 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 responsible to the company for the conduct of the business of the Company”. 7. Armed with the above authorities, the learned counsel for the petitioner would state that it is not shown that the petitioner was responsible for the affairs of the Company on the date of cheque. But his contention is not tenable in view of the fact that the petitioner was neither a Director nor a Chairman at any point of time in the first accused Company. In the capacity of the Manager, he had borrowed the loan. It is within his knowledge that he was terminated from services as early as on 19.07.2000 and it is a big question, whether it was available on his part to obtain loan from the complainant describing him as Manager to the extent of Rs.3,00,000/- on 30.12.2002 much later to the above said termination. It is within his knowledge that he was terminated from services as early as on 19.07.2000 and it is a big question, whether it was available on his part to obtain loan from the complainant describing him as Manager to the extent of Rs.3,00,000/- on 30.12.2002 much later to the above said termination. The above said decisions will not come to the rescue of the petitioner on the other ground also which is on the principles of vicarious liability because, the petitioner has personally issued the cheque as Manager and no question of operation of principles of vicarious liability would arise. 8. He also gathered support from two other decisions of this Court reported in S.B. Shankar Vs. Amman Steel Corporation, Trichirapalli ( 2002 (1) CTC 227 ) and in Leela Rathnam Vs.Vikas Electo Chem Agencies Pvt Ltd., (2004 (1) Crimes 197). The facts in the present case are very much distinguishable as in those decisions the persons, who are holding the position of Chairman and Director of a Company respectively were dealt with and the petitioner cannot take recourse to the benefit of the judgments. 9. The learned counsel for the respondent would argue in vehemence that by no stretch of imagination it could be stated that the petitioner should not be made liable for the reason that he was already terminated from services on 19.07.2000. Firstly, it was not made known to the complainant at the time of advancing the loan and nextly, the petitioner having known fully well that he was not the Manager of the Company, obtained the loan, should made be liable to face the consequences of the loan transactions. He cited two authorities of the Supreme Court of India. The first one is in S.V. Muzumdar and others Vs. Gujarat State Fertilizers Co., Ltd., and another reported in (2005 (3) CTC 380) in which in paragraphs 10 & 11, it is observed thus:- “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”. 11. 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”. 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.” 10. The next one is reported in 2007 (3) SCC 495 in N.Rangachari Vs. Bharat Sanchar Nigam Ltd. In this case, it is held that “it is not proper to split hairs in reading the complaint so as to come to a conclusion that the allegations as a whole are not sufficient to show that at the relevant point of time the appellant and the other are not alleged to be persons incharge of affairs of the Company”. 11. However, in the present complaint, in two places it has been mentioned that in the capacity of the Manager of the first respondent, the loan was obtained by the petitioner. These pleadings are more than sufficient. Further, in the above said decisions of the Supreme Court it is held that as per Section 141 of the Negotiable Instruments Act, it is to be found that the person responsible was the one who was incharge of the conduct of the business of the Company. Proviso to (1) of Section 141 of the Negotiable Instruments Act would show that the persons who wants to get rid of the liability should prove that the offence was committed without his knowledge. But in this case, the facts are otherwise. The petitioner could never plead ignorance with regard to the cheque. 12. Following the principles laid down by the Supreme Court, when the facts of the case are considered it is to be held that the petitioner is liable for the offence to be prosecuted under Section 138 of the Negotiable Instruments Act. The prayer for quashment in favour of the petitioner could not be thought of. The case in STC No.306/2004 shall find its logical conclusion. Legally there is no ground made out by the petitioner to quash the proceedings. The prayer for quashment in favour of the petitioner could not be thought of. The case in STC No.306/2004 shall find its logical conclusion. Legally there is no ground made out by the petitioner to quash the proceedings. The petitioner has to be non-suited for the relief as prayed for. The observations made in this order would in no way affect the merits of the case. 13. In fine, the petition is devoid of merits and hence, it is dismissed. Consequently, the connected miscellaneous petition is also dismissed.