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2009 DIGILAW 792 (CAL)

Manoj Jalan v. STATE OF WEST BENGAL

2009-10-28

PARTHA SAKHA DATTA

body2009
Judgment : PARTHA SAKHA DATTA, J. (1.) The three revisional applications being CRR No. 2509 of 2009, CRR No. 2507 of 2009 and CRR No. 2753 of 2009 are being disposed of by this common order because the parties are the same and common questions of law and fact have arisen in all three applications. In C-2633 of 2009 from which has arisen in CRR No. 2753 of 2009, it has been alleged that towards discharge of debt the accused persons issued in favour of the complainant a cheque for Rs. 20 lacs on 15.10.2002 drawn on State Bank of India, Overseas Branch, Calcutta which was dishonoured on the ground of insufficiency of fund. Statutory notice followed but no payment was made and the case was filed under section 138 of the NI Act. (2.) In C-1017 of 2009 from which has arisen in CRR No. 2507 of 2009 the accused persons issued cheque for Rs. 10,32,634/- on 23.4.2002 towards the discharge of debt which also stood dishonoured on the same ground and the payments were not made in spite of service of statutory notice, (3.) In C-5019 of 2009 from which has arisen the CRR No. 2509 of 2009 the facts are that the accused persons issued in favour of the complainant a cheque towards discharge of debt for Rs. 7 lacs on 18.4.2002 which also stood dishonoured and no payment was made in spite of service of statutory notice. (4.) Now, out of six accused persons including the accused No. 1 which is a company the present application has been filed by the accused No. 5 Monoj Jalan, who is said to be the Director of the company. (5.) Mr. Manjit Singh, learned Advocate appearing for the petitioner advanced two grounds. The first ground is that in the petition of complaint there is no averment in order to meet the requirements of section 141 of the Negotiable Instruments Act. Mr. Singh refers to the decision of the Honble Supreme Court in Ram Raj Singh vs. State of M.P. and Anr., reported in 2009(3) SCC (Cri) 23, wherein according to Mr. The first ground is that in the petition of complaint there is no averment in order to meet the requirements of section 141 of the Negotiable Instruments Act. Mr. Singh refers to the decision of the Honble Supreme Court in Ram Raj Singh vs. State of M.P. and Anr., reported in 2009(3) SCC (Cri) 23, wherein according to Mr. Manjit Singh it has been held that to launch a prosecution against the Directors there must be a specific allegation in the complaint as to the part played by them in the prosecution and there should be clear and unambiguous allegation as to how the Directors are in charge and responsible for the conduct of the business of the company. According to Mr. Singh in the petition of complaint it has not been stated in clear terms as to how this petitioner who is said to be the Director of the company is responsible for the conduct of the business of the company; as such the instant prosecution against the petitioner is not maintainable. The second ground advanced by Mr. Manjit Singh is that the petitioner resigned from the directorship of the company some time before the cheques were issued and in support of his submission he produced certified copy of Form No. 32 showing resignation of Manaj Jalan on 27th March, 2002. Therefore on these two grounds it is submitted that the instant prosecution against the petitioner is not maintainable. (6.) Mr. Ayan Bhattacharjee, learned Advocate appearing for the O.P. complainant submitted that none of the contentions of Mr. Manjit Singh is acceptable because firstly so far as the compliance with the provision of section 141 is concerned, the three-Judge Bench decision in S.M.S. Pharmaceutical Ltd. vs. Neeta Bhalla, reported in 2005 SCC (Cri) 1975, is decisive and the said decision has clearly laid down the law in the matter. It is submitted further that in Ram Raj Singh (supra), it has not been held by the Supreme Court that in the complaint, it has to be disclosed as to how a Director is responsible for the conduct of business of the company or the part played by him in the transaction. In the decision in Ram Raj Singh, there is a reference to the two-Judge Bench decision in N.K. Wahi vs. Sekhar Singh, reported in 2007(3) SCC (Cri) 2003, and what has been read out by Mr. In the decision in Ram Raj Singh, there is a reference to the two-Judge Bench decision in N.K. Wahi vs. Sekhar Singh, reported in 2007(3) SCC (Cri) 2003, and what has been read out by Mr. Singh from the judgment of Ram Raj Singh is virtually the quotation from the decision in N.K. Wahi as quoted in that decision. It is further submitted that neither Ram Raj Singh nor Saroj Kr. Poddar, reported in 2007(3) SCC 693 , has disputed the first decision which laid down the law [S.M.S. Pharmaceutical Ltd., reported in 2005 SCC (Cri) 1975]. (7.) In the petition of complaint, with regard to meet the requirement of section 141 of the NI Act the complainant has averred as follows : "The accused No. 1 is a limited company within the meaning of the Companies Act, 1956 having its office at the address mentioned above; accused No. 2 was/is the Managing Director of the said company and signatory of both the impugned cheques of the present case; accused Nos. 3, 4, 5 and 6 are the Directors of the said accused company and all the accused persons No. 2 to 6 are in-charge and/or responsible to the said accused company for its day- to-day business and/or affairs and they were/are enjoying the overall control over the management of the said accused company during all relevant time." (8.) What requisite averment is needed to attract a Director criminally liable was dealt with in three-Judge Bench decision of that Supreme Court in S.M.S. Pharmaceutical Ltd. vs. Neeta Bhalla, reported in 2005 SCC (Cri) 1975, where it was held as follows: "To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under section 141 of the Act is sought to be fastened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of section 141 has to be spelled out. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of section 141 has to be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within section 141, he would issue the process. We have seen that merely being described as a Director in a company is not sufficient to satisfy the requirement of section 141. Even a non-Director can be liable under section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial. "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 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 requirement of section 141 cannot be said to be satisfied. (b) The answer to the question posed in sub-para (b) has to be in the 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 the 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 the affirmative. 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 the 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 the 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 or Joint Managing Director, these persons are in charge of an responsible for the conduct of business of the company. Therefore, they get covered under section 141. So far as the 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. Reference in N.K. Wahi has been made to the decision in Sabitha Ramamurthy and Anr. vs. R.B.S. Channabasavaradhya and Anr., reported in 2006(9) SCALE 212 and Saroj Kumar Poddar vs. State (NCT of Delhi) and Anr., 2007(2) C Cr. LR (SC) 187. (9.) Mr. Bhattacharjee, learned Counsel appearing for the opposite party No. 2, the complainant, submitted that section 141 of the NI Act deals with vicarious liability by virtue of which a Director of a company is held liable who was in charge and responsible for the conduct of business of the company at the relevant point of time when the alleged offence took place. It is further submitted that what is the requisite averment to attract a Director criminally liable was dealt with in a three-Judge Bench decision of the Supreme Court in S.M.S. Pharmaceutical Ltd. 2005 SCC (Cr) 1975: 2005(2) C Cr. LR (SC 457 (Para 8/17/18/19) wherein it has been observed that it is necessary to specifically aver in a complaint under section 141 of the Act that at the time offence was committed the person accused was in charge of, and responsible for, the conduct of business of the company and in absence of such averment the requirement of section 141 cannot be said to be satisfied. It is submitted that the decision in N.K. Wahi (supra) does not lay down at all that an averment is a must as to how and in what manner a certain person was responsible for conduct of business of this company or otherwise responsible to it in regard to its functioning. (10.) In the second S.M.S. Pharmaceutical Ltd. decision, 2007(2) Supreme 459 , the same principle has been reiterated and it was held that section 141 of the Act does not say that a Director of a company shall autocratically be vicariously liable for commission of an offence on behalf of the company and what is necessary is that sufficient averment should be made to show that the person who is sought to be proceeded against on the premise of his being vicariously liable for commission of an alleged offence by the company must be in charge and shall also be responsible to the company in the conduct of its business. The decision in Saroj Kumar Poddar (supra) which is banked upon by the petitioner has been referred to in second SMS case wherein the same Honble Judge who spoke in Saroj Kr. Poddar case wrote the following lines: "A faint suggestion was made that this Court in Saroj Kumar Poddar (supra) has laid down the law that the complaint petition not only must contain averments satisfying the requirements of section 141 of the Act but must also show 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. A plain reading of the said judgment would show that no such general law was laid down therein. The observations were made in the context of the said case as it was dealing with a contention that although no direct averment was made as against the appellant of the said case fulfilling the requirements of section 141 of the Act, but there were other averments which would show that the appellant therein was liable therefor." In Monaben Ketanbhai Shah vs. State of Gujarat, 2004(7) SCC 15 : 2004 C Cr. LR (SC) 1007, it has been held as follows: "It is not necessary to reproduce the language of section 141 verbatim in the complaint since the complaint is required to be read as a whole. LR (SC) 1007, it has been held as follows: "It is not necessary to reproduce the language of section 141 verbatim in the complaint since the complaint is required to be read as a whole. If the substance of the allegations made in the complaint fulfil the requirements of the section 141, the complaint has to be proceeded and is required to be tried with. It is also true that in construing a complaint a hyper technical approach should not be adopted so as to quash the same. The laudable object of preventing bouncing of cheques and sustaining the credibility of commercial transactions resulting in enactment of sections 138 and 141 has to be borne in mind. These provisions create a statuary presumption of dishonesty, exposing a person to criminal liability if payment is not made within the statutory period even after issue of notice, it is also true fact the power of quashing is required to be exercised very sparingly and where, read as a whole factual foundation for the offence has been laid in the complaint it should not be quashed. All the same, it is also to be remembered that it is the duty of the Court to discharge the accused if taking everything stated in the complaint as correct and construing the allegations made therein liberally in favour of the complainant the ingredients of the offence are altogether lacking. The present case falls in this category as would be evident from the facts noticed hereinafter." (11.) In N. Rangachari vs. Bharat Sanchar Nigam Limited, 2007(2) Law Herald (SC) 1379, There Lordships while relying on the decision in first SMS case made certain observations which are pertinent: "A person normally having a business or commercial dealing 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. 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 cheques was instructed we 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 its. So, all that a payee of 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." (12.) This decision has been quoted extensively in Ram Raj Singh vs. State of M.P. In Ram Raj Singh (supra), it has not been held by Their Lordships of the Supreme Court that to launch a prosecution it has to be stated in the complaint as to how a particular Director is responsible for the conduct of the business of the company. (13.) In K.K. Ahuja vs. V.K. Vora and Anr., reported in 2009(3) E Cr. N 658, which had been relied on by Mr. Manjit Singh. It has been held as follows : The position under section 141 of the Act can be summarised thus: (i) If the accused is the Managing Director or a Joint Managing Director it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to, the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix Managing to the word Director makes it clear that they were in charge of, and are responsible to, the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix Managing to the word Director makes it clear that they were in charge of, and are responsible to, the company, for the conduct of the business of the company. (ii) In the case of a Director or an officer of the company who signed the cheque on behalf of the company, there is no need to make a specific averment that he was in charge of, and was responsible to, the company, for the conduct of the business of the company or make any specific allegation about consent, connivance or negligence. The very fact that the dishonoured cheque was signed by him on behalf of the company, would give rise to responsibility under sub-section (2) of section 141. (iii) In the case of a Director Secretary or Manager [as defined in section 2(24) of the Companies Act] or a person referred to in clauses (e) and (f) of section 5 of Companies Act, an averment in the complaint that he was in charge of, and was responsible to, the company for the conduct of the business of the company is necessary to bring the case under section 141(1). No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under section 141(2) by making necessary averments relating to consent and connivance or negligence in the complaint, to bring the matter under that sub-section. (iv) Other officers of a company can not be made liable under sub-section(1) of section 141. Other officers of a company can be made liable only under sub-section (2w) of section 141, be averring in the complaint their position and duties in the company and their role in regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligence." (14.) In this decision also it has not been held that there has to be a specific averment as to how a particular Director is responsible or of the exact role was played by him in the prosecution. (15.) The next point is whether the alleged resignation of the petitioner from the power of directorship can be taken to be the ground for quashing of the proceeding. Mr. (15.) The next point is whether the alleged resignation of the petitioner from the power of directorship can be taken to be the ground for quashing of the proceeding. Mr. Manjit Singh referred to the two decisions one of Madhya Pradesh High Court (unreported) and another Delhi High Court (unreported) to submit that whether a Director is resigned from directorship as is evident from Form No. 32 there cannot be any prosecution. In Madhya Pradesh decision is in connection with a case between Monoj Jalan vs. Annapurna Enterprise and this Delhi decision is in connection with the case of Vinoy Kumar vs. State and Anr. However, Mr. Singh relied on a Single Bench decision of this Court in Saroj Kr. Jhunjhunwala vs. State of W.B. and Anr., reported in 2007(1) C Cr. LR (Cal) 793, where Honble Judge of this Court quashed the proceeding on the ground that a particular Director resigned from the directorship before the prosecution as it was found from Form No. 32 but Mr. Ayan Bhattacharjee, learned Counsel for the O.P. submits that the decision in Saroj Kr. Jhunjhunwala (supra) was challenged before the Honble Supreme Court in Criminal Appeal No. 1472 of 2008 (Shree Jagannath Ferro Casting vs. Saroj Kr. Jhunjhunwala and Anr.,) where Their Lordships held as follows : "Leave granted. Counsel for respondent No. 1 fairly states that considering the limited scope of section 482 Cr. PC, the impugned order of the High Court cannot be sustained on the question of discharge. On this statement, we set aside the impugned order of the High Court. The appeals are allowed accordingly. It is, however, made clear that it will be open to respondent No. 1 accused to seek resort to the remedies available in law to him. The Magistrate shall now proceed with the matter in accordance with law without being influenced by any of the observations made either hereinabove or by the High Court in the impugned order." (16.) In such circumstances, the decision in Saroj Kr. Jhunjhunwala is of no avail. In Budhmal Bhansali @ B. Bhansali vs. State of W.B. and Anr., reported in 2008(1) C Cr. LR (Cal) 486, where it was held as follows: "When a fact falls within the category of shall presume, the Court shall record the facts as proved, unless and until it is disproved. Jhunjhunwala is of no avail. In Budhmal Bhansali @ B. Bhansali vs. State of W.B. and Anr., reported in 2008(1) C Cr. LR (Cal) 486, where it was held as follows: "When a fact falls within the category of shall presume, the Court shall record the facts as proved, unless and until it is disproved. Plain reading will show that even when a fact falls within the category of shall presume, a rebuttable presumption is raised. Unless the presumption is rebutted the Court shall presume the fact as proved. So it is clear that any fact falling within the category of shall presume does not fall within the category of conclusive proof. Only in cases which falls within the category of conclusive proof. The Court shall not allow evidence to be given for the purpose of disproving it." (17.) Whether Form No. 32 can be taken necessary aid of to quash a criminal proceeding under section 138 of the NI Act came up for consideration by this Court in a number of decisions apart from the one in Saroj Kr. Jhunjhunwala which I have reproduced earlier. (18.) In Fateh Chand Bhansali vs. Hindustan Development Corporation Ltd., reported in 2005(1) C Cr. LR (Cal) 581, this question came up for consideration. Here another Single Bench of this Court observed as follows: "It is also equally settled that this Court at this stage cannot look into the papers and documents annexed with the revisional application as those were neither verified not tested. Therefore, the question whether the petitioners resigned from the company and submitted Form 32 under the Companies Act, and thereby no way responsible in this matter are all questions which can be decided in the trial. There is no need of discussion which can be decided in of law in this respect but, the decision of State of M.P. vs. Awadh Kishore Gupta (supra) is an authority regarding permissibility of this Court to look into the papers and documents annexed with the revisional application. The story of petitioners that they resigned from the company by submitting Form No. 32 and are in no way responsible for the alleged offence is a defence of accused petitioners. The story of petitioners that they resigned from the company by submitting Form No. 32 and are in no way responsible for the alleged offence is a defence of accused petitioners. The defence or alibi of accused is a matter for consideration in the trial on the basis of evidence which cannot be decided by this Court." (19.) Yet another Honble Single Judge of this Court in Rajendra Mohan Sodhi @ R.M. Sodhi vs. State of W.B. and Anr., reported in 2008(2) E Cr. N 516, had the occasion to consider this question and it has been held that if the presumption arises out of such document then it is also subject to rebuttal evidence which can only be made at the time of trial. This decision followed N. Rangachari vs. Bharat Sanchar Nigam Limited, reported in 2007(2) E Cr. N 568. In Bharat Sanchar Nigam Limited it was pleaded that the Chairman had resigned effectively on 26th August, 2004 when promise between the promoters and investors of Data Access (India) Ltd. started developing and the two cheques that were the subject matter of the complaint were dated 31st August, 2004 which was after operation had effectively resigned. Their Lordships of the Supreme Court held as follows: "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 adverteen 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-in-Charge 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 in-charge of the affairs of the company. Reading the complaint as a whole, we are not satisfied that it is a case where the contentions sought to be raised by the appellant can only be dealt with after conclusion of the trial. Reading the complaint as a whole, we are not satisfied that it is a case where the contentions sought to be raised by the appellant can only be dealt with after conclusion of the trial. (20.) The decision of this Court in Rajendra Mohan Sodhi (supra) was challenged in the Honble Supreme Court being Special Leave Petition No. 4882 of 2008 which was further dismissed. (21.) Yet in another decision an Honble Single Judge of this Court had occasion to consider this point in Bibek Raychaudhuri and Ors. vs. Virama Enterprise Private Ltd., reported in 2007(2) E Cr. N 611. Here also it was pleaded that at the time of handing over the cheques the petitioners were not in the Board of Directors. It was held in the decision that "the categorical and specific allegations made against the petitioners/accused persons in the petition of complaint can only be judged in the context of the evidence to be adduced at the time of trial. The challenge thrown by the complainant can be properly and effectively responded at a subsequent stage, as this Court is not expected to rely solely how on the various documents including Form No. 32 reportedly filed before the Registrar of Companies. (22.) In Sreekant Bangur vs. State of West Bengal and Anr., reported in 2000 C Cr. LR (Cal) 363, yet another learned Single Judge responded to the same question in the negative. (23.) In view of the above decisions of this Court and the Honble Supreme Court orders as referred to above and constrain to hold that this point has to be adduced in the negative for the purpose of the application under section 482 of the Cr. PC. (24.) Accordingly, the revisional applications are not maintainable and they are dismissed. (25.) Urgent xerox certified copy, if applied for, be given to the parties as expeditiously as possible. Appeals dismissed.