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Madhya Pradesh High Court · body

2023 DIGILAW 301 (MP)

Raghvendra Singh Tomar v. Rakesh Kumar Tyagi

2023-02-23

DEEPAK KUMAR AGARWAL

body2023
ORDER 1. This Order shall also govern disposal of CRR No.706 of 2009 preferred by Rakesh Kumar Tyagi (hereinafter referred to as ''complainant'') u/S 397/401 of CrPC for enhancement of sentence awarded to Raghvendra Singh Tomar (hereinafter referred to as ''accused'') whereby the Court of JMFC, Jaura, District Morena in Criminal Case No.135 of 2007 vide judgment dated 27-08-2008 convicted accused for offence u/S 138 of Negotiable Instruments Act [ in short '' the NI Act''] and sentenced him to undergo one year rigorous imprisonment with fine of Rs.6 lac which has been affirmed by Additional Sessions Judge (Fast Track Court), Jaura, District Morena in Criminal Appeal No.151 of 2008 vide judgment dated 29-06-2009 maintaining the conviction of accused under Section 138 of the NI Act, sentenced him to remain under custody till rising of Court with fine of Rs.6 lac out of which Rs.5,75,000/- was directed to be given to complainant. 2. Similarly, CRR No.598 of 2009 has been preferred preferred by accused under Section 397/401 of CrPC challenging the judgment of his conviction and order of sentence passed by Trial Court as well as affirmed by lower appellate Court for offence under Section 138 of the NI Act. Since facts of both revisions are identical in nature, therefore, for the sake of convenience, they are heard simultaneously. 3. Necessary facts for disposal of present revisions, in short, are that complainant issued a notice through his Counsel to accused as well as M/s Hakim Singh Builders & Contractors Pvt. Ltd. (hereinafter referred to as ''Company'') stating therein that since accused is the Director of the said Company and is engaged in the business of construction, therefore, he is wholly responsible for the conduct of affairs of Company. On behalf of Company, he had executed an oral contract at Guna in regard to construction of work to be carried out under Pradhan Mantri Sadak Yojana and for that purpose, complainant was appointed as petty contractor. After completion of work by complainant, accused had issued a cheque dated 21-07-2006 on behalf of the Company and by putting signature, has given to complainant. When the said cheque bearing no.457451 amount of Rs.4 lac was deposited in the concerned Bank, the same was dishonoured. After expiry of period of 15 days, thereafter complainant filed a complaint under Section 138 of the NI Act before the Court of JMFC Jaura, District Morena. When the said cheque bearing no.457451 amount of Rs.4 lac was deposited in the concerned Bank, the same was dishonoured. After expiry of period of 15 days, thereafter complainant filed a complaint under Section 138 of the NI Act before the Court of JMFC Jaura, District Morena. After giving notice, the accused denied the allegation inter alia contending that complainant never worked as a petty contractor either under him or the Company and there was not at all any oral contract with the complainant in regard to construction of work at Guna. In his defence, accused produced documents D1 to D3 stating therein that the alleged cheque was never issued for discharge of any debt or any liability towards complainant. On the basis of averments made in complaint and defence taken by accused as well as documents available therein, the trial Court convicted the accused under Section 138 of the NI act and sentenced him to undergo rigorous imprisonment of one year with fine of Rs. 6 lac vide judgment dated 27-08-2008. Being aggrieved, the accused preferred an appeal before lower appellate Court and lower Appellate Court confirming the conviction of accused under Section 138 of the NI Act, sentenced him to remain under custody till rising of Court with fine of Rs.6 lac out of which Rs.5,75,000/- was directed to be given to complainant. Being dissatisfied, the present revisions have been filed at the instance of accused and complainant. 4. Shri Lahoti, the learned counsel for accused submits that the judgments passed by both the Courts below are contrary to the evidence available on record and contrary to the settled proposition of law regarding discharge of debt and liability. It is further contended that the mandatory provisions of Section 141 of NI Act have been violated. The instant complaint was preferred only against accused without impleading registered Company before the trial Court. Further contention of Shri Lahoti is that there can be no vicarious liability unless there is a prosecution against the Company. For maintaining the prosecution under Section 141 of the NI Act, arraigning of a Company as an accused is imperative and nonimpleadment of the Company would be fatal for the complaint. Further contention of Shri Lahoti is that there can be no vicarious liability unless there is a prosecution against the Company. For maintaining the prosecution under Section 141 of the NI Act, arraigning of a Company as an accused is imperative and nonimpleadment of the Company would be fatal for the complaint. To buttress his contention, he has relied on the decision of Hon'ble Apex Court in the case of Aneeta Hada vs. M/s. Godfather Travels & Tours Pvt. Ltd. (2012) 3 Supreme 416 and Pawan Kumar Goel vs. State of UP & Another, 2022 Live-law (SC) 971. It is further contended by Shri Lahoti that from the documents produced before the trial Court, it is very clear that that upto 5-8-2006, neither any work order was issued to the Company nor any running bill was received by accused towards work. Both the Courts below did not consider the defence taken by accused. It is further contended that the trial Court did not follow the procedure prescribed u/S 200 of CrPC whereby, statement of complainant is required to be recorded before Magistrate. It is further contended that in the trial of an offence involving Section 138 of the NIA Act, initial burden lies upon the complainant to prove his case, whereas in the case at hand, the complainant has utterly failed to prove that he had worked as a petty contractor either under the accused or the Company. Hence, prayed for setting aside the impugned judgment passed by lower appellate Court and the Court of JMFC. 5. On the other hand, Shri Shukla opposed the contentions of Shri Lahoti and submitted that so far impleadment of the Company before trial Court concerned, the accused did not raise such an objection before the trial Court and first time, raised objection before this Court by filing a revision which is not maintainable as the date of execution of contract is of year 2006 and the judgment cited above is of year 2012, i.e. after passing of judgment by the trial Court. There is limited jurisdiction of the revisional Court. Hence, the revision filed by accused deserves dismissal. It is further contended that lower appellate Court has committed an error while passing the impugned judgment of conviction and order of sentence under Section 138 of the NI Act. Hence, the sentence awarded deserves to be enhanced.\ 6. There is limited jurisdiction of the revisional Court. Hence, the revision filed by accused deserves dismissal. It is further contended that lower appellate Court has committed an error while passing the impugned judgment of conviction and order of sentence under Section 138 of the NI Act. Hence, the sentence awarded deserves to be enhanced.\ 6. Heard the learned counsel for the parties and perused the impugned judgments as well as record. 7. Section 141of the NI Act reads as under: - ''141. Offences by companies. - (1) If the person committing an offence under Section 138 is a company, every person 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 and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence: Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation. - For the purposes of this section- (a) 'company' means any body corporate and includes a firm or other association of individuals; and (b) 'director', in relation to a firm, means a partner in the firm.'' 8. The Hon'be Apex Court in the matter of Pawan Kumar Goel (supra) has held as under:- ''19. Explanation. - For the purposes of this section- (a) 'company' means any body corporate and includes a firm or other association of individuals; and (b) 'director', in relation to a firm, means a partner in the firm.'' 8. The Hon'be Apex Court in the matter of Pawan Kumar Goel (supra) has held as under:- ''19. This Court has been firm with the stand that if the complainant fails to make specific averments against the company in the complaint for the commission of an offence under Section 138 of NI Act, the same cannot be rectified by taking recourse to general principles of criminal jurisprudence. Needless to say, the provisions of Section 141 impose vicarious liability by deeming fiction which pre-supposes and requires the commission of the offence by the company or firm. Therefore, unless the company or firm has committed the offence as a principal accused, the persons mentioned in subSection (1) and (2) would not be liable to be convicted on the basis of the principles of vicarious liability. 20. Reference in this connection may also be made to another judgment of the two-Judge Bench of this Court in Himanshu Vs. B. Shivamurthy and Another (Supra), the facts wherein have a stark similarity to the facts of the present case, considering the issue where the complaint was lodged only against the director without arraigning the company as an accused and whether the company could be subsequently arraigned as an accused, it was observed as under:- '11. In the present case, the record before the Court indicates that the cheque was drawn by the appellant for Lakshmi Cement and Ceramics Industries Ltd., as its Director. A notice of demand was served only on the appellant. The complaint was lodged only against the appellant without arraigning the company as an accused. 12. The provisions of Section 141 postulate that if the person committing an offence under Section 138 is a company, 4 (2018) 13 SC 663 every person, who at the time when the offence was committed was in charge of or 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 and shall be liable to be proceeded against and punished. 13. In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. 13. In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned as an accused.' 21. This issue stands concluded by a decision of three-Judge Bench of this Court in the case of Aneeta Hada Vs. Godfather Travels & Tours (P) Ltd. (Supra), wherein it has been held that for maintaining the prosecution under Section 141 of NI Act, arraigning of the company as an accused is imperative and non-impleadment of the company would be fatal for the complaint. It may be relevant to extract the following from the said judgment :- '58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words 'as well as the company' appearing in the Section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a director is indicted. 59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself.' 26. The other categories of offenders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself.' 26. The question whether it is necessary to specifically state in the complaint that the person accused was in charge of, or responsible for the conduct of the business of the company, was subject matter of reference by a two-Judge Bench of this Court along with other questions to be adjudicated by a larger Bench. The following questions were referred for consideration :- '(a) Whether for purposes of Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the allegation read as a whole fulfill the requirements of the said section and it is not necessary to specifically state in the complaint that the person accused was in charge of, or responsible for, the conduct of the business of the company. (b) Whether a director of a company would be deemed to be in charge of, and responsible to, the company for conduct of the business of the company and, therefore, deemed to be guilty of the offence unless he proved to the contrary. (c) Even if it is held that specific averments are necessary, whether in the absence of such averments the signatory of the cheque and or the managing directors or joint managing director who admittedly would be in charge of the company and responsible to the company for conduct of its business could be proceeded against.' 27. A three-Judge Bench in the case of S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla (Supra), considering the aforesaid questions after analysing the provisions of Section 141 of the Act and specially 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.' used in the said Section, observed as under :- '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. 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 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 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 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. 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. 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. 11. A reference to sub-section (2) of Section 141 fortifies the above reasoning because sub-section (2) envisages direct involvement of any Director, Manager, Secretary or other officer of a company in commission of an offence. This section operates when in a trial it is proved that the offence has been committed with the consent or connivance or is attributable to neglect on the part of any of the holders of these offices in a company. In such a case, such persons are to be held liable. Provision has been made for Directors, Managers, Secretaries and other officers of a company to cover them in cases of their proved involvement. 12. The conclusion is inevitable that the liability arises on account of conduct , act or omission on the part of a person and not merely on account of holding an office or a position in a company. Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the necessary facts which make a person liable.' 28. The three-Judge Bench also took note of the earlier pronouncements of this Court in the case of State of Haryana Vs. Brij Lal Mittal & Ors. 8, wherein it was held that vicarious liability of a person for being prosecuted for an offence committed under the Act by a company arises if at the material time he was in charge of and was also responsible to the company for the conduct of its business. Simply because a person is a director of a company, it does not necessarily mean that he fulfils both the above requirements so as to make him liable. Conversely, without being a director a person can be in charge of and responsible to the company for the conduct of its business. 29. The Bench also considered the dictum of this Court in the case of K.P.G. Nair Vs. Conversely, without being a director a person can be in charge of and responsible to the company for the conduct of its business. 29. The Bench also considered the dictum of this Court in the case of K.P.G. Nair Vs. Jindal Menthol India Ltd. (Supra), which was also a case under the Negotiable Instruments Act. In the said case, it was found that the allegations in 8 (1998) 5 SCC 343 9 (2001) 10 SCC 218 the complaint did not in express words or with reference to the allegations contained therein make out a case that at the time of commission of the offence, the appellant was in charge of and was responsible to the company for the conduct of its business. It was held that requirement of Section 141 was not met and the complaint against the accused was quashed. 30. After analyzing the aforesaid and various other pronouncements, the three-Judge Bench in paragraph 18 of the reports, observed as under :- '18. To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a persons 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 respondent falls within parameters of Section 141 has to be spelled 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.' 31. 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.' 31. The Bench answered the questions posed in the reference as under :- '19 . (a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied. (b) The answer to question posed in sub-para (b) has to be in negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for conduct of its business. The requirement of Section 141 is that 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. (c) The answer to question (c ) has to be in affirmative. The question notes that the Managing Director or Joint Managing Director would be admittedly in charge of the company and responsible to the company for conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as Managing Director or Joint Managing Director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub- section (2) of Section 141.' 9. Therefore, they get covered under Section 141. So far as signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub- section (2) of Section 141.' 9. In view of aforesaid legal position as well as on going through the impugned judgments and record, this Court is of the considered opinion that the complaint filed by the complainant is not maintainable in view of provisions enshrined under Section 141 of the NI Act. Therefore, the revision preferred by accused is allowed and the impugned judgment 2906-2009 passed by learned lower appellate Court in Criminal Appeal No.151 of 2008 and the judgment dated 27-08-2008 passed by learned Trial Court in Criminal Case No.135 of 2007 are hereby set aside. The accused is acquitted of offence under Section 138 of the NI Act. As a consequence thereof, since the complaint filed by the complainant was not maintainable unless the Company is impleaded as accused, therefore, the revision filed by complainant fails and is dismissed. The amount deposited, if any, in terms of impugned judgments/orders shall be refunded to accused. 10. Let a copy of this order be sent to the Courts below for information and compliance, so also a copy of this order be kept in connected Criminal Revision No.706 of 2009.