STANDARD CHARTERED BANK Vs. STATE OF MAHARASHTRA AND ORS. ETC.
CODE OF CRIMINAL PROCEDURE, 1973 (CrPC)
Section 482 - Saving of inherent powers of High Court
Negotiable Instruments Act, 1881
Section 138 - Dishonour of cheque for insufficiency, etc., of funds in the account.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Crl.), 271-273 of 2016, Judgment Date: Apr 06, 2016
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NOS.271-273 OF 2016
(Arising out of S.L.P.(Crl.) Nos.484-486 of 2016)
Standard Chartered Bank …Appellant
Versus
State of Maharashtra and Others Etc. …Respondents
J U D G M E N T
Dipak Misra, J.
Leave granted.
2. The present appeals, by special leave, are directed against the order
dated 13th October, 2015, passed by the High Court of Judicature at Bombay
in Criminal Writ Petition Nos. 1482-1484 of 2015 whereby the learned single
Judge by the common impugned order has quashed the orders of issuance of
summons against the respondent Nos. 2 and 3 herein (original accused Nos. 5
and 4) by the Metropolitan Magistrate, 23rd Court at Esplanade, Mumbai,
under Section 138 of the Negotiable Instruments Act, 1881 (for short, ‘the
Act’). Be it noted that the High Court has declined to quash the order of
the Magistrate issuing summons against the respondent No. 4 (original
accused No. 2), but the said accused has not approached this Court.
3. The facts, briefly stated, are that M/s ABG Shipyard Ltd. is a
company registered under the Companies Act, 1956. On being approached by
the authorities of the company, a short term loan facility for a sum of Rs.
200 crores was granted by the appellant-bank to the company on 28.04.2012.
As averred in the complaint, the company executed an indemnity in favour of
the appellant-bank and agreed to repay the amount in three instalments; one
on 15.12.2012, the second on 15.01.2013 and the last on 15.02.2013. The
company issued three cheques, one dated 15.12.2012 for Rs.66,67,00,000/-,
and the two others dated 15.01.2013 and 15.02.2013 for Rs.66,67,00,000/-
and Rs.66,66,00,000/- respectively towards the repayment of the liability.
As per the dates mentioned in the cheques, they were presented before the
bank but due to “insufficient funds” and “account blocked” the cheques were
dishonoured. The appellant-bank issued requisite statutory notice for each
cheque. As no response was given by the respondents, the appellant filed
three complaints, being C.C. No. 451/SS of 2013, C.C. No. 843/SS of 2013
and C.C. No. 1145/SS of 2013 under Section 138 of the Act before the
Metropolitan Magistrate, 23rd Court at Esplanade, Mumbai who took
cognizance and issued summons against all the accused persons.
4. The respondent nos. 2 to 4 herein, being grieved by the orders
issuing summons, preferred three revision petitions, that is, Revision
Application Nos. 1123 to 1125 of 2014 before the City Civil & Sessions
Court, Mumbai, and the revisional court after due deliberation did not
perceive any merit in the said challenge and dismissed the revision
petitions.
5. The dismissal order constrained the respondents to prefer criminal
writ petitions, bearing Criminal Writ Petition Nos. 1482 to 1484 of 2015,
before the High Court of Judicature at Bombay and the learned single Judge
by the order impugned allowed the writ petitions preferred by accused nos.
4 and 5 holding that the complainant had averred the said respondent to be
responsible without making any specific assertion in the complaint about
their role. As mentioned earlier, the High Court dismissed the writ
petition preferred by the respondent no.4.
6. On a perusal of the impugned order, it transpires that the learned
Single Judge of the High Court has quashed the summons singularly on the
ground that there are no allegations against the successful writ
petitioners connecting them with the affairs of the Company.
7. Criticizing the aforesaid order passed by the High Court, it is
submitted by Mr. Divan, learned senior counsel appearing for the appellant-
bank that the High Court has failed to properly scrutinize the assertions
made in the complaint, for the complaint has clearly stated about the role
of the accused persons in the complaint. Learned counsel would submit that
it is a case where the respondents had availed loan of Rs.200 crores and
the cheques that had been issued were dishonoured on due presentation, the
High Court should not have exercised the inherent jurisdiction under
Section 482 CrPC to set aside the order issuing summons against the
Executive Director and the whole-time Director who are really the persons
responsible and in charge of day to day affairs of the company.
8. Resisting the aforesaid submissions put forth by Mr. Divan, Ms. Indu
Malhotra, learned senior counsel appearing for the respondents would
contend that the learned Magistrate had taken cognizance in a mechanical
manner without perusing the averments made in the complaint petition and,
therefore, the exercise of jurisdiction by the High Court in setting aside
the order issuing summons cannot be faulted. She has commended us to the
decisions in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and another[1]
(hereinafter referred to as ‘SMS Pharma I’), Gunmala Sales Pvt. Ltd. v. Anu
Mehta and Ors.[2], National Small Industries Corpn. Ltd. v. Harmeet Singh
Paintal & Anr.[3], Tamil Nadu News Print & Papers Ltd. v. D. Karunakar &
Ors.[4], A.K. Singhania v. Gujarat State Fertilizer Company Ltd. & Anr.[5].
9. To appreciate the controversy in proper perspective, it is
appropriate to refer to Sections 138 and 141 of the Act. Section 138 reads
as follows:-:-
“138. Dishonour of cheque for insufficiency, etc., of funds in the
account.—Where any cheque drawn by a person on an account maintained by him
with a banker for payment of any amount of money to another person from out
of that account for the discharge, in whole or in part, of any debt or
other liability, is returned by the bank unpaid, either because of the
amount of money standing to the credit of that account is insufficient to
honour the cheque or that it exceeds the amount arranged to be paid from
that account by an agreement made with that bank, such person shall be
deemed to have committed an offence and shall, without prejudice to any
other provision of this Act, be punished with imprisonment for a term which
may be extended to two years, or with fine which may extend to twice the
amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless—
(a) the cheque has been presented to the bank within a period of six months
from the date on which it is drawn or within the period of its validity,
whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may
be, makes a demand for the payment of the said amount of money by giving a
notice in writing, to the drawer of the cheque, within thirty days of the
receipt of information by him from the bank regarding the return of the
cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount
of money to the payee or as the case may be, to the holder in due course of
the cheque, within fifteen days of the receipt of the said notice.
Explanation.—For the purposes of this section, ‘debt or other liability’
means a legally enforceable debt or other liability.”
10. On a studied scrutiny of the aforesaid provision, it is quite limpid
that to constitute the criminal liability the complainant is required to
show that a cheque was issued; that it was presented in the bank in
question; that on due presentation, it was dishonoured; that, as enshrined
in the provision, requisite notice was served on the person who was sought
to be made liable for criminal liability; and that in spite of service of
notice, the person who has been arraigned as an accused did not comply with
the notice by making payment or fulfilling other obligations within the
prescribed period, that is, 15 days from the date of receipt of notice.
11. Section 141 of the Act deals with offences by companies. It reads as
follows:-
“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.”
12. On a perusal of the aforesaid provision, it is clear as crystal that
if the person who commits an offence under Section 138 of the Act is a
company, the company as well as other person in charge of or responsible to
the company for the conduct of the business of the company at the time of
commission of the offence is deemed to be guilty of the offence. Thus, it
creates a constructive liability on the persons responsible for the conduct
of the business of the company.
13. At one point of time, an issue had arisen before this Court, whether
a complaint could be held to be maintainable without making the company a
party. The said controversy has been put to rest by a three-Judge Bench
decision in Aneeta Hada v. Godfather Travels and Tours Private Limited[6]
wherein it has been held 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.
It has been further held therein that there cannot be any vicarious
liability unless there is a prosecution against the company. In the case
at hand, the company has been arrayed as the accused No. 1 along with the
Chairman and other Directors.
14. Now, we must go back in time to appreciate what has been stated in
S.M.S. Pharma I (supra), wherein a three-Judge Bench
answered a reference on three issues. The answers on two issues which are
relevant for the present purpose are as follows:-
“(a) ………
(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 proves 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.”
15. The three-Judge Bench referred to Section 138 and 141 of the Act,
Sections 203 and 204 of CrPC and observed that a complaint must contain
material to enable the Magistrate to make up his mind for issuing process
and if this were not the requirement, consequences would be far-reaching.
If a Magistrate has to issue process in every case, the burden of work
before the Magistrate as well as the harassment caused to the respondents
to whom process has to be issued would be tremendous. It has been observed
therein that Section 204 of the CrPC commences with the words “if in the
opinion of the Magistrate taking cognizance of an offence there is
sufficient ground for proceeding” and that apart, the words “sufficient
ground for proceeding” again suggest that ground should be made out in the
complaint for proceeding against the respondent. The three-Judge Bench has
ruled that it is settled law that at the time of issuing of the process,
the Magistrate is required to see only the allegations in the complaint and
where the allegations in the complaint or the chargesheet do not constitute
an offence against a person, the complaint is liable to be dismissed.
16. After so stating, the Court adverted to the complaint filed under
Section 138 of the Act and opined that the complaint should make out a case
for issue of process. As far as the officers responsible for conducting
the affairs of the company are concerned, the Court referred to various
provisions of the Companies Act, 1956 and analysed Section 141 of the Act
to lay down as follows:-
“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 the 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 the 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 the 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. 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”.
17. After so stating, the Court placed reliance on
sub-Section 2 of Section 141 of the Act for getting support of the
aforesaid reasoning as the said sub-Section envisages direct involvement of
any Director, Manager, Secretary or other officer of a company in the
commission of an offence. The Court proceeded to observe that the said
provision 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 the offices in a company. It has also
been observed that provision has been made for directors, managers,
secretaries and other officers of a company to cover them in cases of their
proved involvement. It is because a person who is in charge of and
responsible for conduct of business of a company would naturally know why a
cheque in question was issued and why it got dishonoured and simultaneously
it means no other person connected with a company is made liable under
Section 141 of the Act. The liability arises, as the three-Judge Bench
opined, on account of conduct, act or omission on the part of an officer
and not merely on account of holding office or position in a company and,
therefore, in order to bring a case within Section 141 of the Act, the
complaint must disclose the necessary facts which makes a person liable.
In the said case, the Court has referred to the decisions in Secunderabad
Health Care Ltd. v. Secunderabad Hospitals (P) Ltd.[7], V. Sudheer Reddy
v. State of A.P.[8], R. Kanan v. Kotak Mahindra Finance Ltd.[9], Lok
Housing ad Constructions Ltd. v. Raghupati Leasing and Finance Ltd.[10],
Sunil Kumar Chhaparia v. Dakka Eshwaraiah[11], State of Haryana v. Brij Lal
Mittal[12], K.P.G. Nair v. Jindal Menthol India Ltd.[13], Katta Sujatha v.
Fertilizers & Chemicals Travancore Ltd.[14] and eventually expressed thus:-
“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 the respondent falls within the 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”.
18. On the basis of the aforesaid analysis, the Court in this regard
concluded that:-
“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”.
19. After the three-Judge Bench answered the reference, the matter was
placed before a two-Judge Bench. The two-Judge Bench, hearing S.M.S.
Pharmaceuticals Ltd. v. Neeta Bhalla and another[15] (hereinafter referred
to as ‘SMS Pharma II’), reproduced a passage from Sabitha Ramamurthy v.
R.B.S. Channabasavaradhya[16] which reads as follows:-
“7. A bare perusal of the complaint petitions demonstrates that the
statutory requirements contained in Section 141 of the Negotiable
Instruments Act had not been complied with. It may be true that it is not
necessary for the complainant to specifically reproduce the wordings of the
section but what is required is a clear statement of fact so as to enable
the court to arrive at a prima facie opinion that the accused are
vicariously liable. Section 141 raises a legal fiction. By reason of the
said provision, a person although is not personally liable for commission
of such an offence would be vicariously liable therefor. Such vicarious
liability can be inferred so far as a company registered or incorporated
under the Companies Act, 1956 is concerned only if the requisite
statements, which are required to be averred in the complaint petition, are
made so as to make the accused therein vicariously liable for the offence
committed by the company. Before a person can be made vicariously liable,
strict compliance with the statutory requirements would be insisted.”
20. Thereafter the Court referred to the authority in Saroj Kumar Poddar
v. State (NCT of Delhi) and another[17] and noted the observations which we
think it apt to reproduce:-
“14. Apart from the Company and the appellant, as noticed hereinbefore, the
Managing Director and all other Directors were also made accused. The
appellant did not issue any cheque. He, as noticed hereinbefore, had
resigned from the directorship of the Company. It may be true that as to
exactly on what date the said resignation was accepted by the Company is
not known, but, even otherwise, there is no averment in the complaint
petitions as to how and in what manner the appellant was responsible for
the conduct of the business of the Company or otherwise responsible to it
in regard to its functioning. He had not issued any cheque. How he is
responsible for dishonour of the cheque has not been stated. The
allegations made in para 3, thus, in our opinion do not satisfy the
requirements of Section 141 of the Act.”
21. The said observations were clarified by stating that:-
“26. A faint suggestion was made that this Court in Saroj Kumar Poddar
(supra) has laid down the law that the complaint petition not only must
contain averments satisfying the requirements of Section 141 of the Act but
must also show as to how and in what manner the appellant was responsible
for the conduct of the business of the company or otherwise responsible to
it in regard to its functioning. A plain reading of the said judgment would
show that no such general law was laid down therein. The observations were
made in the context of the said case as it was dealing with a contention
that although no direct averment was made as against the appellant of the
said case fulfilling the requirements of Section 141 of the Act but there
were other averments which would show that the appellant therein was liable
therefor.”
22. The said clarification was reiterated in Everest Advertising (P) Ltd.
v. State, Govt. of NCT of Delhi and others[18].
23. In the said case, taking note of the assertions in the complaint
which were really vague, the Court declined to interfere with the order
passed by the High Court which had opined that the complainant did not
disclose commission of offence against the accused persons.
24. Be it noted, the observations made in Saroj Kumar Poddar (supra) and
clarification given in SMS Pharma II (supra) and Everest Advertising (P)
Ltd. (supra) were taken note of in K.K. Ahuja v. V.K. Vora and Anr[19]. In
the said case, the Court explaining the position under Section 141 of the
Act has stated thus:-
“The position under Section 141 of the Act can be summarised thus:
(i) If the accused is the Managing Director or a Joint Managing Director,
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. It is sufficient if an averment is made that the
accused was the Managing Director or Joint Managing Director at the
relevant time. This is because the prefix “Managing” to the word “Director”
makes it clear that they were in charge of and are responsible to the
company, for the conduct of the business of the company.
(ii) In the case of a Director or an officer of the company who signed the
cheque on behalf of the company, there is no need to make a specific
averment that he was in charge of and was responsible to the company, for
the conduct of the business of the company or make any specific allegation
about consent, connivance or negligence. The very fact that the dishonoured
cheque was signed by him on behalf of the company, would give rise to
responsibility under sub-section (2) of Section 141.
(iii) In the case of a Director, secretary or manager [as defined in
Section 2(24) of the Companies Act] or a person referred to in clauses (e)
and (f) of Section 5 of the Companies Act, an averment in the complaint
that he was in charge of, and was responsible to the company, for the
conduct of the business of the company is necessary to bring the case under
Section 141(1) of the Act. No further averment would be necessary in the
complaint, though some particulars will be desirable. They can also be made
liable under Section 141(2) by making necessary averments relating to
consent and connivance or negligence, in the complaint, to bring the matter
under that sub-section.
(iv) Other officers of a company cannot be made liable under sub-section
(1) of Section 141. Other officers of a company can be made liable only
under sub-section (2) of Section 141, 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.”
25. In Harmeet Singh Paintal (supra), a two-Judge Bench did not agree
with the stand of the appellant, emphasized on the averments and found that
in the complaint petition there were no specific averments and,
accordingly, dismissed the appeal filed by the appellant-Corporation
therein. The Court in paragraphs 17 and 18 of the judgment reproduced the
part of the complaint. We have carefully perused the said averments in the
claim petition and we are of the opinion that there cannot be any shadow of
doubt that the assertions made therein did not meet the requirements of
Section 141 of the Act.
26. In A.K. Singhania (supra), after referring to the previous judgments,
the Court found that it was difficult to infer that there was any averment
that the two accused persons who had come to this Court, were in charge and
responsible for the conduct of the business of the Company at the time the
offence was committed. The allegation in the complaints in sum and
substance was that business and financial affairs of the Company used to be
decided, organized and administered by accused persons along with other
Directors.
27. In Gunmala Sales Pvt. Ltd. (supra) the Court was concerned with
Directors who issued the cheques. This authority, as we notice, has to be
appositely understood. The two-Judge Bench referred to SMS Pharma I and
other earlier decisions, and came to hold that:-
“30. When a petition is filed for quashing the process, in a given case, on
an overall reading of the complaint, the High Court may find that the basic
averment is sufficient, that it makes out a case against the Director; that
there is nothing to suggest that the substratum of the allegation against
the Director is destroyed rendering the basic averment insufficient and
that since offence is made out against him, his further role can be brought
out in the trial. In another case, the High Court may quash the complaint
despite the basic averment. It may come across some unimpeachable evidence
or acceptable circumstances which may in its opinion lead to a conclusion
that the Director could never have been in charge of and responsible for
the conduct of the business of the company at the relevant time and
therefore making him stand the trial would be an abuse of process of court
as no offence is made out against him.
31. When in view of the basic averment process is issued the complaint must
proceed against the Directors. But, if any Director wants the process to be
quashed by filing a petition under Section 482 of the Code on the ground
that only a bald averment is made in the complaint and that he is really
not concerned with the issuance of the cheque, he must in order to persuade
the High Court to quash the process either furnish some sterling
incontrovertible material or acceptable circumstances to substantiate his
contention. He must make out a case that making him stand the trial would
be an abuse of process of court. He cannot get the complaint quashed merely
on the ground that apart from the basic averment no particulars are given
in the complaint about his role, because ordinarily the basic averment
would be sufficient to send him to trial and it could be argued that his
further role could be brought out in the trial. Quashing of a complaint is
a serious matter. Complaint cannot be quashed for the asking. For quashing
of a complaint it must be shown that no offence is made out at all against
the Director.”
[Emphasis supplied]
28. After so stating, the Court proceeded to summarise its conclusions,
appreciated the averments made in the complaint petition and opined thus:-
“… Pertinently, in the application filed by the respondents, no clear case
was made out that at the material time, the Directors were not in charge of
and were not responsible for the conduct of the business of the Company by
referring to or producing any incontrovertible or unimpeachable evidence
which is beyond suspicion or doubt or any totally acceptable circumstances.
It is merely stated that Sidharth Mehta had resigned from the directorship
of the Company on 30-9-2010 but no incontrovertible or unimpeachable
evidence was produced before the High Court as was done in Anita
Malhotra[20] to show that he had, in fact, resigned long before the cheques
in question were issued. Similar is the case with Kanhaiya Lal Mehta and
Anu Mehta. Nothing was produced to substantiate the contention that they
were not in charge of and not responsible for the conduct of the business
of the Company at the relevant time. In the circumstances, we are of the
opinion that the matter deserves to be remitted to the High Court for fresh
hearing. However, we are inclined to confirm the order passed by the High
Court quashing the process as against Shobha Mehta. Shobha Mehta is stated
to be an old lady who is over 70 years of age. Considering this fact and on
an overall reading of the complaint in the peculiar facts and circumstances
of the case, we feel that making her stand the trial would be an abuse of
process of court. It is however, necessary for the High Court to consider
the cases of other Directors in light of the decisions considered by us and
the conclusions drawn by us in this judgment.”
.
29. We have referred to the aforesaid decision in extenso, as we are of
the convinced opinion that the analysis made therein would squarely apply
to the case at hand and it shall be clear when we reproduce certain
passages from the complaint.
30. Prior to that, we may profitably refer to a two-Judge Bench decision
in Tamil Nadu News Print & Papers Ltd. v. D. Karunakar and Others[21]. In
the said case, the Court has referred to the decision rendered in S.M.S.
Pharma I (supra) and, thereafter, taken note of the averments made in the
complaint. Be it noted, in the said case it had been averred in the
complaint petition that the accused Nos. 2 to 9 were Directors and were in
day to day management of the accused company and in that context the Court
has opined as follows:-
“Upon perusal of the complaint, we find that an averment has been made to
the effect that Accused Nos.3 to 10 were in fact, in-charge of the day-to-
day business of Accused No.1-company.”
31. We have referred to these decisions as they explicitly state the
development of law and also lay down the duty of the High Court while
exercising the power of quashing regard being had to the averments made in
the complaint petition to attract the vicarious liability of the persons
responsible under Section 141 of the Act.
32. Now, is the time to scan the complaint. Mr. Divan, learned senior
counsel appearing for the appellant-bank, has drawn our attention to
paragraphs 2, 4 and 10 of the complaint petition. They read as follows:-
“2. I further say that I know the accused above named. The accused No.1
is a Company incorporated under the Companies Act, 1956 having its
registered address as mentioned in the cause title. The accused Nos.2 to 7
are the Chairman, Managing Director, Executive Director and whole time
Director and authorized signatories of accused No.1 respectively. As such
being the Chairman, Managing Director, Executive Director and Whole Time
Director were and are the persons responsible and in charge of day to day
business of the accused No.1 viz. When the offence was committed. The
accused Nos.6 and 7 being signatories of the cheque are aware of the
transaction and therefore the accused Nos.2 to 7 are liable to be
prosecuted jointly or severally for having consented and/or connived in the
commission of present office in their capacity as the Chairman, Managing
Director, Executive Director, Whole Time Director and authorized
signatories of accused No.1, further the offence is attributable to accused
Nos.2 to 7 on account of their neglect to ensure and make adequate
arrangements to Honour the cheque issued by accused No.1 and further on
account of the neglect of accused Nos.1 to 7 to comply with the requisition
made in the Demand Notice issue under the provisions of Section 138(c) of
the Negotiable Instruments Act within the stipulated period. The accused
are therefore liable to be proceeded.
xxxxx xxxxx
4. I say that the Accused No. 1 through Accused Nos. 2 and 3 approached
the Complainant Bank at its Branch situated at Mumbai for a Short Term Loan
facility for a sum of Rs. 200 Crore to meet the expenditure of Four ORV
vessels being built at ABG Shipyard. After verifying the documents
submitted the Complainant Bank vide its sanction letter dated 28th April
2012 sanctioned the said Facility for the purpose mentioned therein. The
said terms and conditions mentioned in the sanction letter dated 28th April
2012 were duly accepted by the Accused No. 1 by signing the same. Accused
No. 1 also agreed to pay interest at the negotiated rate by the Complainant
bank. Hereto annexed the marked as Exhibit ‘B’ is a copy of the said
sanction letter dated 28th April 2012.
xxxxx xxxxx
10. I say that the accused Nos.1 to 7 were aware that the aforesaid
cheque would be dishonoured for being “Account Blocked” and all the
accused, in active connivance mischievously and intentionally issued the
aforesaid cheques in favour of the complainant Bank.”
33. The aforesaid averments, as we find, clearly meet the requisite test.
It is apt to mention here that there are seven accused persons. Accused
No.1 is the Company, accused Nos.2 and 3 are the Chairman and Managing
Director respectively and accused Nos.6 and 7 were signatory to the
cheques. As far as the accused Nos.4 and 5 were concerned, they were whole-
time Directors and the assertion is that they were in charge of day to day
business of the Company and all of them had with active connivance,
mischievously and intentionally issued the cheques in question.
34. Thus, considering the totality of assertions made in the complaint
and also taking note of the averments put forth relating to the respondent
Nos. 2 and 3 herein that they are whole-time Director and Executive
Director and they were in charge of day to day affairs of the Company, we
are of the considered opinion that the High Court has fallen into grave
error by coming to the conclusion that there are no specific averments in
the complaint for issuance of summons against the said accused persons. We
unhesitatingly hold so as the asseverations made in the complaint meet the
test laid down in Gunmala Sales Pvt. Ltd. (supra).
35. Resultantly, the appeals are allowed and the order passed by the High
Court is set aside. The learned Magistrate is directed to proceed with the
complaint cases in accordance with law.
……....................J.
[Dipak Misra]
……....................J.
[Shiva Kirti Singh]
New Delhi
April 06, 2016.
-----------------------
[1]
[2] (2005) 8 SCC 89
[3]
[4] (2015) 1 SCC 103
[5]
[6] (2010) 3 SCC 330
[7]
[8] (2015) 8 SCALE 733
[9]
[10] (2013) 16 SCC 630
[11]
[12] (2012) 5 SCC 661
[13]
[14] (1999) 96 Comp Cas 106 (AP)
[15]
[16] (2000) 107 Comp Cas 107 (AP)
[17]
[18] (2003) 115 Comp Cas 321 (Mad)
[19]
[20] (2003) 115 Comp Cas 957 (Del)
[21]
[22] (2002) 108 Comp Cas 687 (AP)
[23]
[24] (1998) 5 SCC 343
[25]
[26] (2001) 10 SCC 218
[27]
[28] (2002) 7 SCC 655
[29]
[30] (2007) 4 SCC 70
[31]
[32] (2006) 10 SCC 581
[33]
[34] (2007) 3 SCC 693
[35]
[36] (2007) 5 SCC 54
[37]
[38] (2009) 10 SCC 48
[39]
[40] (2012) 1 SCC 520
[41]
[42] (2015) 8 SCALE 733
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