M. Vara Lakshmi W/o. Satyanarayana Choudary v. Laxmi srinivasa enterprises
2023-12-11
K SURESH REDDY
body2023
DigiLaw.ai
ORDER : K.SURESH REDDY, J. Accused No.7 in C.C.No.464 of 2014 on the file of the learned Judicial First Class Magistrate, Alamuru, East Godavari District, filed the present criminal petition, under Section 482 Cr.P.C., seeking to quash the proceedings against her in the said C.C. 2. The aforesaid C.C. has been registered against the petitioner/A7 and other accused for the offences punishable under Sections 138 and 142 of the Negotiable Instruments Act, 1881 (for short, 'the N.I. Act'), on the basis of a private complaint filed by respondent No.1 herein. 3. The contents of the complaint filed by the 1st respondent/complainant, in brief, are as under: Complainant is carrying on trade in waste paper. Accused No.1 is a Private Limited Company having its registered office at D.No.12-1/B, Sanagam Road, Tapeswaram Village, Mandapeta Mandal, owning a paper board unit based on waste paper. Accused No.2 is the Managing Director and accused Nos.3 to 8 are Directors of accused No.1-Company. During the course of business, accused No.1-Company purchased waste paper from the complainant from about 06.06.2010 on credit and made part payments from time to time and as per the regularly maintained account of the complainant, an amount of Rs.5,77,726/- was due and payable by accused No.1-Company to the complainant as on 15.03.2011. While things stood thus, accused No.1- Company was sold out to accused No.8 and as per the arrangement made between accused Nos.2 and 8, accused No.8 undertook to discharge the subsisting liability of creditors of accused No.1-Company, including the amount due and payable to the complainant, and arrived at a settlement to pay a sum of Rs.4,20,207/- to the complainant in full quittance of the amount due to it. Accordingly, accused No.8, as one of the Directors of accused No.1, issued a cheque bearing No.067502 dated 25.05.2012 for a sum of Rs.4,20,207/-, drawn on State Bank of India, Mandapeta. When the complainant presented the said cheque for collection through its banker, the same was dishonoured with endorsement ‘Exceed Arrangements’. When the complainant confronted accused Nos.2 and 8 about the dishonor of the cheque, accused No.8 had again issued a cheque bearing No.067524 dated 30.06.2012 for the said sum of Rs.4,20,207/- drawn on State Bank of India, Mandapeta, and both accused Nos.2 and 8 assured the complainant that sufficient funds would be made available in the last week of August, 2012.
On such assurance, the complainant presented the said cheque for collection through its banker – Indian Bank, Rajahmundry, on 24.08.2012, but the said cheque was also dishonoured and returned vide cheque return memo dated 24.08.2012 with an endorsement ‘funds insufficient’. As the accused evaded phone calls of the complainant, the complainant got issued registered legal notice under Section 138 of the N.I. Act on 11.09.2012 calling upon the accused to repay the cheque amount of Rs.4,20,207/- within a period of 15 days after receipt of notice. While accused Nos.1, 6 and 8 willfully returned the notices, the other accused received the notices. Accused No.2, who is the Managing Director, received the notice on 12.09.2012. The accused neither replied to the notice nor paid the cheque amount. Hence, the complaint was filed. 4. Heard Mr. P.R.K. Amarendra Kumar, learned counsel for the petitioner/A7, and the learned Assistant Public Prosecutor appearing for the 2nd respondent/State. Despite service of notice, none appeared for the 1st respondent/complainant. 5. Learned counsel for the petitioner contends that the petitioner/A7 is in no way responsible for the conduct of business of A1-Company and its day-today affairs and, thus, she cannot be vicariously held liable for dishonour of the cheque. He further contends that in the complaint, it was specifically averred that as per the arrangement made between A2 and A8, A8 agreed to discharge the liability of creditors of A1 including the amount due and payable to the complainant, and there is no specific averment as to the role of the present petitioner/A7 either in relation to issuance of the cheque or in the day-to-day affairs of the company. Learned counsel further contends that in the absence of specific averments indicating the role of the petitioner in the day-to-day activities of the Company and in what manner, she is responsible for the conduct of the business of the company, continuation of the subject criminal proceedings against her, merely because she is a Director of the Company, is nothing but an abuse of process of law and, therefore, prays to quash the proceedings against the petitioner. 6. Learned Assistant Public Prosecutor appearing for the 2nd respondent/ State, on the other hand, opposes the criminal petition and submits that the petitioner, being Director of accused No.1-Company, is vicariously liable for the offence committed by the Company. 7. This Court has perused the entire material available on record. 8.
6. Learned Assistant Public Prosecutor appearing for the 2nd respondent/ State, on the other hand, opposes the criminal petition and submits that the petitioner, being Director of accused No.1-Company, is vicariously liable for the offence committed by the Company. 7. This Court has perused the entire material available on record. 8. As per Section 141 of the N.I. Act, 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, at the time the offence was committed, 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. Thus, the liability under Section 141 of the N.I. 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 the company. 9. It is trite law that for making a Director of a company liable for the offences committed by the company under Section 141 of the N.I. 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 array them as an accused in a complaint, making them vicariously liable for the offences merely on the basis of a statement to the effect that they are in charge of and responsible for the conduct of the business of the company, without attributing any specific role to them in the conduct of the business of the company, is not a sufficient or adequate fulfillment of the requirements under Section 141 of the N.I. Act. Section 141 of the N.I. Act being a penal provision creating vicarious liability, the same must be strictly construed.
Section 141 of the N.I. Act being a penal provision creating vicarious liability, the same must be strictly construed. While a Director or an Officer of the company who signed the cheque renders himself liable in case of dishonour of the cheque, other officers of the company can be made liable only under sub-section (2) of Section 141 of the N.I. 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. 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. 10. In the case on hand, the petitioner/A7 is neither Managing Director/ Joint Managing Director of accused No.1-Company nor signatory of the cheque which was dishonoured. According to the complainant, accused No.8, as one of the Directors of accused No.1-Company, has issued the cheque. In the complaint, except mentioning that accused Nos.3 to 8 are Directors of accused No.1-Company and alleging that accused Nos.2 to 8 with a common dishonest intention, made the complainant to believe that the subsisting liability of accused No.1 will be discharged and in furtherance of the same, accused No.8 issued the cheque, there are no specific averments indicating the duties and responsibilities of the petitioner/A7 in the conduct of business of the Company and her role as regards issuance and dishonour of the cheque, disclosing consent, connivance or negligence. In the absence of such specific averments and without clearly indicating as to how and in what manner the petitioner/A7 is responsible for the day-to-day activities of the Company, prosecuting her for the offences alleged by fastening vicarious liability on her, would amount to abuse of process of law. Thus, the proceedings against the petitioner/A7 in the subject C.C. are liable to be quashed. 11. Accordingly, this criminal petition is allowed and the proceedings in C.C.No.464 of 2014 on the file of the learned Judicial First Class Magistrate, Alamuru, East Godavari District, are hereby quashed insofar as the petitioner/A7 alone. 12. As a sequel, pending interlocutory applications, if any, shall stand closed.