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2008 DIGILAW 943 (DEL)

REND MADAN v. STATE

2008-09-29

SUNIL GAUR

body2008
JUDGMENT Sunil Gaur, J .-Petitioner claims herself to be sleeping Director of M/s. Shree Conveyor Systems Pvt. Ltd. and that she has nothing to do with day-to-day business affairs of the aforesaid company. She has been summoned as an accused in Criminal Complaint No.731/2005 titled M/s. R.B.G. Leasing and Credit Limited, under Section 138 of Negotiable Instruments Act. 2. Quashing of the aforesaid complaint filed by respondent No.2 and proceedings pursuant thereto, is prayed for, in this petition. According to the petitioner, she has no role to playas she had not approached respondent No.2 for any loan nor it was given to her and petitioner had not given any assurance of repayment, nor the cheques in question have been signed by her and even the statutory notice regarding dishonouring of aforesaid cheques is not sent to her and, therefore, quashing of aforesaid complaint is sought by placing reliance upon judgments reported in 2005 Crl.LJ 1931; (2005) 8 SCC 89 ; 2007 (2) JCC 171 and AIR 2007 SC 1454 . 3. Respondent No.2/Complainant has drawn attention of this Court to para 2 of the Criminal Complaint to show that petitioner as well as her husband were both In-charge of their company and were responsible for the conduct and business of their company. Whereas, petitioner has pointed out that in paras 4 to 7 of the complaint in question, the active role is attributed to accused No.2 who is the husband of the petitioner and not to accused No.3 who is the petitioner. 4. Both the sides have been heard and the record as well as judgments cited are perused. 5. The contention of the petitioner is that the statutory notice Annexure-P-5 has been sent to accused No. 1 i.e. the private company of the petitioner and not to the petitioner. This contention does not cut any ice for the reason that in the notice Annexure P-5, it is clearly mentioned that the company and all its Directors who are In-charge of and are responsible to the company for the conducts or its business are liable. 6. This contention does not cut any ice for the reason that in the notice Annexure P-5, it is clearly mentioned that the company and all its Directors who are In-charge of and are responsible to the company for the conducts or its business are liable. 6. In case of S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another, VII (2005) SL T 113=IV (2005) BC 425 (SC)=IV (2005) CCR 12 (SC)= 123 (2005) DLT 275 (SC)= (2005) 8 SCC 89 , a Constitution Bench of the Apex Court has held as under: "Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the necessary facts which make a person liable. It is necessary to specifically aver in a complaint that at the time the offence was committed, the person accused was incharge 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." 7. In case of J.N. Bhatia and Ors. v. State and Another, I (2007) BC 276=139 (2007) DLT 361=II (2007) DLT(Crl.) 128=II(2007) CLT118=2007 (2) JCC 171, a Single Judge of this Court has held as under: "It can, therefore, be safely concluded that the view, which is now accepted by the Supreme Court, is that mere repetition of the phraseology contained in Section 141 of the N.I. Act, i.e. the accused is incharge of and responsible for the conduct of the day-to-day affairs of the company, may not be sufficient and something more is to be alleged to show as to how he was so responsible. " 8. Pertinent observations made by the Apex Court in case of N.K. Wahi h v. Shekhar Singh and Ors., II (2007) BC 438 (SC)=II (2007) CCR 63 (SC)=III (2007) SLT 543=138 (2007) DLT 783 (SC)=II (2007) DLT (Crl.) 86 (SC)= AIR 2007 SC 1454 ) are as under: "To launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction. There should be clear and unambiguous allegation as to how the Directors are incharge and responsible for the conduct of the business of the company. The description should be clear. There should be clear and unambiguous allegation as to how the Directors are incharge and responsible for the conduct of the business of the company. The description should be clear. It is true that precise words from the provisions of the Act need not be reproduced and the Court can always come to a conclusion in facts of each case. But still in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable." 9. In case of Saroj Kumar Poddar v. State (N.C.T of Delhi) and Another, 1(2007) SLT 525=1 (2007) CCR 278 (SC)=III (2007) BC 218 (SC)=I (2007) CL T 360 (SC)= (2007) 3 SCC 693 , while dealing with Section 141 of the N.I. Act, it has been observed as• under: "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." 10. On the other hand, learned Counsel for respondent no.2 has placed reliance upon case of N. Rangachari v. Bharat Sanchar Nigam Limited, II (2007) DLT Crl.) 380 (SC)=II (2007) CLT 275 (SC)=IV (2007) BC 516 (SC)=IV (2007) SLT 510=11 (2007) CCR 258 (SC)= AIR 2007 SC 1682 , wherein it has been observed as under: "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 of 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 incharge 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 incharge 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 incharge 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 incharge of its affairs. The Directors are prima facie in that position." 11. The law cannot operate in vacuum. It has to be applied in relation to the facts of the case, which differs from case to case. There cannot be any dispute with the above referred legal position regarding the interpretation of Section 141 of the Negotiable Instruments Act. The real difference lies in the applicability of the law to the facts of a particular case. I am of the considered view that the need to spell out specific role of the Directors of a Company is required, where they are not closely related to each other. However, in the later case i.e. when the Directors are closely related and are infact, husband and wife, then in my humble opinion, the rigours of law i.e. Section 141 of the Negotiable Instruments Act will not apply in the strict sense. In the instant case, the accused company consists of two Directors only i.e. the petitioner and her husband, who is also an accused in these proceedings. No doubt, in paragraphs 4 to 7, the averments pertained to accused No.2 who is the husband of the petitioner but there are averments in paras 3, 13 and 14 of the complaint (Annexure-P-1) which pertain to both the accused i.e. the petitioner and her husband. 12. The law as it stands today, prevails. Out of the judgments cited, the latest one is of N. Rangachari (supra). 12. The law as it stands today, prevails. Out of the judgments cited, the latest one is of N. Rangachari (supra). In this decision the verdict of the Constitution Bench rendered in case of S.M.S. Pharmaceuticals Ltd. (Supra) as well as decision in Saroj Kumar Poddar (supra), relied upon by the petitioner, have been considered and thereafter, it has been authoritatively said that the complainant is expected to be generally aware about the composition of the accused company and it is not reasonable to expect that he would know as to what role has been played by which Director of the accused company i~ the impugned transaction. I find myself in complete agreement with the dictum in N. Rangacharis case (supra) and prima facie, conclude that the specific role played by a particular Director in the alleged transaction is a matter, which is peculiarly within the knowledge of the accused company\and those who manage it. However, still it will be open to petitioner to show at trial that she was indeed a sleeping partner only. 13. In these circumstances, I would like to refer to the clinching observations made in N. Rangacharis case (supra) which read as under: "We think that, in the circumstances, the High Court has rightly come to the conclusion that it is not a fit case for exercise of jurisdiction under Section 482 of the Code of Criminal Procedure for quashing the complaint. In fact, an advertence to Sections 138 and 141 of the Negotiable Instruments Act shows that on the other elements of an offence under Section 138 being satisfied, the burden is on the Board of Directors or the Officers incharge of the affairs of the company to show that they are not liable to be convicted. Any restriction on their power or existence of any special circumstance that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial such a restriction or to show that at the relevant time they were not incharge of the affairs of the company. Reading the complaint as a whole, we are satisfied that it is a case where the contentions sought to be raised by the appellant can only be dealt with after the conclusion of the trial." 14. No good ground for quashing of the complaint in question is made out. Reading the complaint as a whole, we are satisfied that it is a case where the contentions sought to be raised by the appellant can only be dealt with after the conclusion of the trial." 14. No good ground for quashing of the complaint in question is made out. The petition is dismissed with directions that nothing stated herein shall influence or prejudice the trial of this case. 15. This petition and the pending applications, if any, stand disposed of. Petition dismissed.