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2012 DIGILAW 182 (KAR)

Nischal Jain v. Matha Minerals

2012-03-01

N.ANANDA

body2012
Judgment : N. Ananda, J. 1. The petitioner who is one of the Directors of M/s. Reliance Polycrete Private Limited has filed this petition for quashing the proceedings in C.C. No.20621/2006 pending trial for an offence punishable under Section 138 of the Negotiable Instruments Act, inter alia, contending that he was not in-charge of day-to-day business of the company and the averments of complaint do not bring the petitioner under the purview of Section 141 of the Negotiable Instruments Act. 2. I have heard Sri. Arvind Kamath, learned Counsel for petitioner and Sri. L.M. Chidanandayya, learned Counsel for respondent. 3. The learned Counsel for petitioner has relied on the judgment of Supreme Court reported in 2011 (6) UJ 3765: (2012 (1) KCCR SN 1 (SC)) in the case of Anita Malhotra Vs. Apparel Export Promotion Council and another) wherein, the Supreme Court has held: “17. This Court has repeatedly held that in case of a Director, complaint should specifically spell out how and in what manner the Director was in-charge of or was responsible to the accused company for conduct of its business and mere bald statement that he or she was in-charge of and was responsible to the company for conduct of its business is not sufficient (Vide National Small Industries Corporation Limited Vs. Harmeet Singh Paintal and Anr. (2010) 3 SCC 330 ). In the case on hand, particularly, in para 4 the complaint, except the mere bald and cursory statement with regard to the Appellant, the complainant has not specified her role in the day-to-day affairs of the Company. We have verified the averments as regard to the same and we agree with the contention of Mr. Akhil Sibal that except reproduction of the statutory requirements the complainant has not specified or elaborated the role of the appellant in the day-to-day affairs of the company. On this ground also, the appellant is entitled to succeed.” 4. In a decision reported in 2010 Cri LJ 1907: (in the case of National Small Industries Corp. Ltd. Vs. Harmeet Singh Paintal and another) the Supreme Court has held: “10. Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. On this ground also, the appellant is entitled to succeed.” 4. In a decision reported in 2010 Cri LJ 1907: (in the case of National Small Industries Corp. Ltd. Vs. Harmeet Singh Paintal and another) the Supreme Court has held: “10. Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in-charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent No. 1 was in-charge of or was responsible to the accused company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability. A company may have a number of Directors and to make any or all the Directors as accused in a complaint merely on the basis of a statement that they are in-charge of and responsible for the conduct of the business of the company without anything more is not a sufficient or adequate fulfillment of the requirements under Section 141. 11. In acatena of decisions, this Court has held that for making Directors liable for the offences committed by the company under Section 141 of the Act, there must he specific averments against the Directors, showing as to how and in what manner the Directors were responsible for the conduct of the business of the Company.” 5. In the case on hand, the averments of complaint relating to petitioner (arrayed as accused No.3) are as follows: “9. The complainant submits that, the Bankers have issued the endorsement on 15.2.2006 and within 30 days i.e., on 13.3.2006. the complainant instructed their advocates to issue legal notice calling upon the accused herein to make clearance of the amount of Rs.50,00,000/- (Rupees Fifty Lakhs only) towards the cheque dated 14.2.2006 bearing No.113046 drawn on M/s. ICICI Bank Limited, Defense Colony Branch, B-78, Defense Colony, New Delhi. The complainant gave 15 days time to clear the cheques. As pointed out earlier, the 1st accused is a company and it is represented by its Managing Director. The complainant gave 15 days time to clear the cheques. As pointed out earlier, the 1st accused is a company and it is represented by its Managing Director. The 2nd accused is the Managing Director of the 1st Accused and the 3rd Accused is the Director of the 1st Accused. The legal notice dated 13.3.2006 making a written demand was sent to the accused on 16.3.2006 by both registered post with acknowledgement due and also by under certificate of posting. The 1st and 2nd accused received the said legal notice sent by Registered Post Acknowledgment Due on 16.3.2006. The true copy of the legal notice dated 13.3.2006 issued to the accused is produced herewith as Annexure-G. The true copy of the postal acknowledgement for having received the legal notice by the 1st and 2nd accused is produced herewith as Annexures-H1 & H2. The complainant submits that, the said notices were also sent to the last known address. In addition to the same, the complainant also detected the new address of the accused as S-439, 1st Floor, Greater Kailash-II. New Delhi. The copies of the legal notices were also sent to those addresses. The legal notices sent to the new address were returned stating that they have left. However, copies of the legal notice sent under Certificate of Posting and Ordinary Post is received by the accused. The copies of postal receipt for having sent the legal notice, through certificate of posting is produced herewith and marked as Annexures-J1 & J2 respectively. The copies of the postal acknowledgment and the remarks of the postal authority are produced herewith as Annexurers-K & L series. 11. That the 1st accused is a company. The 2nd accused is the Managing Director, who has signed the cheque. The 3rd accused is also a Director of the 1st accused, who is actively managing and administering the affairs of the 1st accused.” 6. In my considered opinion, these averments are hardly sufficient to bring the petitioner within the purview of Section 141 of the Negotiable Instruments Act in view of what has been held by the Supreme Court in the aforestated judgments. 7. Sri. LM. Chidanandayya, Learned Counsel for respondent has referred to legal notice, in particular, to Para 6 of the legal notice dated 13.03.2006, wherein it is stated: “6. 7. Sri. LM. Chidanandayya, Learned Counsel for respondent has referred to legal notice, in particular, to Para 6 of the legal notice dated 13.03.2006, wherein it is stated: “6. The third of you is a company registered under the Companies Act and the others are the Directors of the company. All of you are managing the Administration of the Company and all of you have committed the offence under Section 138 of the Negotiable Instruments Act. Therefore, the notices are issued to all of you for the dishonor of the cheque for the reasons referred to above. It is requested to treat this as a written demand under Section 138 of the Negotiable Instruments Act.” The learned Counsel would submit that this notice has not been replied by petitioner. In that way, the petitioner has admitted that he was in the management and in-charge of day-to-day business of first accused company. 8. This submission cannot be accepted for more than one reason. In order to invoke Section 141 of the Negotiable Instruments Act, necessary averments should be found in the complaint, under Section 138 of N.I.Act, purpose of issuing notice to the accused for compliance of demand made therein, not for fastening vicarious criminal liability. In order to fasten vicarious liability by involving Section 141 of the Negotiable Instruments Act there shall be necessary averments in the complaint. 9. In the result, I pass the following: ORDER The petition is accepted. The proceedings initiated in C.C. No.20621/2006 against petitioner (arrayed as accused No.3) are quashed.