TAMIL NADU NEWS PRINT & PAPERS LTD. Vs. D.KARUNAKAR & ORS.

Supreme Court of India (Division Bench (DB)- Two Judge)

Appeal (Crl.), 1846-1847 of 2008, Judgment Date: Aug 06, 2015

                                                              NON-REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                       CRIMINAL APPELLATE JURISDICTION

                  CRIMINAL APPEAL No(s).  1846-1847 OF 2008


TAMIL NADU NEWS PRINT & PAPERS LTD.                             Appellant(s)

                                   VERSUS

D.KARUNAKAR & ORS.                                            Respondent(s)



                               J U D G M E N T

ANIL R. DAVE, J.

1.    In these appeals, the order dated 12th  April,  2007,  passed  by  the
High Court of judicature at Madras in Crl. O.P.Nos. 1222 & 4098 of 2007  and
Crl. M.P. No. 1 of 2007, has been challenged.

2.    By virtue of the impugned  order,  the  High  Court  has  allowed  the
petitions filed under the provisions of Section 482 of the Code of  Criminal
Procedure, whereby proceedings in pursuance of C.C. No. 3022 of 2000 on  the
file of learned IX Metropolitan Magistrate, Saidpet, Chennai in  respect  of
some of the accused have been quashed.


3.    The facts giving rise to the present appeals, in a  nutshell,  are  as
under :-

      The appellant is a company manufacturing news prints and  papers.   It
had business dealings with M/s Manito Electronics Pvt. Ltd.,  Accused  No.1,
a company of which Accused Nos. 2 to 9 were the Directors.  Though, all  the
accused had not filed quashing petitions, the High  Court  has  quashed  the
proceedings in respect of all the accused, other than Accused No.  1,  which
is the company and Accused No. 2, who  was  the  Managing  Director  of  the
company, who had issued the cheque.

      A cheuqe for Rs.57,68,524/- (Fifty Seven Lakhs  Sixty  Eight  Thousand
Five Hundred and Twenty Four) had been issued on behalf  of  Accused  No.  1
company by Accused No. 2, the Managing Director to  the  appellant  company.
As the cheque had not been honoured and  in  spite  of  a  statutory  notice
issued, no amount in respect of the  said  cheque  had   been  paid  to  the
present appellant, a complaint, being CC No. 3022 of 2000 had been filed  in
the Court of IX Metropolitan Magistrate, Saidpet, Chennai.

4.    The present respondents had filed two petitions under Section  482  of
the Code of Criminal Procedure for quashing the said  complaint,  which  the
High Court has allowed to the limited extent, as stated hereinabove.

5.    The present appellant, in whose favour the cheque had been  issued  by
Accused No. 2, on behalf of Accused no.1 company, has been aggrieved by  the
order whereby the proceedings have been quashed in part by  the  High  Court
and therefore, the present appeals have been filed by the complainant.

6.    Though served, no one has appeared on behalf of the  respondents.   It
appears from the record that notice  issued  to  Accused  no.1  company  was
refused and whereabouts of all the Directors could not be known.   In  these
circumstances, a paper publication was effected yet none  has  appeared  for
the respondents.

7.    It has been  submitted  by  the  learned  counsel  appearing  for  the
appellant that the High Court was not right in quashing the  proceedings  in
part so far as Accused Nos.3 to  10  are  concerned.   He  has  referred  to
Section  141(1)  of  the  Negotiable  Instruments  Act,  1881   (hereinafter
referred to as, “the Act”), which reads as under :-
“141(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.”
                                                         (Emphasis supplied)

8.    It has been submitted by the learned counsel for  the  appellant  that
in the complaint, an averment has been made  to  the  effect  that  all  the
accused were Directors and incharge of day-to-day business of Accused No.  1
–  company  and  therefore,  they  are  liable  to  be  punished  under  the
provisions of Section 138 of the Act.

9.    It  has  been  further  submitted  by  the  learned  counsel  for  the
appellant that the  High  Court  is  not  right  when  it  has  observed  in
paragraph 7 of the impugned order that “the complainant has not whispered  a
word about the position held by the petitioners  herein  and  there  is  not
even a  single  statement  to  the  effect  that  the  petitioners  are  the
Directors and as such they are in charge of the day to day business  of  A1,
the Company.  It is merely stated that A3 to A9 are involved and  in  charge
of the business of A1, the Company.”

10.   The learned counsel has drawn our attention to the Judgment  delivered
by this Court in the case of S.M.S. Pharmaceuticals Ltd.  Vs.  Neeta  Bhalla
and Another reported in (2005) 8 SCC 89.  Paragraph 19(a)  of  the  Judgment
reads 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........”

11.   The learned counsel has also submitted that, in fact, an averment  had
been made in the complaint that Accused Nos. 2 to 9 were Directors and  were
in day to day management of the accused company.  In spite of the  aforesaid
fact, the High Court has made the aforesaid observation that  there  was  no
such averment made against Accused Nos. 3 to  10.   According  to  him,  the
said view of the High Court is not  correct  and  therefore,  this  criminal
appeal deserves to be allowed.

12.   We have carefully gone through the impugned order passed by  the  High
Court and the complaint filed on behalf of the appellant.

13.   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.

14.   It is an admitted position that simply because someone is  a  Director
in a company, he cannot be held responsible in respect of  a  cheque  issued
on behalf of the company, but if the concerned Director is in-charge of  and
is responsible to the company for its conduct of business, he  can  be  held
to be guilty of the offence under Section 138 of the Act and therefore,  the
High  Court  ought  not  to  have  quashed  the  proceedings  against   such
directors.

15.   In our opinion, the High Court has committed an  error  by  making  an
observation that not a single statement was made in  the  complaint  to  the
effect that Accused Nos. 3 to 10 were in-charge of the  day-to-day  business
of Accused No. 1 – company.

16.   It is also pertinent to note that on behalf  of  the  accused  company
notice was refused and whereabouts of  all  the  Directors  are  not  known.
Notices  served  upon  them  in  normal  course  could  not  be  served  and
therefore, by way of substituted service, a paper publication was  made  and
an affidavit giving details about the publication has been placed on  record
of this Court.  In spite of the said fact, no body has  appeared  on  behalf
of the respondents.  This fact also indicates the intention of the  accused.

17.   For the reasons stated hereinabove, in our opinion, as  there  was  an
allegation to the effect that Accused Nos. 2 to 10 were involved in  day-to-
day business of Accused No. 1 – company, we see no reason for  sparing  them
by the High Court.

18.   In these circumstances, the impugned order passed by  the  High  Court
is set aside and the Criminal Appeals are allowed.

19.   It is also directed that the proceedings shall  commence  as  soon  as
possible so that they can come to an end at an early date.

20.   The Registry is directed to send an intimation of  this  order  to  IX
Metropolitan Magistrate, Saidpet, Chennai.  Record and proceedings, if  sent
to this Court, be returned forthwith.
                                                   .......................J.
                                                            [ ANIL R. DAVE ]


                                                   .......................J.
                                                             [ AMITAVA ROY ]

      New Delhi;
      August 06, 2015.