CRR 4099 of 2011,CRAN 2028 of 2012,CRAN 652 of 2012

25th June, 2012

Petitioner Counsel: Mr. SHIBADAS BANERJEE, Sr. Bar-at-Law, Mr. HIMANGSHU DE, Sr. Adv., Mr. AMARESH BAG, Mr. MRITYUJAY CHATTERJEE
Respondent Counsel: Mr. SANDIPAN GANGULY, Mr. SABYASACHI BANERJEE, Mr. AYAN BHATTACHARYYA, Mr. AYAN CHAKRABORTY, Mr. PARTHA PRATIM SARKAR, Mr. ANJAN DUTTA, Mr. PAWAN KR. GUPTA, Mr. ARIJIT BHUSAN BAGCHI

Cases Cited:
S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla and Anr., 2005(5) ALL MR 1118 (S.C.)=(2005) 8 SCC 89 [Para 6]
N. Rangachari Vs. Bharat Sanchar Nigam Limited, 2007 ALL MR (Cri) 1437 (S.C.)=(2007) 5 SCC 108 [Para 7]
K.K. Ahuja Vs. V. K. Vora and Anr., 2009 ALL SCR 1524=(2009) 10 SCC 48 [Para 7]
N. K. Wahi Vs. Shekhar Singh & Ors., 2007 ALL MR (Cri) 1445 (S.C.)=(2007) 9 SCC 481 [Para 9]
National Small Industries Corporation Ltd. Vs. Harmeet Singh Paintal & Anr., 2010 ALL MR (Cri) 921 (S.C.)=(2010) 3 SCC 330 [Para 10]
Pepsico India Holdings Pvt. Ltd. Vs. Food Inspector and Anr., (2011) 1 SCC 176 [Para 11]

JUDGMENT

JUDGMENT :- Present petition has been filed by three Directors of the Navkar Buildestates Pvt. Ltd. (hereinafter referred to as the 'Company') namely Anu Mehta, Kanhaiya Lal Mehta and Siddharth Mehta. It is averred in the petition that petitioner nos. 2 and 3 are continuing to be directors of the Company. Siddharth Mehta is resigned from the company. The averment made regarding petitioner no.3, Siddharth Mehta, is that he has resigned from the Company is seriously disputed by the counsel for the complainant.

2. The present revision petition has been filed under Section 482 Cr.P.C. The above said three petitioners have prayed that the Complaint Case no.24033 of 2011 pending before the Metropolitan Magistrate, 9th Court, Calcutta, against them for offence under Sections 138/141 of the Negotiable Instruments Act, be quashed.

3. The Company had issued a cheque in favour of the complainant company opposite party no.1. The cheque had bounced and the same led the complainant company to institute the prosecution against the Company and its Directors by filing a complaint under Sections 138/141 of the N.I. Act.

4. The petitioners have been summoned to stand trial by the Court of Metropolitan Magistrate, 9th Court, Calcutta. In the present petition, accused petitioners have raised two questions for the consideration of this Court:

i) Wether the Directors can be prosecuted on the bald assertion made in the complaint, that "the Directors thereof and were at the time when the offence committed in charge of and were responsible for the conduct and day to day business of the said accused No.1 company".

ii) Whether the Director who has resigned can be prosecuted after his resignation has been accepted by the Board of the Directors of the Company?

5. The first question raised in the petition relates to all the three directors who were arrayed as accused in their capacity as the Directors of the Company.

6. The controversy is not new to the courts. Question No.1 has been considered by the courts from last so many years. In S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla and Anr., reported in (2005) 8 SCC 89 : [2005(5) ALL MR 1118 (S.C.)] held as under:

"19.In view of the above discussion, our answers to the questions posed in the reference are as under:

(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 off, 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.

(b) The answer to the question posed in sub-para (b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases.

(c) The answer to Question (c) has to be in the affirmative. The question notes that the managing director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141."

7. In N. Rangachari Vs. Bharat Sanchar Nigam limited, reported in (2007) 5 SCC 108 : [2007 ALL MR (Cri) 1437 (S.C.)], it was held that once averment as made in the present complaint has been made, it will satisfy the ingredients of the offence qua the Directors. But as law evolves on further consideration, it was held in K.K. Ahuja Vs. V. K. Vora and Anr., reported in (2009) 10 SCC 48 : [2009 ALL SCR 1524] that even though the averment made as in the present case, satisfy the ingredients of offence, it is desirable that further particulars should be given as to how the Directors are responsible and same must be incorporated in the complaint.

8. The question which has engaged attention of this Court is whether the Directors can be held criminally liable because of their vicarious liability.

9. In N. K. Wahi Vs. Shekhar Singh & Ors., reported in (2007) 9 SCC 481 : [2007 ALL MR (Cri) 1445 (S.C.)], it was held as under:

"8. To launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction. There should be clear and unambiguous allegation as to how the Directors are in-charge and responsible for the conduct of the business of the company. The description should be clear. It is true that precise words from the provisions of the Act need not be reproduced and the court can always come to a conclusion in facts of each case. But still, in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable."

10. Thereafter, in National Small Industries Corporation Ltd. Vs. Harmeet Singh Paintal & Anr., reported in (2010) 3 SCC 330 : [2010 ALL MR (Cri) 921 (S.C.)], it was held as under:

"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. In a catena of decisions, this Court has held that for making Directors liable for the offences committed by the company under Section 141 of the Act, there must be specific averments against the Directors, showing as to how and in what manner the Directors were responsible for the conduct of the business of the company."

11. The controversy has been finally settled by three judges Bench in Pepsico India Holdings Pvt. Ltd. Vs. Food Inspector and Anr. reported in (2011)1 SCC 176. The emphatic words which settled the old pending issue are as under:

"39. As mentioned hereinbefore, the High Court erred in giving its own interpretation to the decision of this Court in S.M.S. Pharmaceuticals Ltd.'s case (supra), which was reiterated subsequently in several judgments, some of which have been indicated hereinabove, and relying instead on the decision of Rangachari's case (supra), the facts of which were entirely different from the facts of this case. It is now well established that in a complaint against a Company and its Directors, the Complainant has to indicate in the complaint itself as to whether the Directors concerned were either in charge of or responsible to the Company for its day-to-day management, or whether they were responsible to the Company for the conduct of its business. A mere bald statement that a person was a Director of the Company against which certain allegations had been made is not sufficient to make such Director liable in the absence of any specific allegations regarding his role in the management of the Company."

12. In view of the above noted judicial pronouncements, it is to be noted that in the present case, except the averments, that Directors were in-charge and responsible to the company nothing has been stated as to what part was played by the directors petitioners and how they were responsible regarding the finances of the company, issuance of cheque and control over the funds of the company. Ingredients prescribed by plethora of judgments are lacking.

13. So far as the second question is concerned, whether Siddharth Mehta had resigned before the cheque was issued or not, require no decision of this Court, as this Court, in view of the settled legal position in favour of the petitioners as answer to question no.1, is inclined to quash the proceedings against the present Directors. Consequently, as answer to the question no.1, present petition is accepted. The impugned complaint qua the present petitioners is quashed. However, it is clarified that the complaint shall proceed against the Company and against other Directors especially Santilal Mehta who being Director of the company had issued the cheque. Needless to say that the Company or Santilala Meheta if they have any other arguments in their favour, they can take recourse to the lawful remedy available to them.

14. At this stage, counsel for the complainant has stated that since the proceedings are pending since long, the Trial Court be directed to conclude the trial within a specified time.

15. The prayer made by the counsel for the complainant is accepted. Trial Court is directed to conclude the trial as expeditiously as possible.

16. With the above observations, the instant revision petition along with the applications being CRAN 2028 of 2012 and CRAN 652 of 2012 stand disposed of.

17. Urgent Photostat certified copy of this order, if applied for, be given to the learned advocates for the parties.

Ordered accordingly.