Criminal Application No.244 of 2007

18th June, 2008

Petitioner Counsel: Mr. MANISH BHATIA,A. S. Khan & Associates
Respondent Counsel: Smt. V. M. AMLANI,Mr. K. V. SASTE

Cases Cited:
S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla, 2005(5) ALL MR 1118 (S.C.)=2005(8) SCC 89 [Para 6,7,8]
Shishir B. Desai Vs. Ceat Financial Services Ltd., 2006 ALL MR (Cri) 2083 [Para 6,7]
Skyline Aquatech Exports Ltd. Vs. M/s. Sachima Agro Industries Pvt. Ltd., 2007 ALL MR (Cri) 3314 [Para 6,7]
K.P.G. Nair Vs. Jindal Menthol India Ltd., 2001 ALL MR (Cri) 1206 (S.C.)=2001(10) SCC 218 [Para 7]
Katta Sujatha Vs. Fertilizers & Chemical Travancore Ltd., 2004 ALL MR (Cri) 598 (S.C.)=2002(7) SCC 655 [Para 7]

JUDGMENT

JUDGMENT :- Heard the learned counsel for the applicant/original accused No.4, learned APP for the State and the learned counsel for respondent No.2/original complainant. Perused the reply filed by the respondent No.2.

2. This application challenges an order passed by the learned Magistrate issuing process upon a complaint filed for the offence punishable under section 138 of the Negotiable Instruments Act. The complaint pertains to dishonour of cheque amounting to Rs.35,092/-. One cheque is of Rs.35,000/- and the other cheque is of Rs.92/- only. Admittedly, the applicant is not signatory of the cheques. The order issuing process was challenged by the applicant in revision being Revision Application No.98 of 2006. The said revision application was dismissed by the Additional Sessions Judge, Greater Mumbai vide order dated 23rd February 2006. Both these orders passed by the learned Magistrate as well as the Sessions Judge are impugned in this application.

3. The learned advocate appearing for the applicant has submitted that the applicant has been arrayed as accused No.4 because he was director of the accused No.1 company. He submitted that the applicant had resigned as director from the said company on 27th October, 2003. The cheques which were subject-matter of the complaint were issued on 8-4-2004 and 7-4-2004 and the same came to be dishonoured on 13th & 10th April, 2004 respectively. He submitted that at that time, as the applicant was not the director of the accused No.1 company, he cannot be said to be liable under section 138 of the Negotiable Instruments Act. He further contended that when the cause of action arose, applicant was not the director of the said company, hence, he cannot be held liable under the Negotiable Instruments Act. In reply to this contention, the learned advocate for the respondent No.2 submitted that no evidence has been led to show that the applicant had resigned on 27th October, 2003 and hence, in the absence of such evidence on record, it cannot be said that the applicant was not the director of the respondent company at the relevant time, and hence, he is liable.

4. There is one another aspect which is necessary to take into consideration. The learned counsel for the applicant submitted that to attract the provisions of section 138 of the Negotiable Instruments Act, it is essential that the averments have to be made in the complaint that at the time of offence the accused was in charge of and was responsible to the company for the conduct of the business of the company. He has submitted that these vital and necessary averments do not appear in the complaint. He submitted that as the necessary averments are absent in the complaint, applicant cannot be said to be liable under section 138 of the Negotiable Instruments Act.

5. The learned counsel for the respondent No.2 submitted that the necessary averments were made in the complaint and she has placed reliance on the averments in the complaint, wherein it is stated as under -

"I know the accused abovenamed. I say that the accused No.1 is the Limited Company, registered under the provisions of Indian Companies Act, and the accused Nos.2 to 5 are the directors of the accused No.1 and the accused No.5 is also the authorized signatory herein, and their respective addresses are as mentioned in the title of this Complaint. I say that all the accused Nos.2 to 5 herein are actively involved in day to day management, administration and the business of the respondent."

6. I have perused the said complaint. In support of his contention that the complaint must contain the averments which are essential, the learned advocate for the applicant relied upon a decision of Supreme Court in S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla, reported in 2005(8) SCC 89 : 2005(5) ALL MR 1118 (S.C.), and two decisions of this Court in the case of Shishir B. Desai & Anr. Vs. Ceat Financial Services Ltd. & Anr., reported in 2006 ALL MR (Cri) 2083 and in the case of Skyline Aquatech Exports Ltd. & Ors. Vs. M/s. Sachima Agro Industries Pvt. Ltd. reported in 2007 ALL MR (Cri) 3314.

7. In the case of Skyline [2007 ALL MR (Cri) 3314] (supra) after considering various judgments including S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla, 2005(5) ALL MR. 1118 (S.C.) : 2005(8) SCC 89; K.P.B. Nair Vs. Jindal Menthol India Ltd., 2001 ALL MR (Cri) 1206 (S.C.): 2001(10) SCC 218; Katta Sujatha Vs. Fertilizers & Chemical Travancore Ltd., 2002(7) SCC 655 : [2004 ALL MR (Cri) 598 (S.C.)], this court has held that the necessary averments i.e. accused was in charge of and was responsible to the company for the conduct of the business being absent, the complaint is liable to be quashed.

In the case of Skyline [2007 ALL MR (Cri) 3314] (supra) the averments in the complaint were as under-

"again in para 21, the complainant reiterated that all the accused persons were in charge of and responsible for the conduct of the business of accused No.1 and as such the accused Nos.1 to 7 were guilty of having committed offences punishable under section 138 read with section 141 of the Act. From the averments in para 2 of the complaint reflected above, I am of the opinion that the necessary ingredients which are required under section 141 of the Negotiable Instruments Act are not complied with. The complainant had not stated anywhere in the complaint that the applicant is responsible to the company for the conduct of the business of the company, at the time when the offence was committed."

And in the case of Shishir B. Desai [2006 ALL MR (Cri) 2083] (Supra) the averments in the complaint were as under -

"2. That accused No.1 is Public Limited Company. Accused Nos.2 to 7 are its Directors. Accused Nos.2 to 7 are all in charge of and responsible to the accused No.1 for the conduct of the business and functioning of the accused No.1. Their office addresses and residential addresses are as shown in the cause title."

8. The Supreme Court has rendered its decision in the case of S.M.S. Pharmaceuticals [2005(5) ALL MR 1118 (S.C.)] (supra) in the context of the phraseology of Section 141 of the Negotiable Instruments Act. Section 141 deals with offences by companies. Whenever the person committing an offence under section 138 is a company, then every person who at the time of the offence was committed, was in charge and was responsible to the company for the conduct of the business of the company as well as company shall be deemed to be guilty of the offences and shall be liable to be proceeded and punished accordingly. As to when an offence under section 138 is committed is clear from a reading thereof. It is upon the cheque being returned "unpaid" by the bank. In the instant case, the complaint is completely silent about this material aspect. The complaint does not state that at the relevant time i.e. when the cheques were returned unpaid/dishonoured, the applicant was in any way in charge of and was responsible for the conduct of the business of the company. It is only when such averments are made in the complaint that a prima-facie conclusion can be drawn about the guilt of the person hence, in my view, as far as the present complaint is concerned, complaint cannot proceed. No offence can be said to be committed by the applicant when admittedly it is not shown that on the date of commission of offence, applicant was in charge of and responsible for conduct of business of the company. Therefore, allowing such a complaint to proceed as far as applicant is concerned, would be a clear abuse of the process of the court. Therefore, the complaint stands quashed as far as applicant is concerned.

9. In the result the impugned order dated 23rd July, 2004 passed by the learned trial judge and the order dated 23rd February, 2006 passed by the learned Additional Session Judge are set aside, as far as applicant is concerned.

Complaint quashed.