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Judgment
J.K. Maheshwari, J.
This petition has been filed invoking inherent jurisdiction of the High Court u/s 482 of Cr.P.C. assailing the order dated 9.12.2002 passed by IIIrd ACJM Indore in criminal case No.2401/02 registered on a private complaint of the respondent firm u/s 138 of Negotiable Instruments Act (hereinafter it be referred as "N.I. Act" in short)due to dishonoring of cheques, whereupon cognizance has taken by the court below by issuing summons to petitioners.
M/s Pannalal Kakriya & Sons the respondent, is a partnership firm filed a private complaint against the accused/petitioners, inter-alia contending that the cheques Annexure-P/1 dated 23.9.2002, Annexure- P/2 dated 26.9.02 and Annexure-P/3 dated 28.9.2002 issued on behalf of petitioner No.1 M/s M.A.S. Spinning Mills Pvt. Ltd. Company signed by petitioner No.2 in the capacity of Managing Director. In para 2 of the complaint, it is averred that accused/petitioner No.1 is a company duly registered and incorporated under the companies Act, 1956 having its registered, and address given in the petition. Accused/petitioner No.2 Mr. K.A. Shanmugham is the managing Director or the accused company, and the accused/petitioner No. 3 Mrs. Lakshmi Ammal, No.4 Mr A.S. Pandu Rangan and No.5 Mr. A.S. Gopinath are other directors, It is averred that all the accused/petitioner No.2, 3, 4 and 5 above named are actively involved to run the business of the Company M/S K.A.S. Spinning Mills Pvt. Ltd, at the material time when the offence was committed, they were in charge and responsible to the company for the conduct of business thereof, and guilty of the commission of offence u/s 138 of N.I. Act, thus all of them are liable to be proceeded against and punished for the said act, It is further said in the private complaint that on receiving the cheques, it was submitted for clearance in the bank, but on account of insufficiency of fund, those were dishonored and returned back. Even on demand in writing payments of the said chqeues were not made, however a private complaint was filed u/s 138 of N.I. Act joining the company, Managing Director and other Directors as accused. The trial Court after recording the statements u/s 200 of Cr.P.C. passed the order on 9.12.2002 to take cognizance and issuance of summons, Assailing such an order and to seek quashment of private complaint, the company and directors have come u/s 482 of Cr.P.C for invoking inherent powers of this Court after six and half year.
In this petition it is averred that the cheques were of the account of company (petitioner No. 1) and signed by Managing Director petitioner No.2 Mr. K.A. Shanmugham. In fact petitioner No.3 Mrs. Lakshmi Ammal was joined as Director being a family member, it is not Specifically pleaded in private complaint how she is responsible being incharge to the company. It is further said that Mr.A.S. Gopoinath Director of the company had already submitted his resignation on 1.10.2001, which was acknowledged by the Registrar of the Companies on 15.3.2002. The disputed cheques were issued on 10.10.2002 under the signature of petitioner No.2 Mr. K.A. Shanmugham, however Mr. A.S. Gopinath is not at all responsible, because at the relevant time he was neither director not signatory of the said negotiable instruments, In the petition u/s 482 it is not averred, way the petitioner No.4 Mr. A.S. Pandurangan is not responsible, and why the private complaint may not be proceeded with or the orders of taking cognizance and issuance of summons may be recalled quashing the private complaint against him.
Shri Gupta. Learned counsel appearing for the petitioners has argued with vehemence and submitted that in between the same parties another petition M.Cr.C. No. 1108/08 M/s K.A.S. Spinning Mills Pvt. Ltd. and Others Vs. M/s Pannalal Kankariya & Sons, was filed on account of dishonouring of some different cheques which is decided on 16.9.2008 by the coordinate bench of this court. In the said order it is observed that Mr. A.S. Gopinath petitioner No.5 has already resigned from the post of director of the petitioner No.1 company, the said resignation had already been acknowledged by the registrar of the companies on 15.3.2009 while the disputed cheques were issued on 10.10.2002, however on the date of issuance of cheques he was no more director of the said company, therefore, private complaint against Mr. A.S. Gopinath is not entertain able, thus order passed by the trial Court taking cognizance and issuance of summons against him is liable to be set aside consequently private complaint filed against Mr. A.S. Gopinath has been quashed,
Shri Gupta further submits that the Court has also quashed the complaint against Mrs. Laxmi Ammal accused applicant No.3 and Mr. A.S. Pandurangan petitioner No.4 because in a pleading of private complaint there is a bald statement making allegation against them, which is not supported by any document or evidence in support. However it is held, simple allegation of engaging any director in a husiness would not be sufficient, in fact something more should have been brought on record to show, how the accused persons are engaged in day-to-day business and the affairs of the company, Thus it is observed in absence of such evidence the prosecution against Mrs. Laxmi Ammal and Mr. A.S. Pandurangan is not valid In view of these facts, it is argued by Shri Gupta that in an identical case in between the same party prosecution against Mrs. Laxmi Ammal and A.S. Pandurangan has been quashed. However on the ground of party, in this case also private complaint filed against them may also be ordered to be quashed.
On the other hand, Shri Shaha learned counsel appearing on behalf of respondent has drawn my attention to para 2 of the private complaint and provisions of Section 141 of N.I. Act and submitted that for the purpose of making a specific allegation in a cases of company, it is specifically pleaded that at the time when the offence was committed every director of the company was incharge and responsible to the affairs and to conduct the business. In support to such pleading, statements of witnesses deposed before the Court is on record, however in view of the specific pleadings and statements of witnesses against the directors of company having responsible being in-charge of the affairs, no documents are required to support those pleadings at the stage of proceeded against by taking cognizance, and issuance of summons, Under the companies law presumption ought to be drawn that the directors of the company are aware with respect to day-to-day business and affairs of the company and responsible to company. It is said tat the petitioners themselves have not disputed that the petitioner No.3 Mrs. Laxmi Ammal and respondent No.4 A.S. Pandurangan were not the directors of the company at the time of issuance of disputed cheques, In support to the said contention reliance has been placed on the judgment of Hon''ble Supreme Court in the case of N. Rangachari Vs. Bharat Sanchar Nigam Ltd., reported in 2007 (4) MPLJ 375, wherein the pleadings were similar to the pleading of this case, and the apex court has declined to interfere at the stage of taking cognizance and directed to decide the complaint on the basis of evidence which may be adduced in trial. It is contended by him that the judgment of this court in the case of K.A.S. Spinning Mills Pvt. Ltd. (supra) is without having consideration of the judgments of Apex Court in the case of N. Rangachari (supra), however in view of pleadings as made in the private complaint requirement of Section 141 of N.I. Act has been satisfied for the purpose of taking cognizance. Thus, in the light of judgment of the Apex court, the judgment of learned Single Judge may not be viewed and cannot be over come, therefore, private complaint filed against petitioners No.3 and 4 may be continued and cannot be quashed. It is fairly conceded by Shri Shah that quashment of private complaint against respondent No.5 shall govern by the findings of the judgment of the co-ordinate bench of learned Single Judge in the case of K.A.S Spinning Mill Pvt. Ltd, (supra) because as per the documents produced at the time of issuance of cheque he was not the director of the company. It is also urged that petitioner have filed this petition, after more than six year and half month from the date of order impugned, belatedly, however inherent power of the high Court should not be exercised in favour petitioner Nos. 1 to 4. In view of the aforesaid submissions, it in argued that the petition filed by the petitioners No.1 to 4. M/s K.A.S. Spinning mills Pvt. Ltd, Mr. K.A. Shanmugham, Mrs. Lakshmi Ammal, and Mr. A.S. Pandu Rangan deserves to be dismissed.
After having heard learned counsel for the parties and to advert the arguments as advanced by learned counsel appearing of both the side, it is necessary to refer the pleading of private complaint filed by the respondent against the accused petitioners. Relevant para 2 of the private complaint is being reproduced here in below :-
That the accused No.1 is a company duly registered and incorporated under the Companies Act, 1956 having its registered office at the aforementioned address. Accused No.2 Mr. K.A. Shanmugham has been the Managing Director of the accused-company and the accused No.3 Mrs. Lakshmi Ammal, accused No.4 Mr. A.S. pandu rangan and accused No.5 Mr. A.S. Gopinathe have been its directors. All the accused Ns.2,3,4 and 5 above named have been and are taking an active part in running the business of the accused-Company M/S K.A.S. Spinning Mills Pvt. Ltd, and at all material times and at the time the offence u/s 138 of the Negotiable Instruments Act, 1881 as amended by act No. 66 of 1988 was committed by all the above named five accused as hereinafter stated. All the four accused Nos. 2,3,4 & 5 being the directors of the accused No.1 Company M/S K.A.S Spinning Mills Pvt. Ltd, were in charge of, and were responsible to the accused-company for the conduct of the business thereof. And being guilty of the commission of the offence u/s 138 of the Negotiable Instruments Act, all of them as well as the accused-company are liable to be proceeded against and punished under said act,
Section 141 of N.I. Act deals with the offences by the company, which is also reproduced here as under :-
Offences by companies :- (1) If the person committing an offence u/s 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 will 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 be proves that the offence was committed without his knowledge, or that be had exercised all due diligence to prevent the commission of such offence,
2 [ 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 Govt. or State Govt. or a financial corporation owned or controlled by the Central Govt. Or the State Govt. 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, manger, 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 proceeded against and punished accordingly.
Bare reading of provisions of Section 141 of N.I. Act it is apparent that if a company has committed an offence u/s 138 of N.I. Act then 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 with and punished accordingly. In a private complaint on having the said ingredients, the company and their directors may be proceeded against and punished accordingly. While 1st proviso to sub-section (I) of Section 141 of N.I. Act offers a defence to the directors against whom the court has proceeded with on having the said pleadings in private complaint. As per the proviso, if the company or the directors is in a position to set forth that offence was committed without their knowledge, or they had exercised all due diligence to prevent the commission of such offence. On establishing the defence they may not be liable to be punished. The second proviso makes it clear that a person if nominated as director of a company by virtue of any office or employment of the Central Govt. or State Govt. or Financial Corporation owned controlled by the Central Govt. or the State Govt. then he shall not be liable for prosecution under this chapter. Thus by close reading of both the proviso of Section 141 of N.I. Act it is apparent that any of the director of a company, who was holding the office by virtue of office or employment of the Central Govt. may not be proceeded against in the complaint to the offence punishable Section 138 of N.I. Act of accused company. While in the case of other directors of the company, on proceeded against them or on taking cognizance by court, a defence is available to prove that they are not in the knowledge of issuance of said cheque or despite due deligence he could not prevent commission of such offence. Thus it is apparent that all the continuing directors of the company, who were at the time of commission of offence may be proceeded against, if it is pleaded that at the time of commission of offence, they were in-charge, and were responsible to the company for the conduct of business of company. The discussion as made hereinabove finds support from the judgment of Hon''ble Apex Court in the case of SMS Pharmaceuticals Ltd. Vs. Neeta Bhalla and Anr., reported in (2005) SCC 89 which has also been considered in the case of N. Rangachari (supra) the relevant paragraphs are being reproduced as under:
In the present case, we are concerned with criminal liability on account of dishonour of cheque. It primarily falls on the drawer company and is extended to officers of the Company, the normal rule in the cases involving criminal liability is against vicarious liability, that is, no one is to be held criminally liable for an act of another. This normal rule is, however, subject to exception on account of specific provision being made in statutes extending liability to other, Section 141 of the Act is an instance of specific provision which in case an offence u/s 138 is committed by a Company, extends criminal liability for dishonour of cheque to officers of the Company. Section 141 contains conditions which have to be satisfied before the liability can be extended to officers of company. Since the provision creates criminal liability, the conditions have to be strictly complied with. The conditions are intended to ensure that a person who is sought to-be made vicariously liable for an offence of which the principal accused is the Company, had a role to play in relation to the incriminating act and further that such a person should know what is attributed to him make him liable. In other words, persons who had nothing to do with the matter need not be roped in. A company being a juristic person, all its deeds and functions are result of acts of others. Therefore, officers of a company who are responsible for acts done in the name of the company are sought to be made personally liable for acts which result in criminal action being taken against the company. It makes every person who, at the time the offence was committed, was incharge of, and was responsible to the Company for the conduct of business of the company, as well as the Company, liable for the offence, the proviso to the sub-section contains an escape route for persons who are able to prove that the offence was committed without their knowledge or that they had exercised all due diligence to prevent commission of the offence.
In said judgment after referring various earlier decisions of the apex court, it has further laid down as under :-
It is necessary to specifically aver in a complaints u/s 141 that at the time the offence was committed, the person accused was 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.
The Court has further dealt with the issue whether a director of the company may be deemed to be in-charge or responsible to the company for conduct of the business of the Company and, therefore, deemed to be guilty of the offence unless he proves to the contrary, the Apex court observed as under :-
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 u/s 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.
In view of ratio descended of judgment of SMS Pharmaceuticals Ltd. (supra) and judgment of N. Rangachari (supra) after discussing various provisions of the companies act, the Apex Court came to bold as under :-
A person normally having business of commercial dealing with a company, would satisfy himself about its creditworthiness and reliability by looking at its promoters and Board of Directors and the nature and extent of its business and its Memorandum or Articles of Association. Other than that, he may not be aware of the arrangements within the company in regard to its management, daily routine, etc. Therefore when a cheque issued to him by the company is dishonoured, he is expected only to be aware generally of who are in-charge of the affairs of the company. It is not reasonable to expect him to know whether the person who signed the cheque was instructed to do so or whether he has been deprived of his authority to do so when he actually signed the cheque. Those are matters peculiarly within the knowledge of the company and those incharge of it. So all that a payee of a cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in charge of its affairs. The Directors are prima-facie in that position.
Thereafter looking of the similar pleading as apparent in the present case the Apex Court has come to the conclusion, which is being reproduced as under :-
In the case on hand, reading the complaint as a whole, it is clear that the allegations in the complaint are that at the time at which the two dishonoured cheques were issued by the company, It is not proper in split hairs in reading the complaint so as to come to a conclusion that the allegations as a whole are not sufficient to show that at the relevant point of time the appellant and the other are not alleged to be persons in-charge of the affairs of the company. Obviously, the complaint refers to the point of time when the two cheques were issued, there presentment, dishonour and failure to pay in spite of notice of dishonour. We have no hesitation in overruling the argument in that behalf by the learned Senior Counsel for the appellant.
We think that, in the circumstances, the High Court has rightly come to the conclusion that it is not a fit case for exercise of jurisdiction u/s 482 of the Code of Criminal Procedure for quashing the complaint. In fact an advertence to sections 138 and 141 of the Negotiable Instruments Act shows that on the other elements of an offence u/s 138 being satisfied, the burden is on the Board of Directors or the Officers in-charge of the affairs of the company to show that they are not liable to be convicted. Any restriction on their power or existence of any special circumstance that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial such a restriction or to show that at the relevant time they were not in-charge of the affairs of the company. Reading the complaint as a whole, we are satisfied that it is a case where the contention sought to be raised by the appellant can only be dealt with after the conclusion (sic) of the trial.
We therefore affirm the decision of the High court and dismiss this appeal, We make it clear that the case will have to be tried and disposed of in accordance with law on the basis of the evidence that may be adduced.
Thus in view of the judgment of N. Rangachari (supra) and looking to the pleadings as made by the respondent in the private complaint, I am of the considered opinion that the requirement of Section 141 of N. I.Act has been satisfied to proceed against petitioners No.1 to 4 (M/s K.A.S. Spinning Mills Pvt. Ltd, Mr. K.A. Shanmugham, Mrs. Lakshmi Ammal, an Mr. A.S. Pandu Rangan), at the stage of taking cognizance and issuance of summons as per the judgment of apex court of Neeta Bhalla (supra) and N. Rangachari (supra), therefore, it does not warrant any interference invoking inherent powers of this Court u/s 482 of Cr.P.C it is further to be noted that cognizance was taken by issuing summons by the court on 9.12.2002 and petitioners have remained silent for more than 6 and 1/2 years and thereafter they have chosen to come before this Court for quashment of private complaint. In the facts and circumstances of this case, and as per discussion made herein above, delay in filing of this petition also conquer my view to decline interference in absence of documentary defence as available to petitioner No.5 in terms of proviso 1st of sub-section (1) of Section 141 of N.I. Act.
So far as continuation of private complaint against respondent No.5 A.S. Gopinath is concerned, it is suffice to say that as per the documents available on record, he was not the director at the time of issuance of the cheques, because his resignation was accepted long back and acknowledged by the Registrar of the companies. However, at the time of offence was committed, it cannot be said that petitioner No.5 was incharge, and was responsible for conduct of business of company, Therefore, prosecution against Mr. A.S. Gopinath cannot be continued and the private complaint filed against him may be ordered to be quashed.
In view of foregoing discussion, I partly allow this petition and the order of taking cognizance and issuance of summons against the petitioners No. 1 to 4 (M/s K.A.S. Spinning Mills Pvt. Ltd,) Mr. K.A. Shanmugham, Mrs. Lakshmi Ammal, and Mr. A.S. Pandurangan) do not call for any interference and the order of trial court is upheld to such extent, while the prosecution and issuance of summons against the petitioner No.5 (A.S. Gopinath) is hereby quashed. It is further made clear here that the case against the petitioner No.1 to 4 shall have to be tried and disposed of in accordance with law on the basis of evidence that may be adduced during trial. In the facts and circumstances of the case, parties are directed to bear their own cost.