Krishna Sachdeva vs Modella Knitwear

Sarojnei Saxena, J.—Petitioner is seeking quashment of complaint filed u/s 138 of Negotiable Instruments Act against her as Director of M/s. M.S. Shoes East Limited 5-NWA, Punjabi Bagh Extension, New Delhi.

Respondent filed a complaint u/s 138 of the Act against M/s. M.S. Shoes East Limited through its Managing Director, Shri Pawan Sachdeva, Ms. Sadhna Sachdeva and Ms. Krishna Sachdeva (Petitioner) as Directors of the said company. Respondent averred that the accused were to discharge a liability of Rs. 1,53,48740/ -. In order to discharge its part of the liability accused No. 2 issued a cheque for Rs. 50,97,330/ - only payable at Oriental Bank of Commerce at New Delhi on 28.10.1995. He was assured that the cheque will be encashed. When the complainant-Respondent presented the cheque in the said bank for clearance, the cheque was returned with memo dated 27.2.1996 bearing remarks "Insufficient funds". He gave a notice to the accused persons to make payment but despite receipt of notice, no payment is made, Hence the complaint.

Petitioner's contention is that she is a non-working Director aged 85 years; she is mother of accused No. 2. After filing of the complaint Rs. 20 lacs were paid to the complainant-Respondent who entered into a compromise with accused persons and agreed to withdraw this complaint, but despite that he is prosecuting his complaint. A receipt was issued in lieu of the acceptance of payment of Rs. 20 lacs, but now he has started disputing execution of the said receipt and is also asserting that Rs. 20 lacs were paid against the other outstanding liabilities of the accused-company.

According to the Petitioner, as she is a non-working Director, she is not personally liable for day-to-day dealing/affairs of the company; therefore the complaint qua her be quashed.

The other points raised in the petition were not pressed at the time of arguments.

In support of the above contentions, Petitioner's learned Counsel has relied on Sushil Singla v. Haripal Singh 1994 (1) R.C.R. 621.

The facts of Sushil Singla's case (supra) are distinguishable. While considering the contentions made in that case, the learned Judge has observed that there is no allegation in the complaint against Directors that when offence was committed by the company, they were in charge of, and were responsible to the company for conduct of its business. The allegations in the complaint have been made only against the company and Qimat Rai Garg, its Managing Director and the cheque was also issued by Municipal Corporation of Delhi Vs. Ram Kishan Rohtagi and Others, Harbhajan Singh Kalra v. State of Haryana and Anr. 1992 (1) R.C.R. 169 and Vyapak Puri v. State of Punjab and Anr. 1991 (3) R.C.R. 501, the complaint qua Directors was quashed.

So far as payment of Rs. 20 lacs to the Respondent-complainant is concerned, that is a question of fact because as per the Petitioner herself, the complainant ha snot yet admitted the receipt of Rs. 20 lacs against the cheque for which this complaint u/s 138 of the Negotiable Instruments Act is filed by him. Even otherwise, if this is a fact that Rs. 20 lacs has been paid to the complainant discharging their liabilities, against the said cheque on the basis of which this complaint is filed, criminal liability of the accused persons is yet to be decided by the Criminal Court as this payment is said to have been made during the pendency of the complaint. Hence, on this basis, complaint cannot be quashed.

To appreciate the second contention, observations made by the Apex Court in Official Liquidator, Supreme Bank Ltd. Vs. P.A. Tendolkar (Dead) by Lrs. and Others, in para 40 are relevant, which are as under:

It is certainly a questioned" fact to be determined upon the evidence in each case, whether a Director, alleged to be liable for misfeasance, had acted reasonably as well as honestly and with due diligence, so that he could not be held liable for conniving, at fraud and misappropriation which takes place. A Director may be shown to be so placed and to have been so closely and so long associated personally with the management of the company that he will be deemed to be not merely cognizant of but liable for fraud in the conduct of the business of a company even though no specific act of dishonestly is proved against him personally. He cannot shut his eyes to what must be obvious to everyone who examines the affairs of the company even superficially. If he does so he could be held liable for dereliction of duties undertaken by him and compelled to make good the losses incurred by the company due to his neglect even if he is not shown to be guilty of participating in the commission of fraud. It is enough if his negligence is of such a character as to enable frauds to be committed and loses thereby incurred by the company.

In this case, copy of the complaint is attached with the petition. In para 2 of the complaint complainant-Respondent has specifically mentioned "that the facts of the case are that Pawan Sachdeva, accused No. 2 is the Managing Director of M/s. M.S. Shoes East Limited accused No. 1, accused Nos. 3 and 4 are active and responsible Directors of the company-accused No. 1".

Further in para 7, the complainant-Respondent has specifically averred as under:

.... It is important to mention here that Pawan Sachdeva, Managing Director-Accused No. 2, Sadhna Sachdeva and Krishna Sachdeva, Directors respectively. Accused Nos. 3 and 4 are active and responsible for the day-to-day business of the accused company as well as the company. The accused Nos. 2, 3 and 4 hold day to day affairs of the accused company. The cheque in question has been returned unpaid due to their negligence....

Section 141 of the Act provides as under:

Section 141. Offence by companies: (1) If the person committing an offence u/s 138 is a company, every person who at the time 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.

Thus it is obvious that the Respondent-complainant has made specific allegations in this complaint that the Petitioners, being Director of the said Company is active and responsible for day-to-day business of the accused-company as well.

Sub-section (2) of Section 141 provides that where any offence under this Act is committed by a Company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, and neglect on the part of any director, manager secretary, or other officers of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offences and shall be liable to be proceeded against and punished accordingly.

In this complaint, as I have mentioned above, Respondent-complainant has also pleaded that the cheque in question has been returned unpaid due to the negligence of accused Nos. 2. 3 and 4. Hence, it is obvious that these are questions of facts which are required to be enquired into and decided by the trial Court

Thus, finding no merit in this petition, it is hereby dismissed without issuing notice to the Respondent.