SUNITA PALITA & OTHERS Versus M/S PANCHAMI STONE QUARRY
SUNITA PALITA & OTHERS Versus M/S PANCHAMI STONE QUARRY
Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. OF 2022
[Arising out of SLP (Crl.) No. 10396 of 2019]
SUNITA PALITA & OTHERS … Appellant (s)
Versus
M/S PANCHAMI STONE QUARRY ... Respondent (s)
J U D G M E N T
Indira Banerjee, J.
Leave granted.
2. This appeal is against a judgment and order dated 11th
September 2019 passed by the Calcutta High Court dismissing the
Criminal Revisional Application being C.R.R. No.2835 of 2018 filed by
the Appellants being the 3rd, 4th and 5th Accused, under Section 482 of
the Code of Criminal Procedure, 1973, hereinafter referred to as “the
Cr.P.C.”, for quashing the proceedings in Case No. AC/121/2017, inter
1
alia, under Section 138/141 of the Negotiable Instruments Act, 1881,
hereinafter referred to as “the NI Act”, pending against the Appellants
in the Court of the Judicial Magistrate, 2nd Court, Suri, Birbhum, West
Bengal.
3. The Respondent M/s Panchami Stone Quarry, hereinafter
referred to as “PSQ” filed a petition of complaint, inter alia, against
the Appellants under Section 138/141 of the NI Act which was
registered as Case No. AC/121/2017.
4. In the petition of complaint, PSQ impleaded M/s MBL
Infrastructure Limited, a public limited company, within the meaning of
the Companies Act 2013 (hereinafter referred to as “the Accused
Company”), as Accused No.1. One Mr. Anjanee Kumar Lakhotia,
Managing Director of the Accused Company was impleaded as the
Accused No.2 and the Appellants were impleaded as Accused Nos. 3, 4
and 5. The Appellant No.1 was the fourth accused, Appellant No.2 was
the fifth accused and Appellant No.3 was the third accused.
5. In the said petition of complaint, PSQ alleged “Accused Nos.2, 3,
4 and 5 are the Directors of Accused No.1. i.e., M/s MBL
Infrastructures Ltd. respectively [and] are responsible to conduct the
day-to-day business affairs of the Accused No.1.”
6. The Accused Company placed orders on PSQ on different dates
for purchase, inter alia, of Stone Dust and Stone Aggregate. Purchase
2
Orders dated 24.12.2015, 25.05.2016, 07.01.2016 and 09.04.2016
were issued by the Accused Company, specifying the materials
required to be supplied, along with the rates and quantity thereof.
7. Pursuant to the aforesaid purchase orders, PSQ supplied
materials to the Accused Company, and raised bills totalling
Rs.2,31,60,674/- (Rupees Two Crore, Thirty One Lakhs, Sixty
Thousand, Six Hundred and Seventy Four only) on the Accused
Company.
8. In discharge of its liability against the bills raised by PSQ on the
Accused Company, the Accused Company had issued an Account
Payee Cheque being No.001174 dated 15th March 2017 for a sum of
Rs.1,71,08,512/- (Rupees One Crore, Seventy One Lakhs, Eight
Thousand, Five Hundred and Twelve only) drawn on the Park Street
Branch of Kotak Mahindra Bank at Kolkata, in favour of PSQ.
9. It is not in dispute that the Accused No.2-Anjanee Kumar
Lakhotia is the Managing Director and authorised signatory of the
Accused Company. The said Accused No.2, Anjanee Kumar Lakhotia
signed the said cheque.
10. In the Petition of Complaint there is a bald averment that the
Appellants being the Accused Nos. 3, 4 and 5 were Directors of the
Accused Company and responsible for the day-to-day affairs of the
Accused Company. This averment is devoid of any particulars.
3
11. On 10th April 2017, PSQ deposited the cheque in its bank for
encashment, but the cheque was dishonoured, with the endorsement
‘account closed’. On 3rd May 2017, PSQ received intimation of
dishonour of the cheque from its banker. Thereafter, PSQ sent a
demand notice dated 29th May 2017 by speed post, calling upon the
Accused to make payment of the amount of the dishonoured cheque,
as per the provisions of Section 138 of the NI Act.
12. Alleging that the Accused Company had not paid the amount of
the dishonoured cheque, that is, Rs.1,71,08,512/- (Rupees One Crore,
Seventy One Lakhs, Eight Thousand, Five Hundred and Twelve only) to
PSQ within the time stipulated, PSQ filed the aforesaid complaint
under Section 138 read with Section 141 of the NI Act, through its
proprietor.
13. By an order dated 13th July 2017, the Additional Chief Judicial
Magistrate, 2nd Court, Suri, Birbhum registered the petition as a
complaint case, and after taking cognizance, directed issuance of
summons to the Accused, with liberty to the Accused to adopt plea
bargaining. Case records were directed to be transferred to the file of
the Judicial Magistrate, 2nd Court, Suri, Birbhum. On the same day,
the Judicial Magistrate, 2nd Court, Suri, Birbhum, West Bengal, received
the case records for trial and disposal.
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14. On 26th March 2018, the Accused appeared through Advocates
and filed petitions under Section 205 of the Cr.P.C. and under Section
305 of the Cr.P.C. Sections 205 and 305 of the Cr.P.C. are set out
hereinbelow:-
“Section 205. Magistrate may dispence with personal
appearance of accused.- (1) Whenever a Magistrate
issues a summons, he may, if he sees reason so to do,
dispense with the personal attendance of the accused and
permit him to appear by his pleader.
(2) But the Magistrate inquiring into or trying the case may,
in his discretion, at any stage of the proceedings, direct the
personal attendance of the accused, and, if necessary,
enforce such attendance in the manner hereinbefore
provided.”
***
“Section 305. Procedure when corporation or
registered society is an accused.- (1) In this section,
"corporation" means an incorporated company or other body
corporate, and includes a society registered under the
Societies Registration Act, 1860 (21 of 1860).
(2) Where a corporation is the accused person or one of the
accused persons in an inquiry or trial, it may appoint a
representative for the purpose of the inquiry or trial and
such appointment need not be under the seal of the
corporation.
(3) Where a representative of a corporation appears, any
requirement of this Code that anything shall be done in the
presence of the accused or shall be read or stated or
explained to the accused, shall be construed as a
requirement that thing shall be done in the presence of the
representative or read or stated or explained to the
representative, and any requirement that the accused shall
be examined shall be construed as a requirement that the
representative shall be examined.
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(4) Where a representative of a corporation does not
appear, any such requirement as is referred to in subsection
(3) shall not apply.
(5) Where a statement in writing purporting to be signed by
the Managing Director of the corporation or by any person
(by whatever name called) having, or being one of the
persons having the management of the affairs of the
corporation to the effect that the person named in the
statement has been appointed as the representative of the
corporation for the purposes of this section, is filed, the
Court shall, unless the contrary is proved, presume that such
person has been so appointed.
(6) If a question arises as to whether any person, appearing
as the representative of a corporation in an inquiry or trial
before a Court is or is not such representative, the question
shall be determined by the Court.”
15. By an order dated 9th July 2018, the Court of Judicial Magistrate,
2
nd Court, Suri, Birbhum declined to dispense with the appearance of
the Appellants and directed the accused to appear on 20th August
2018.
16. On 26th March 2018, the matter was adjourned till 16th May 2018
for appearance. The case was heard on diverse dates and ultimately
adjourned till 9th July 2018 for Orders. By an Order dated 9th July 2018,
the Judicial Magistrate, 2nd Court, Suri, Birbhum rejected the Petitions
under Sections 305 and 205 of the Cr.P.C., in the absence of the
accused persons. The Court directed the accused persons to remain
present in Court positively on next date, that is 20th August 2018 to
face appropriate proceedings.
6
17. The Appellants filed a Criminal Revisional Application in the High
Court under Section 482 of the Cr.P.C., inter alia, praying that the
proceedings in Case No.AC.121/2017 under Section 138 read with
Section 141 of the NI Act pending in the Court of the Judicial
Magistrate, 2nd Court, Suri be quashed and pending such order, all
proceedings in the said case be stayed.
18. In the High Court, it was contended that the Judicial Magistrate,
2
nd Court, Suri, dealt with the application under Section 205 of the
Cr.P.C. without considering whether any useful purpose would be
served by requiring the personal attendance of the Accused or
whether the progress of the trial was likely to be hampered on
account of their absence.
19. By the judgment and order impugned in this Appeal, a Single
Bench of the High Court rejected the application under Section 482 of
the Cr.P.C. Being aggrieved, the Appellants have approached this
Court. The Appellants claim that they are independent non-executive
Directors of the Accused Company, who are in no way responsible for
the day-to-day affairs of the Accused Company.
20. Mr. Sidharth Luthra appearing on behalf of the Appellants
submitted that Section 205 of the Cr.P.C. confers discretion on the
Court to exempt personal appearance of an accused, till such time as
his appearance may be considered necessary. In considering an
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application under Section 205 of the Cr.P.C., the Magistrate has to
bear in mind the nature of the case, as also the conduct of the
persons summoned. The Magistrate may not exempt personal
appearance, where any useful purpose would be served by requiring
the personal attendance of the accused, or where the progress of the
trial was likely to be hampered on account of his absence.
21. Mr. Luthra pointed out that Section 305 of the Cr.P.C. provides
how a body corporate, made accused in a criminal case, may be
represented. The Magistrate overlooked the fact that the Accused
Company was being represented by an authorized officer.
22. Mr. Luthra further argued that Section 141 of the NI Act being a
penal provision creating vicarious liability, the same must be strictly
construed. Mere statement in the complaint that the Appellants were
in charge of and responsible to the Accused Company, for the
conduct of the business of the Accused Company without any specific
role attributed to the Appellants, was not sufficient for proceeding
against the Appellants under Section 141 of the said Act.
23. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla
1 cited by
Mr. Luthra, this Court held:
“10. 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
1 (2005) 8 SCC 89
8
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 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.”
24. Mr. Luthra emphatically argued that the Appellants are
independent, non-executive Directors of the Accused Company and in
9
no way responsible for the day-to-day affairs of the Accused
Company. Such Directors are inducted in the company for their
expertise or special knowledge in any particular discipline. They are
not in charge of the management of the company.
25. Mr. Luthra argued that the Appellants had relied on
unimpeachable documents, particularly, Form No. DIR-12 of Appellant
No.1 and Appellant No.3, and DRI Form No.32 of the Appellant No.2,
which showed the status of the respective Appellants as NonExecutive Independent Directors w.e.f. 01.04.2014. The Appellants
being Non-Executive Independent Directors, are entitled to have the
Complaint Case No. AC/121/2017 quashed as against them.
26. Mr. Luthra referred to Section 2(47) and Section 149 of the
Companies Act, 2013 dealing with independent Directors which are
extracted hereinbelow for convenience:-
“2. Definitions: …
(47) “independent director” means an independent director
referred to in sub-section (5) of section 149;
***
149. Company to have Board of Directors: …
(6) An independent director in relation to a company, means
a director other than a managing director or a whole-time
director or a nominee director,—
(a) who, in the opinion of the Board, is a person of integrity
and possesses relevant expertise and experience;
(b)(i) who is or was not a promoter of the company or its
holding, subsidiary or associate company;
10
(ii) who is not related to promoters or directors in the company,
its holding, subsidiary or associate company;
(c) who has or had no pecuniary relationship, other than
remuneration as such director or having transaction not
exceeding ten per cent of his total income or such amount
as may be prescribed, with the company, its holding,
subsidiary or associate company, or their promoters, or
directors, during the two immediately preceding financial
years or during the current financial year;
(d) none of whose relatives—
(i) is holding any security of or interest in the company, its
holding, subsidiary or associate company during the two
immediately preceding financial years or during the current
financial year:
Provided that the relative may hold security or interest in the
company of face value not exceeding fifty lakh rupees or two
per cent. of the paid-up capital of the company, its holding,
subsidiary or associate company or such higher sum as may
be prescribed;
(ii) is indebted to the company, its holding, subsidiary or
associate company or their promoters, or directors, in excess
of such amount as may be prescribed during the two
immediately preceding financial years or during the current
financial year;
(iii) has given a guarantee or provided any security in
connection with the indebtedness of any third person to the
company, its holding, subsidiary or associate company or
their promoters, or directors of such holding company, for
such amount as may be prescribed during the two
immediately preceding financial years or during the current
financial year; or
(iv) has any other pecuniary transaction or relationship with
the company, or its subsidiary, or its holding or associate
company amounting to two per cent or more of its gross
turnover or total income singly or in combination with the
transactions referred to in sub-clause (i), (ii) or (iii);
(e) who, neither himself nor any of his relatives—
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(i) holds or has held the position of a key managerial
personnel or is or has been employee of the company or its
holding, subsidiary or associate company in any of the three
financial years immediately preceding the financial year in
which he is proposed to be appointed:
Provided that in case of a relative who is an employee, the
restriction under this clause shall not apply for his
employment during preceding three financial years.
(ii) is or has been an employee or proprietor or a partner, in
any of the three financial years immediately preceding the
financial year in which he is proposed to be appointed, of—
(A) a firm of auditors or company secretaries in practice or
cost auditors of the company or its holding, subsidiary or
associate company; or
(B) any legal or a consulting firm that has or had any
transaction with the company, its holding, subsidiary or
associate company amounting to ten per cent or more of
the gross turnover of such firm;
(iii) holds together with his relatives two per cent or more of
the total voting power of the company; or
(iv) is a Chief Executive or director, by whatever name
called, of any non-profit organisation that receives twentyfive per cent or more of its receipts from the company, any
of its promoters, directors or its holding, subsidiary or
associate company or that holds two per cent or more of the
total voting power of the company; or
(f) who possesses such other qualifications as may be
prescribed.”
27. Mr. Luthra has also referred to Section 150 of the Companies
Act, 2013 which is set out hereinbelow:-
150. Manner of selection of independent directors
and maintenance of databank of independent
directors.—(1) Subject to the provisions contained in subsection (5) of Section 149, an independent director may be
selected from a data bank containing names, addresses and
12
qualifications of persons who are eligible and willing to act
as independent directors, maintained by any body, institute
or association, as may by notified by the Central
Government, having expertise in creation and maintenance
of such data bank and put on their website for the use by
the company making the appointment of such directors:
Provided that responsibility of exercising due diligence
before selecting a person from the data bank referred to
above, as an independent director shall lie with the company
making such appointment.
(2) The appointment of independent director shall be
approved by the company in general meeting as provided in
sub-section (2) of Section 152 and the explanatory
statement annexed to the notice of the general meeting
called to consider the said appointment shall indicate the
justification for choosing the appointee for appointment as
independent director.
(3) The data bank referred to in sub-section (1), shall create
and maintain data of persons willing to act as independent
director in accordance with such rules as may be prescribed.
(4) The Central Government may prescribe the manner and
procedure of selection of independent directors who fulfil
the qualifications and requirements specified under Section
149.
28. In K.K. Ahuja v. V.K. Vora
2
this Court discussed the principles
of the vicarious liability of the officers of a company in respect of
dishonour of a cheque and held: -
“27. 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
2 (2009) 10 SCC 48
13
“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.”
29. In Pooja Ravinder Devidasani v. State of Maharashtra
and Anr.
3
this Court held as under:-
“17. ... Non-executive Director is no doubt a custodian of the
governance of the company but is not involved in the dayto-day affairs of the running of its business and only
monitors the executive activity. To fasten vicarious liability
under Section 141 of the Act on a person, at the material
3 (2014) 16 SCC 1
14
time that person shall have been at the helm of affairs of
the company, one who actively looks after the day-to-day
activities of the company and is particularly responsible for
the conduct of its business. Simply because a person is a
Director of a company, does not make him liable under the
NI Act. Every person connected with the Company will not
fall into the ambit of the provision. Time and again, it has
been asserted by this Court that only those persons who
were in charge of and responsible for the conduct of the
business of the Company at the time of commission of an
offence will be liable for criminal action. A Director, 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 for an offence under Section 141 of the NI Act.
In National Small Industries Corpn. [National Small
Industries Corpn. Ltd. v. Harmeet Singh Paintal,
(2010) 3 SCC 330 : (2010) 1 SCC (Civ) 677 : (2010) 2
SCC (Cri) 1113] this Court observed: (SCC p. 336,
paras 13-14)
“13. Section 141 is a penal provision creating
vicarious liability, and which, as per settled law,
must be strictly construed. It is therefore, not
sufficient to make a bald cursory statement in a
complaint that the Director (arrayed as an
accused) is in charge of and responsible to the
company for the conduct of the business of the
company without anything more as to the role of
the Director. But the complaint should spell out
as to how and in what manner Respondent 1 was
in charge of or was responsible to the accused
Company for the conduct of its business. This is
in consonance with strict interpretation of penal
statutes, especially, where such statutes create
vicarious liability.
14. A company may have a number of Directors
and to make any or all the Directors as accused
in a complaint merely on the basis of a statement
that they are in charge of and responsible for the
conduct of the business of the company without
anything more is not a sufficient or adequate
fulfilment of the requirements under Section
141.”
***
15
18. In Girdhari Lal Gupta v. D.H. Mehta [Girdhari Lal
Gupta v. D.H. Mehta, (1971) 3 SCC 189 : 1971 SCC (Cri)
279 : AIR 1971 SC 2162] , this Court observed that a person
“in charge of a business” means that the person should be
in overall control of the day-to-day business of the Company.
19. A Director of a company is liable to be convicted for an
offence committed by the company if he/she was in charge
of and was responsible to the company for the conduct of its
business or if it is proved that the offence was committed
with the consent or connivance of, or was attributable to
any negligence on the part of the Director concerned
(see State of Karnataka v. Pratap Chand [State of
Karnataka v. Pratap Chand, (1981) 2 SCC 335 : 1981 SCC
(Cri) 453] ).
20. In other words, the law laid down by this Court is that for
making a Director of a company liable for the offences
committed by the company under Section 141 of the NI
Act, there must be specific averments against the
Director showing as to how and in what manner the
Director was responsible for the conduct of the
business of the company.”
30. As held in K.K. Ahuja v. V.K. Vora (supra) when the accused is
the Managing Director or a Joint Managing Director of a company, 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. This is because the prefix “Managing” to
the word “Director” makes it clear that the Director was in charge of
and responsible to the company, for the conduct of the business of
the company. A Director or an Officer of the company who signed the
cheque renders himself liable in case of dishonour. Other officers of a
company can be made liable only under sub-section (2) of Section
141 of the NI Act by averring in the complaint, their position and
duties in the company, and their role in regard to the issue and
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dishonour of the cheque, disclosing consent, connivance or
negligence.
31. In course of the hearing Mr. Luthra emphasized on the
proceedings initiated against the Accused Company under Section 7
of the Insolvency and Bankruptcy Code 2016, hereinafter referred to
as the “IBC”.
32. By an order dated 30th March 2017, the Calcutta Bench of the
National Company Law Tribunal, hereinafter referred to as the “NCLT”,
admitted the application of a Financial Creditor of the Accused
Company for appointment of an Interim Resolution Professional (IRP)
to administer the Accused Company, as a result of which the
Appellants were suspended by operation of law. When statutory
notice of dishonour was sent to the Appellants, the management of
the Accused Company had been taken over by the IRP.
33. It is stated that PSQ had availed the remedy under the IBC and
filed its claim before the IRP, which now forms part of an Approved
Resolution Plan of the Accused Company. PSQ would, therefore, be
paid in terms of the Approved Resolution Plan. Mr. Luthra submitted
that the Resolution Plan of the Accused Company had been upheld by
the National Company Law Appellate Tribunal (NCLAT). All appeals
against the Resolution Plan had been dismissed by the NCLAT.
17
34. Section 482 of the Cr.P.C. protects the inherent power of the
High Court to make such orders as may be necessary to give effect to
any order under the Cr.P.C or to prevent abuse of the process of any
Court or otherwise secure the ends of justice.
35. While it is true that inherent jurisdiction under Section 482
should be exercised sparingly, carefully and with caution and only
when such exercise is justified by the tests specially laid down in the
Section, the Court is duty bound to exercise its jurisdiction under
Section 482 of the Cr.P.C. when the exercise of such power is justified
by the tests laid down in the said Section. Jurisdiction under Section
482 of the Cr.P.C. must be exercised if the interest of justice so
requires.
36. The High Court rightly held that when a complaint was filed
against the Director of a company, a specific averment that such
person was in charge of and responsible for the conduct of business of
the company was an essential requirement of Section 141 of the NI
Act. The High Court also rightly held that merely being a Director of
the company is not sufficient to make the person liable under Section
141 of the NI Act. The requirement of Section 141 of the NI Act was
that the person sought to be made liable should be in charge of and
responsible for the conduct of the business of the company. This has
to be averred as a fact.
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37. The High Court also rightly held that the Managing Director or
Joint Managing Director would admittedly be in charge of the company
and responsible to the company for the conduct of its business by
virtue of the office they hold as Managing Director or Joint Manging
Director. These persons are in charge of and responsible for the
conduct of the business of the company and they get covered under
Section 141 of the NI Act. A signatory of a cheque is clearly liable
under Section 138/141 of the NI Act.
38. The High Court, however, failed to appreciate that none of these
Appellants were Managing Director or Joint Managing Director of the
Accused Company. Nor were they signatories of the cheque which
was dishonoured.
39. The High Court proceeded to hold that, in construing a
complaint, a hyper technical approach should not be adopted, to
quash the same. The High Court observed rightly that the laudable
object of preventing bouncing of cheques and sustaining the
credibility of commercial transactions, resulting in enactment of
Sections 138 and 141 of the NI Act has to be borne in mind. A
complaint should also not be read with a pedantically hyper technical
approach to deny relief under Section 482 of the Cr.P.C. to those
impleaded as accused, who do not have any criminal liability in
respect of the offence alleged in the complaint. As observed by the
High Court, the provisions of Section 138/141 of the NI Act create a
19
statutory presumption of dishonesty, against those covered by Section
138/141 of the NI Act and expose them to criminal liability, if payment
is not made within the statutory period, even after issue of notice.
40. The High Court further held that the power of quashing is
required to be exercised sparingly. The High Court, in effect, found
that even though, on perusal of the complaint, it appeared that the
exact words used in Section 141 of the NI Act had not been used in
the complaint, the essential pleadings were there in the complaint.
41. There can be no doubt that in deciding a Criminal Revisional Application under Section 482 of the Cr.P.C. for quashing a proceeding
under Section 138/141 of the NI Act, the laudable object of preventing
bouncing of cheques and sustaining the credibility of commercial
transactions resulting in enactment of the said Sections has to be
borne in mind. The provisions of Section 138/141 of the NI Act create
a statutory presumption of dishonesty on the part of the signatory of
the cheque, and when the cheque is issued on behalf of a company,
also those persons in charge of or responsible for the company or the
business of the company. Every person connected with the company
does not fall within the ambit of Section 141 of the NI Act.
42. A Director of a company who was not in charge or responsible
for the conduct of the business of the company at the relevant time,
will not be liable under those provisions. As held by this Court in, inter alia, S.M.S. Pharmaceuticals Ltd. (supra), the liability under
20
Section 138/141 of the NI Act arises from being in charge of and responsible for the conduct of the 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. It would be a
travesty of justice to drag Directors, who may not even be connected
with the issuance of a cheque or dishonour thereof, such as Director
(Personnel), Director (Human Resources Development) etc. into criminal proceedings under the NI Act, only because of their designation.
43. Liability depends on the role one plays in the affairs of a company and not on designation or status alone as held by this Court in
S.M.S. Pharmaceuticals Ltd. (supra). The materials on record
clearly show that these Appellants were independent, non-executive
Directors of the company. As held by this Court in Pooja Ravinder
Devidasani v. State of Maharashtra and Anr. (supra) a non-Executive Director is not involved in the day-to-day affairs of the company
or in the running of its business. Such Director is in no way responsible for the day-to-day running of the Accused Company. Moreover,
when a complaint is filed against a Director of the company, who is
not the signatory of the dishonoured cheque, specific averments have
to be made in the pleadings to substantiate the contention in the
complaint, that such Director was in charge of and responsible for
conduct of the business of the Company or the Company, unless such
Director is the designated Managing Director or Joint Managing Direc21
tor who would obviously be responsible for the company and/or its
business and affairs.
44. The High Court correctly observed that three categories of
persons were covered by Section 141 of the NI Act – the company who
committed the offence as alleged; everyone who was in-charge of or
was responsible for the business of the company and any other
person who was a Director or a Manager or a Secretary or Officer of
the Company with whose connivance or due to whose neglect the
company had committed the offence.
45. Even though the High Court deprecated the adoption of a hyper
technical approach in construing pleadings, to quash criminal
proceedings, the High Court adopted a hyper technical approach in
rejecting the application under Section 482 of the Cr.P.C., on a cursory
reading of the formalistic pleadings in the complaint, endorsing the
contents of Section 141 of the NI Act, without any particulars. What
the High Court overlooked was, the contention of these Appellants
that they were non-Executive Independent Directors of the Accused
Company, based on unimpeachable materials on record. The High
Court observed that in the petition it had specifically been averred
that all the accused persons were responsible and liable for the whole
business management of the Accused Company, and took the view
that the averments in the complaint were sufficient to meet the
requirements of Section 141 of the NI Act.
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46. As held by this Court in National Small Industries
Corporation Ltd. v. Harmeet Singh Paintal
4 quoted with approval
in the subsequent decision of this Court in Pooja Ravinder
Devidasani v. State of Maharashtra and Anr. (supra) the
impleadment of all Directors of an Accused Company on the basis of a
statement that they are in charge of and responsible for the conduct
of the business of the company, without anything more, does not fulfil
the requirements of Section 141 of the NI Act.
47. In any event there could be no justification for not dispensing
with the personal appearance of the Appellants, when the Company
had entered appearance through an authorized officer. As held by this
Court in Pepsi Foods Ltd. v. Special Judicial Magistrate and
Ors.
5
summoning an accused person cannot be resorted to as a
matter of course and the order must show application of mind.
48. In our considered view, the High Court erred in law in not exercising its jurisdiction under Section 482 of the Cr.P.C in the facts and
circumstances of this case to grant relief to the Appellants.
49. For the reasons discussed above, the appeal is allowed. The
judgment and order of the High Court is set aside. Criminal Case No.
AC/121/2017 pending under Section 138/141 of the NI Act in the
Court of Judicial Magistrate, 2nd Court, Suri, Birbhum is quashed in so
4 (2010) 3 SCC 330
5 (1998) 5 SCC 749
23
far as these Appellants are concerned. It is made clear that the proceedings may continue against the other accused in the criminal
case, including in particular the Accused Company, its Managing
Director/Additional Managing Director and/or the signatory of the
cheque in question.
…....................................J
[INDIRA BANERJEE]
...............................……..J
[J.K. MAHESHWARI]
NEW DELHI;
AUGUST 01, 2022
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