Research › Search › Judgment

Jharkhand High Court · body

2015 DIGILAW 1094 (JHR)

Puranmal Agrawal v. State of Jharkhand

2015-09-15

H.C.MISHRA

body2015
ORDER H.C. Mishra, J. Heard learned counsel for the petitioners and the learned counsel for the State as also learned counsel for the complainant opposite party No. 2. 2. The petitioners have prayed for quashing the order dated 18.04.2011 passed by Smt. K.M. Prasad, learned Judicial Magistrate, Jamshedpur, in C/1 Case No. 660 of 2011, whereby the Court below has found prima facie offence under Section 138 of the Negotiable Instruments Act, (hereinafter referred to as the “Act”), against the petitioners and have directed for issuance of summons against them. The petitioners have also prayed for quashing the entire criminal proceeding against them in the said complaint case. 3. The complainant opposite party No. 2 filed the complaint case in the Court of the learned Chief Judicial Magistrate, Jamshedpur, in which it is stated that the complainant is the partner of M/s S.P. Minerals, which used to supply the iron ore to M/s Bihar Sponge Iron Ltd. Chandil, in the district of Seraikella-Kharswan. The said Bihar Sponge Iron Ltd., after making sponge, fines and dust of the iron ore used to supply the same to M/s Sati Iron and Steel Pvt. Ltd., Gamharia, having its office in Jamshedpur. It is alleged in the complaint petition that there was an agreement between the complainant’s firm and M/s Sati Iron and Steel Pvt. Ltd. Jamshedpur, according to which M/s Stati Iron and Steel Pvt. Ltd., used to make the payment of their purchased sponge, iron fines and dusts etc., directly to the complainant’s firm and the business was going on smoothly between the parties. Alleging, that all of a sudden since the last part of year 2009 the accused persons stopped making payments to the complainant for the iron ore supplied by them to Bihar Sponge Iron Ltd. Chandil. It is alleged that ultimately the accused persons issued nine account payee post dated cheques of Rs.10,00,000/-each, but due to the repeated requests of the accused persons, the cheques were not presented in the bank, on the plea of payment to be made by them. In view of the fact that no payment was ultimately made, the cheques were deposited in the bank, but by that time the period of three cheques had already expired. In view of the fact that no payment was ultimately made, the cheques were deposited in the bank, but by that time the period of three cheques had already expired. All the nine cheques were returned back, out of which three cheques were dishonoured due to their expiry and the remaining six cheques were dishonoured as exceeding arrangements, and the complainant was informed about it by the bank on 01.02.2011. Thereafter, the legal notice was given to the accused persons on 09.02.2011 for the payment of Rs.60,00,000/-out of the six cheques which were presented in the bank within the due period, but when no payment was made, the complaint case was filed on 03.03.2011. 4. In the Complaint petition M/s Sati Iron and Steel Pvt. Ltd., Jamshedpur, has been made accused No. 1 and the petitioners have also been added as accused stating that the petitioners are the Directors of the said Company and they are running the said Company under their direct supervision and are directly responsible for day to day affairs of the Company. With these allegations the complaint was filed, which was registered as C/1 Case No. 660 of 2011. 5. The complainant’s statement was recorded on solemn affirmation and on the basis of the allegations in the complaint petition, the statement of complainant on solemn affirmation and on the basis of the documents filed through affidavit, the Court below has found prima facie offence under Section 138 of the Negotiable Instruments Act against all the petitioners by the impugned order dated 18.04.2011, which has been challenged in this case. 6. It may be stated that by order dated 15.05.2012 notice was issued to the complainant opposite party No. 2 and further proceedings in the Court below was stayed. The complainant has appeared through advocate and has also filed the Interlocutory Application, being I.A. No. 4928 of 2015, for vacating the order of stay. 7. Learned counsel for the petitioners has submitted that the petitioners have been falsely implicated in this case, and the complaint petition itself would show that the petitioners have no direct dealing with the complainant’s firm rather the petitioners were getting the supply of sponge iron, fines and dust of the iron ore, from M/s Bihar Sponge Iron Ltd. Chandil. 7. Learned counsel for the petitioners has submitted that the petitioners have been falsely implicated in this case, and the complaint petition itself would show that the petitioners have no direct dealing with the complainant’s firm rather the petitioners were getting the supply of sponge iron, fines and dust of the iron ore, from M/s Bihar Sponge Iron Ltd. Chandil. It is also submitted that the petitioners have been made accused being the Directors in the Company, only stating that the petitioners are responsible for day to day affairs of the Company, but it is no where alleged that the cheques in question were issued by any of the petitioners. Learned counsel for the petitioners submitted that the there are catena of decisions and it is now a settled principle of law that merely on the allegation that a person is a Director of the company and he is in charge of the day to day affairs of the company or that he was responsible to the company for the conduct of business of the company, he cannot be made vicariously liable under Section 141 of the Negotiable Instruments Act. In this connection learned counsel has placed reliance upon several decisions of the Supreme Court, including the one in National Small Industries Corpn. Ltd. Vs. Harmeet Singh Paintal & Anr., reported in (2010) 3 SCC 330 . Placing reliance on this decision, learned counsel has submitted that the petitioners, merely being the Directors of the Company, cannot be made vicariously liable for the offence under Section 138 of the Act, even if the entire allegation in the complaint petition is accepted against the petitioners. Learned counsel accordingly, submitted that the impugned order finding prima facie offence against the petitioners cannot be sustained in the eyes of law. 8. Learned counsel for the State as also learned counsel for the complainant opposite party No. 2 have opposed the prayer submitting that in view of the allegations made in the complaint petition, the offence is directly made out against the petitioners also, being the Directors of the Company, as it is stated in the complaint petition that the said Company is being run under the direct supervision of these petitioners and they are directly responsible for day to day affairs of the Company. Learned counsel accordingly, submitted that in view of the allegations against the petitioners there is no infirmity in the impugned order, nor there can be any interference in the criminal proceeding against the petitioners at this stage. 9. Having heard learned counsels for both the sides and upon going through the record, I find that these petitioners have been made accused in the case only stating that the petitioners are the Directors of the accused Company, and they are running the Company under their direct supervision and they are also directly responsible for day to day affairs of the said Company. It is not stated in the entire complaint petition that any of the cheques in question had been signed and issued by either of these petitioners. According to the complaint petition, none of these petitioners are the Managing Director or a Joint Managing Director, or a Director who had issued the cheques in question. It is apparent from the complaint petition that the petitioners have been made accused along with the Company itself and accordingly, the petitioners being the Directors, are also, allegedly, vicariously liable under Section 141 of the Act for the offence under Section 138 of the Act. The question whether all the Directors of the company can be made vicariously liable under Section 141 of the Negotiable Instruments Act, is no more res integra. The question has been considered by the Hon'ble Supreme Court of India times and again and in the case of National Small Industries Corpn. Ltd. (supra), relied upon by the learned counsel for the complainant, the Apex Court has taken into consideration its earlier decisions on the point and has laid down the law as follows:- "13. 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 1 was in charge of or was responsible to the accused Company for the conduct of its business. But the complaint should spell out as to how and in what manner Respondent 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. 14. 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. 15. In a Catena 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 be 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. **** **** **** 39. From the above discussion, the following principles emerge: (i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. (ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. (iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint / petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of an responsible for the business of the company and by virtue of their position they are liable to be proceeded with. (iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with. (vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint. (vii) 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." 10. From the law laid down by the Hon’ble Apex Court, it is thus apparent that for making the Director of a company vicariously liable for the offence, if he is not the Managing Director or a Joint Managing Director of the company, it is not sufficient to make a bald cursory statement in the complaint that the Director is in charge of and responsible to the company for the conduct of the business of the company, without anything more as to what role was played by the Director. Admittedly, in the present case the petitioners are neither the Managing Director nor the Joint Managing Director of the Company. There is no allegation against the petitioners to have issued the cheques in question. There is only a bald cursory statement in the complaint petition that the Company is being run under the direct supervision of the petitioners and they are directly responsible for day to day affairs of the Company. 11. In that view of the matter, I am of the considered view that the case of the petitioners is fully covered by the decision of the Apex Court in National Small Industries Corpn. Ltd. (supra), and accordingly, in absence of the necessary averments in the complaint petition, they cannot be made vicariously liable for the offence under Section 138 of the Act, only being the Directors of the Company. Ltd. (supra), and accordingly, in absence of the necessary averments in the complaint petition, they cannot be made vicariously liable for the offence under Section 138 of the Act, only being the Directors of the Company. The petitioners could not have been added as accused in the case nor the Court below ought to have found prima facie offence against the petitioners on the basis of the statements in the complaint petition. Accordingly, the impugned order dated 18.04.2011 finding prima facie offence under Section 138 of the Negotiable Instruments Act against the petitioners, as also the criminal proceeding qua the petitioners in the said complaint case, cannot be sustained in the eyes of law. 12. For the foregoing reasons, the impugned order dated 18.04.2011 passed by Smt. K.M. Prasad, learned Judicial Magistrate, Jamshedpur, in C/1 Case No. 660 of 2011, as also the entire criminal proceeding qua the petitioners only, in the said complaint case, are hereby, quashed. 13. This application is accordingly, allowed. Consequently, the Interlocutory Application filed by the complainant opposite party No. 2, also stands disposed of.