Ramnarayam Jagadeesan, S/o Jagadeesan v. Sri Vijaya Sai Cottor Traders, Rep. By its partner Mr. Sure Srinivas Rao
2023-12-01
K.SURESH REDDY
body2023
DigiLaw.ai
ORDER : The present Criminal Petition, under Section 482 Cr.P.C., is filed by the petitioner-accused No. 6 seeking to quash the proceedings against him in C.C.No. 821 of 2015 on the file of the Court of learned V Additional Junior Civil Judge, Guntur, registered for the offences punishable under Sections 138 to 142 of the Negotiable Instruments Act, 1881 (for short, 'the Act'). 2. In the complaint, respondent No. 1-complainant, Managing Partner of M/s. Sri Vijaya Sai Cotton Traders, Guntur, alleged that accused Nos. 2 to 10 are Directors of accused No. 1 company i.e. M/s. Shri Renuga Textiles Limited and they are responsible for conduct of day-to-day business affairs of accused No. 1 company. Accused No. 1 placed orders on respondent No. 1 for supply of cotton. Pursuant to the aforesaid purchase orders, respondent No. 1 supplied cotton to accused No. 1. In discharge of its liability against the bills raised by respondent No. 1 on accused No. 1, the latter had issued a cheque bearing No. 625456 dated 22-02-2014 for a sum of Rs.23,81,764/- drawn on S.B.I., SME Branch, Theni, Chennai, Tamil Nadu State, in favour of the former. When respondent No. 1 presented the cheque in its bank i.e. South Indian Bank Limited, Koritepadu, Guntur, the same was dishonoured with the endorsement 'payment stopped by drawer'. On 21-05-2014, respondent No. 1 received intimation of dishonor of the cheque from its banker. Thereafter, respondent No. 1 got issued a legal notice on 14-06-2014 calling upon the accused to make payment of the amount of the dishonoured cheque as per the provisions of Section 138 of the Act. Alleging that the accused did not pay the amount of the dishonoured cheque i.e. Rs.23,81,764/- to respondent No. 1 within the time stipulated, the latter filed the aforesaid complaint under Sections 138 to 142 of the Act. 3. Heard Sri D.Vijay Kumar, learned counsel, representing Sri T.S.Anirudh Reddy, learned counsel appearing for the petitioner-accused No. 6, and learned Assistant Public Prosecutor appearing for the respondent-State. None appeared for respondent No. 1- complainant. 4.
3. Heard Sri D.Vijay Kumar, learned counsel, representing Sri T.S.Anirudh Reddy, learned counsel appearing for the petitioner-accused No. 6, and learned Assistant Public Prosecutor appearing for the respondent-State. None appeared for respondent No. 1- complainant. 4. Sri D.Vijay Kumar, learned counsel, emphatically argues that the petitioner is an independent non –executive Director of the accused company and in no way responsible for the conduct of day-to-day affairs of the accused company; that he is inducted in the company for his expertise or special knowledge in particular discipline and he is not in charge of the management of the company and that except reproduction of the statutory requirements, the complaint did not specify or elaborate the role of the petitioner in the day to day affairs of the accused company and therefore he could not be criminally prosecuted for the dishonour of the cheque in question. 5. Learned Assistant Public Prosecutor appearing for the respondent-State, on the other hand, opposes the criminal petition and submits that the petitioner being Director of the accused company is liable to be criminally prosecuted with regard to the dishonour of the cheque in question. 6. This Court has perused the entire material available on record. 7. A Director of a company is liable to be convicted for an offence committed by the company if he/she was in charge of and was responsible to the company for the conduct of its business or if it is proved that the offence was committed with the consent or connivance of, or was attributable to any negligence on the part of the Director concerned. In other words, for making a Director of a company liable for the offences committed by the company under Section 141 of the Act, there must be specific averments against the Director showing as to how and in what manner the Director was responsible for the conduct of the business of the company. A company may have a number of Directors and to make any or all the Directors as accused in 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 of the Act. Section 141 of the Act being a penal provision creating vicarious liability, the same must be strictly construed.
Section 141 of the Act being a penal provision creating vicarious liability, the same must be strictly construed. Mere statement in the complaint that the accused, being Directors, were in charge of and responsible to the accused company, for the conduct of the business of the accused company without any specific role attributed to the accused, was not sufficient for proceeding against them under Section 141 of the Act. 8. While a Managing Director or a Joint Director of the company would be admittedly in charge of the company and responsible for the conduct of its business, the same yardstick would not apply to a Director. When the accused is the Managing Director or a Joint Managing Director of a company, 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. This is because the prefix 'Managing' to the word 'Director' makes it clear that the Director was in charge of and responsible to the company for the conduct of the business of the company. A Director or an Officer of the company who signed the cheque renders himself liable in case of dishonour. Other officers of a company can be made liable only under sub-section (2) of Section 141 of the Act by 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. 9. The liability under Section 138/141 of the Act arises from being in charge of and responsible for the conduct of the 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. It would be a travesty of justice to drag Directors who may not even be connected with the issuance of a cheque or dishonour thereof. Neither the petitioner in the present case was Managing Director or Joint Managing Director of the accused company nor was he signatory of the cheque which was dishonoured.
It would be a travesty of justice to drag Directors who may not even be connected with the issuance of a cheque or dishonour thereof. Neither the petitioner in the present case was Managing Director or Joint Managing Director of the accused company nor was he signatory of the cheque which was dishonoured. In the case on hand, particularly, in sub-paragraph No. (d) of paragraph No. 3 of the complaint, except the mere bald and cursory statement with regard to the petitioner-accused No. 6 that he is Director having the day-to-day control and supervision over the affairs of the accused company, respondent No. 1- complainant did not specify the role of the petitioner in the day to day affairs of the accused company. This Court has verified the averments as regard to the same and therefore agrees with the contention of learned counsel for the petitioner that except reproduction of the statutory requirements, respondent No. 1- complainant did not specify or elaborate the role of the petitioner-accused No. 6 in the day to day affairs of the accused company. Therefore, the petitioner-accused No. 6 is entitled to succeed. 10. For the reasons discussed above, the proceedings against the petitioner-accused No. 6 in C.C. No. 821 of 2015 on the file of the Court of learned V Additional Junior Civil Judge, Guntur, are hereby quashed. 11. The criminal petition is allowed. Pending miscellaneous applications, if any, shall stand disposed of in consequence.