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2011 DIGILAW 873 (DEL)

Kavita Aggarwal v. State

2011-09-21

MUKTA GUPTA

body2011
JUDGMENT 1. By the present petition the Petitioner seeks quashing of the complaint and order dated 22nd August, 2005 issuing summons against the Petitioner for offence under Section 138 of Negotiable Instruments Act, 1881 (hereinafter NI Act) in Complaint Case No. 819/09/08 titled as M/s. Delhi Paints and Oils Traders v. M/s. Mega Lube India Ltd. 2. The grievance of the Petitioner is that the complaint regarding dishonour of the cheques was filed by Respondent No. 2 against M/s. Mega Lube India Ltd. along with nine other persons wherein the Petitioner was named as accused No. 8. It is contended that neither any legal notice was issued nor served on the Petitioner. Even in the legal notice issued there was no mention of the Petitioner’s name. As per the complainant there is no allegation set out in the complaint qua the Petitioner. As a matter of fact in the complaint blanks have been left after the accused numbers and the Petitioner has been assigned no role. Further even in the statement of the complainant recorded there is no allegation as to how the Petitioner was responsible and in charge of the day-to-day affairs of the company. It is contended that in the absence of the requisite ingredients of Sections 138 read with Section 141, NI Act being complied with no summons could have been issued against the Petitioner. The order of the learned Judge suffers from gross illegality and warrants interference of this Court. 3. Learned Counsel for Respondent No. 2 on the other hand contends that the Petitioner has been named as one of the accused in the memo of parties of the complaint and being the Director of the company, the Petitioner was liable for the offence committed by the company. He further states that the challenge to the impugned order is highly belated. The summons were issued on 22nd August, 2005 and the Petitioner has filed the present petition on 16th April, 2010. Thus the petition deserves to be dismissed on this short ground itself. 4. I have heard learned Counsel for the parties. It may be noted that though the order of summoning was issued on 22nd August, 2005. According to the Petitioner, however the summons were not served on the Petitioner as no steps were taken by the Respondent. Thus the petition deserves to be dismissed on this short ground itself. 4. I have heard learned Counsel for the parties. It may be noted that though the order of summoning was issued on 22nd August, 2005. According to the Petitioner, however the summons were not served on the Petitioner as no steps were taken by the Respondent. The summons were served only in the year 2010 when the Petitioner immediately filed the present petition. The complaint filed by the Respondent in the present case makes an interesting reading. Though the name of the Petitioner has been mentioned at serial No. 8 in the memo of parties of the criminal complaint however, nothing beyond that has been stated. Further the complaint makes no allegations against the petitioner specifically as in paragraph 2 of the complaint after the word accused number blanks have been left. Para 2 of the complaint is reproduced as under: “2. That Accused No. 1 herein is the Limited Company named as M/s. Mega Lube India Ltd. A company incorporated under the Companies Act and having its office at A-46, Hauz Khas, New Delhi-110016. The accused No. (sic.) is Managing Director, Accused No. (sic.) is Authorised Signatory, Accused No. (sic.) is Chairman, and Accused No. (sic.) and are Directors and Accused No. (sic.) is the Vice President and Accused No. (sic.) is General Manager and Accused No. (sic.) is Deputy General Manager and who are directly and actively involved in the financial dealings of the accused company with accused Nos. 2 to 10. Hence all the accused are liable for action under Section 138 read with 141 of the Negotiable Instruments Act.” 5. Thus a bare reading of the complaint shows that there are no allegations set out against the Petitioner warranting issuance of summons. The Respondent was examined on oath. As per the testimony of Satish Anand, Manager of the Respondent herein the allegation as set out in para 4 of the affidavit are: “4. That accused herein is a Private Limited firm named as M/s. Mega Lube India Ltd., and having its office at A-46, Hauz Khas, New Delhi. The other accused named herein are working in the capacity of Directors, who are directly and actively involved in the financial dealings of the accused firm with accused. That accused herein is a Private Limited firm named as M/s. Mega Lube India Ltd., and having its office at A-46, Hauz Khas, New Delhi. The other accused named herein are working in the capacity of Directors, who are directly and actively involved in the financial dealings of the accused firm with accused. Hence, all other Directors are liable for action under Section 138 read with Section 141 of the Negotiable Instruments Act.” Thus a reading of the complaint and evidence by way of affidavit of the authorized representative of the Respondent nowhere alleges that the petitioner is the director of the company and responsible for the day-to-day affairs of the company. In the affidavit the petitioner is not named. In the complaint it is not stated that she is one of the Directors. Besides bald averment in the affidavit that the other accused named herein are working in the capacity of Directors who are directly and actively involved in the financial dealings of the accused/petitioner no other averment has been made. The affidavit does not even state that the accused number 8 mentioned in the complaint is the Director of the accused No. 1. The liability under Section 138, NI Act is of the person who issues the cheque drawn on an account maintained by him, in discharge of a legal and enforceable debt or liability. 6. The vicarious liability in case of a company or firm under Section 141, NI Act would arise if a person is in charge and responsible for the conduct of the business of the company or the firm. The Hon’ble Supreme Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, 123 (2005) DLT 275 (SC)=VII (2005) SLT 113=IV (2005) BC 425 (SC) =IV (2005) CCR 12 (SC)= (2005) 8 SCC 89 , held as under: “10. While analysing 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. While analysing 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 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 responsible 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 the 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 the 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 the conduct of business of a company at the relevant time. Liability depends on the role one plays in the affairs 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. Liability depends on the role one plays in the affairs 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 serious consequences 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. 18. 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 spelt 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.” 7. In K.K. Ahuja v. V.K. Vora and Another, V (2009) SLT 429=III (2009) DLT (Crl.) 751 (SC)=III (2009) BC 676 (SC)=III (2009) CCR 326 (SC)= 2009 (10) SCC 48 , held as under: “27. This will enable him to meet the case at the trial.” 7. In K.K. Ahuja v. V.K. Vora and Another, V (2009) SLT 429=III (2009) DLT (Crl.) 751 (SC)=III (2009) BC 676 (SC)=III (2009) CCR 326 (SC)= 2009 (10) SCC 48 , held as under: “27. The position under Section 141 of the Negotiable Instruments Act, 1881 can be summarized 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. (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 cannot be made liable under Sub-section (1) of Section 141. 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 cannot be made liable under Sub-section (1) of Section 141. Other officers of a company can be made liable only under Sub-section (2) 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.” 8. Thus in the present case a bare perusal of the complaint would show that there is no allegation that the Petitioner is the Director and is responsible and in-charge for the day-to-day affairs of the company by virtue of which vicarious liability could be imposed upon him. 9. In the facts and circumstances of the case, the petition and the application are allowed. The order dated 22nd August, 2005 issuing summons against the Petitioner for offence under Section 138 of Negotiable Instruments Act, 1881 in complaint case No. 819/09/08 titled as M/s. Delhi Paints and Oils Traders v. M/s. Mega Lube India Ltd. is set aside. Petition and application are disposed of.