Smt. B. Devi (Basanti Devi) vs State Of U.P. & Others
2015 Latest Caselaw 4697 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

AFR
 
Court No. - 34
 
Case :- CRIMINAL MISC. WRIT PETITION No. - 2770 of 2003
 
Petitioner :- Smt. B. Devi (Basanti Devi)
 
Respondent :- State Of U.P. & Others
 
Counsel for Petitioner :- Surendra Tiwari
 
Counsel for Respondent :- Govt.Advocate, Diwakar Pandey
 

 
Hon'ble Sudhir Agarwal,J.

1. Heard learned counsel for the petitioner and perused the record.

2. M/s Agrarians Agro Fields Limited is a Company registered under the provisions of Companies Act, 1956, having its registered office at C-2/67 New Kondli Delhi. One of the functions in which Company was engaged is property and financial transactions. Petitioner is one of the Director of Company. Other two Directors are Sri K. Rawat and Sri Devi Singh Negi. Sri Trilok Chand Sharma is the Chairman/ Managing Director of the Company.

3. It is alleged that petitioner resigned from Directorship on 28.02.1998 and information sent to Registrar, Companies, Delhi and Haryana.

4. Respondent 4, Sri Ratan Prakash Tyagi filed criminal complaint under Section 138 of Negotiable Instruments Act 1938 (hereinafter referred to as the "Act, 1938") read with Section 420 IPC alleging that Company and its Directors including petitioner have committed fraud to usurp money of innocent people including respondent 4.

5. The company floated a scheme representing that amount invested shall be doubled within a period of three and half years and in order to assure benefit and also in lieu of deposits made by investors, lumpsum investment  certificates and cheque of matured amount in advance were issued. Respondent 4 invested Rs.10,000/- through cheque dated 31.08.1997 and a further amount of Rs.10,000/- vide cheque dated 10.09.1997. The Company issued two certificates of lump sum investment amount and two post dated cheques of Rs.20,000/- each. Cheques were signed by Sri Trilok Chand Sharma and Sri Devi Singh Negi, the Managing Director and Director of Company. The cheques were issued in presence of petitioner and other Director, Sri K. Rawat. After expiry of period of three and half years and on maturity, respondent 4 submitted cheques for collection to Central Bank of India, Sihani, Ghaziabad but later on he was informed that cheques were dishonoured on the ground of in-sufficient funds in the account of Company.

6. The statement of complainant-respondent 4 under Section 200 Cr.P.C. was recorded and thereafter Special Judicial Magistrate, C.B.I. Ghaziabad issued process and passed an order dated 18.03.2002 summoning petitioner and other co-accused persons under Section 138 of Act, 1938.

7. Petitioner preferred a Criminal Revision No.179 of 2003 challenging order dated 18.03.2002, whereby she was summoned besides other accused. The revision was dismissed by Sri R.P. Yadav, Sessions Judge, Ghaziabad vide order dated 17.04.2003, hence this petition.

8. It is contended that petitioner has already resigned from the office of Director of Company and, therefore, cannot be incharge of affairs of Company in terms of Section 141 of Act 1938. The order summoning petitioner, therefore, is illegal. Further, petitioner had not issued cheques under her signature and, therefore, for dishonouring of cheques, petitioner cannot be held responsible and no criminal proceedings can be initiated against her. Learned counsel for petitioner in support of his submissions placed reliance on National Small Industries Corp. Ltd. Vs. Harmeet Singh Paintal and others, 2010(69) ACC 334, Monaben Ketanbhai Shah and another Vs. State of Gujarat and others, JT 2004(6) SC 309, Aparna A. Shah Vs. Sheth Devel Opers Private Ltd. and another, 2013(8) SCC 71 and A.K. Singhania Vs. Gujarat State Fertilizer Company Ltd. and another, 2014(84) ACC 1.

9. The respondent 4, having put in appearance, has filed a counter affidavit stating that Company is a bundle of fraud and involved in cheating of public including petitioner's. Accused have consistently changed their address, repeatedly, and presently i.e. at the time of filing of counter affidavit, office of Company is not at the address given in para 2 of writ petition. On the date cheques were issued and respondent 4 was represented so as to persuade him to invest in the Company, petitioner was a Director. Her alleged resignation and document i.e. Annexure 1, is a forged document with intention to avoid legal proceedings. In Form 32 at the note of bottom it is mentioned that cause of resignation shall be mentioned but no reason has been given, why petitioner allegedly resigned. Recording of statement under Section 202 Cr.P.C. to support statement recorded under Section 200 is not mandatory in view of Section 141 Cr.P.C. Petitioner is wife of Trilok Chand Sharma, Managing Director of Company and is also daughter-in-law of another Director of Company who is also accused in the proceedings. She was well aware of the intention and motive of running Company i.e. cheating with people. Court below has rightly issued summoning order.

10. From the pleadings in the writ petition it is evident that petitioner was Director of Company alongwith Trilok Chand Sharma, Chairman / Managing Director who is husband of petitioner.

11. The first submission is that she has resigned on 28.02.1998. True copy of Form 32 (Annexure no.1 to the writ petition) is a certified true copy issued by Deputy Registrar of Companies National Capital Terrotory of Delhi & Haryana on 08.05.2003. Whether it was registered earlier or not is not very clear. Be that as it may, it is the defence of petitioner-accused which was admittedly not and could not have been taken before Magistrate concerned when he issued summoning order after recording statement of complainant under Section 200 Cr.P.C. and finding a prima facie case against all Directors of Company.

12. At the stage of summoning, defence of accused which they may adduce subsequently, cannot be seen since there was no occasion to look into such probable defence which may come when accused would appear and place their case before Magistrate. At the stage of issuing summons, Court has to see, whether a prima facie commission of offence has been shown and appropriate material has come justifying summoning of accused persons against whom complaint has been made.

13. Judgement relied by learned counsel for the petitioner are in the context as to when Section 141 of Negotial Instrument Act, 1881 (hereinafter referred to as the "Act, 1881") can be invoked to implicate a Director of Company so as to deem him / her guilty of an offence.

14. Section 141 reads as under:-

"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."

15. It says, where a person committing an offence under Section 138 is a Company, every person who at the time offence was committed, was incharge of and was responsible to Company for conduct of business of Company as well as Company both shall be deemed to be guilty of offence.

16. Proviso provides an exception in respect of a person who is in-charge and responsible to Company for conduct of its business, if prove that offence was committed without his knowledge or that he has exercised due intelligence to prevent commission of such offence.

17. Second proviso takes care of such Directors of Company who by virtue of holding am office or employment in Central Government or State Government or Financial Corporation under the Administration and Control by Central Government or State Government, are there. It is said that such Director will not be liable for prosecution under the chapter with reference to Section 141 of the Act, 1881.

18. Sub-section 2 also provides, if offence has been committed by Company and it is found that offence has been committed with consent or connivance or it is attributable to any negligent on the part of any Director, Manager, Secretary or other Officer of Company such Director etc. would also be deemed guilty of such offence.

19. Thus to attract criminal liability against a Director in a Company with reference to Section 141 of Act, 1881, minimum requirement necessary to be stated in the complaint is that the person(s) concerned was/were in-charge of and responsible to the conduct of business of Company. It is a necessary ingredient which would be necessary to proceed against such Director.

20. It is true that a complaint is not to be read as a statute and Court is not expected to find out a particular set language since no particular form is prescribed to attract Section 141 but what I find necessary is that the complaint must show in substance pre-requisites of statute. It must show in substance the requirement of statute and disclose necessary averments that would be sufficient to proceed against a Director.

21. In S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla, 2005(8) SCC 89, Court said:

"(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. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied." (emphasis added)

22. Again in National Small Industries Corp. Ltd. Vs. Harmeet Singh Paintal (supra), Court in para 25 said:

"25 From the above discussion, the following principles emerge :

(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.

(ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.

(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make accused therein vicariously liable for offence committed by company along with averments in the petition containing that accused were in-charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.

(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred.

(v) If accused is Managing Director or Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.

(vi) If accused is a Director or an Officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint.

(vii) 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." (emphasis added)

23. Both these authorities have been followed and reiterated in A.K. Singhania Vs. Gujarat State Fertilizer Company (supra).

24. In Monaben Ketanbhai Shah Vs. State of Gujarat (supra), question of Section 141 was considered in the light of a complaint made against partnership firm. The accused named in complaint were five out of which three were ladies. Magistrate discharged lady accused holding that in complaint there are no allegations making out an offence against them. Sessions Judge, however, took a different view and set aside the order passed by Magistrate. In the order of Sessions Judge also however it was mentioned that, "No doubt, it is not specifically mentioned in the complaint that all the accused were in charge of the business", still Sessions Judge proceeded to reverse the order passed by Magistrate observing that mere non-mention of specific words would not mean that they were not in charge of the business. High Court upheld the order passed by Sessions Judge except of one accused whom High Court found that a student studying at Ahamedabad upto 1998 and thereafter she was married and went to USA. Thus, her case was considered separately and she was discharged. The remaining two sisters then came in appeal. Supreme Court in paragraph 5 of the judgment specifically said, "There are no averments in the complaint that the appellants have taken active interest in the business." In view of aforesaid backdrop and looking to the averments contained in complaint, Supreme Court found that except stating that appellants were partners in form, no assertions were made so as to attract Section 141 and to make all the partners of firm liable for criminal liability. It is in these facts and circumstances, Court allowed appeal and set aside order passed by Sessions Judge and restored order of Magistrate discharging lady partners in firm.

25. In D. B. Mehta and others Vs. State of Uttar Pradesh and another, 2012 (78) ACC 13, a Single Judge of this Court (Hon'ble Ramesh Sinha, J.) found that accused-petitioner had already resigned as Director and this fact was admitted by complainant before Court. This was also admitted by complainant that petitioner in that case had no concern with day-to-day functioning of Company. This is evident from para 7 of judgment, which reads as under -

"7. On the other hand, Sri Vipin Saxena, learned counsel appearing on behalf of the respondent no.2 admitted that the petitioners are not the signatory of the cheque in question and the petitioners have already resigned before the issuance of the cheque in question. Learned counsel further could not dispute the fact that the petitioners had no concern at all with day to day functioning of the Company and only the person who was only responsible to manage the affairs of the Company at the relevant point of time can be at most liable under section 138 of Negotiable Instruments Act read with Section 141 of the Negotiable Instruments Act."

(emphasis added)

26. It is in these facts and circumstances, proceedings initiated against petitioners in that case were quashed.

27. In Smt. Katta Sujatha Vs. Fertilizers and Chemicals Travancore Ltd. and another 2003(1) AWC 612 (SC) also Court held as a matter of fact that in complaint it was not stated that appellant Smt. Katta Sujatha was incharge of business and is responsible for the conduct of business of firm. The relevant observations in para 4 of judgment reads as under -

"However, one thing is clear that the appellant was in no way involved in any of the transactions referred to in the complaint and it was not stated that she was in charge of the business and was responsible for the conduct of the business of the firm in terms of Section 141 of the Act nor was there any other allegation made against the appellant that she had connived with any other partner in the matter of issue of cheque." (emphasis added)

28. It is in these circumstances and exposition of law as discussed above, I proceed to examine the complaint, whether it contains relevant averments so as to attract criminal liability of petitioner in the case in hand.

29. In complaint, petitioner is accused no.3. Para 1 of complaint states as under -

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"(1) That you accused persons in collusion with one another in a planned manner, registered a company in the name of Agrarians Agro Fields Limited, accused no 1, in which you Trilok Chandra Sharma, accused no 2, are the Chairman cum Managing Director and OP Nos. 3 to 5 are the directors of the Company, OP No. 1. OP Nos. 2 to 5 are running the company and contribute in its operations and entire proceedings in a regular manner. For all the works undertaken, all the accused persons are liable severally and jointly." (emphasis added)

(English translation by the Court)

30. The role assigned to petitioner is also referred to in para 4 and 5 of complaint. Clear and specific averments thus have been made in respect of petitioner also that she alongwith other Directors was responsible for conducting business of Company and participating regularly in all business and functions of Company.

31. To my mind at the stage of issue summons after registering a complaint and recording statement under Section 200 Cr.P.C., requirement of statute for the purpose of issue of summons against all Directors stood satisfied. The further fact whether any of accused-Director was not holding office at the time of commission of offence or had already resigned is a matter to be examined when defence in this regard comes before Court and evidence adduced. It is not a case where factum that petitioner resigned from office of Director of Company is admitted by complainant as was the case before this Court in D.B.Mehta (supra). Therefore, the aforesaid judgment in D.B. Mehta (supra) has no application to the facts of this case. Other judgments make it very clear that if averments are made in complaint so as to attract liability of Directors of Company and if complaint satisfy requirement of Section 141, then order of Magistrate issuing summons cannot be faulted for any other reason or facts which are in the nature of defence, i.e., one or more Directors have resigned or were not having any knowledge etc.

32. The petitioner has also relied on a recent judgment in M/s Aparna A. Shah Vs. M/s Sheth Developers (supra). That was a case where some money was obtained by M/s Aparna A. Shah and her husband from M/s Sheth Developers Pvt. Ltd. through a cheque which was deposited in a joint account of husband and wife. Subsequently to discharge financial liability repayment was sought to be made through a cheque issued by husband only and when Company deposited said cheque, it was dishonoured. Hence it was not a case where offence was committed by Company so as to attract Section 141. An attempt was made to extend scope of criminal liability by reading "vicarious liability" but this was negatived by Court observing that only to the extent it is permissible by Section 141 matter can be seen and nothing more can be read in a penal statue. Para 13 of judgment making such observation, reads as under -

"13. In the case on hand, we are concerned with criminal liability on account of dishonour of a cheque. It primarily falls on the drawer, if it is a Company, then Drawer Company and is extended to the officers of the company. The normal rule in the cases involving criminal liability is against vicarious liability. To put it clear, no one is to be held criminally liable for an act of another. This normal rule is, however, subject to exception on account of specific provision being made in statutes extending liability to others. For example, Section 141 of the N.I. Act is an instance of specific provision that in case an offence under Section 138 is committed by a company, the criminal liability for dishonour of a cheque will extend to the officers of the company. As a matter of fact, Section 141 contains conditions which have to be satisfied before the liability can be extended. Inasmuch as the provision creates a criminal liability, the conditions have to be strictly complied with. In other words, the persons who had nothing to do with the matter, need not be roped in. A company being a juristic person, all its deeds and functions are the result of acts of others. Therefore, the officers of the company, who are responsible for the acts done in the name of the company, are sought to be made personally liable for the acts which result in criminal action being taken against the company. In other words, it makes every person who, at the time the offence was committed, was in-charge of, and was responsible to the company for the conduct of business of the company, as well as the company, liable for the offence. It is true that the proviso to sub- section enables certain persons to prove that the offence was committed without their knowledge or that they had exercised all due diligence to prevent commission of the offence. The liability under Section 141 of the N.I. Act is sought to be fastened vicariously on a person connected with the company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability."

33. In M/s Aparna A. Shah Vs. M/s Sheth Developers (supra), on behalf of Company it was attempted to argue that she had knowledge of entire transactions, therefore, responsible alongwith husband even though cheque was issued only by husband but Court found no justification to proceed against wife by bringing in Section 141, which was applicable only to a case where offence is committed by Company and not individual. This is also evident from para 15 of judgment where Court has noticed submissions advanced on behalf of complainant M/s Sheth Developers Pvt. Ltd.-respondent no.1 before Supreme Court and findings recorded by Court in this regard. Para 15 of judgment reads as under:

"15. Mr. Mukul Rohtagi, learned senior counsel for respondent No.1, by drawing our attention to the definition of "person" in Section 3(42) of the General Clauses Act, 1897 submitted that in view of various circumstances mentioned, the appellant herein being wife, is liable for criminal prosecution. He also submitted that in view of the explanation in Section 141(2) of the N.I. Act, the appellant wife is being prosecuted as an association of individual. In our view, all the above contentions are unacceptable since it was never the case of respondent No.1 in the complaint filed before learned Magistrate that the appellant wife is being prosecuted as an association of individuals and, therefore, on this ground alone, the above submission is liable to be rejected. Since, this expression has not been defined, the same has to be interpreted ejusdem generis having regard to the purpose of the principle of vicarious liability incorporated in Section 141. The terms "complaint", "persons" "association of persons" "company" and "directors" have been explained by this Court in Raghu Lakshminarayanan vs. Fine Tubes, (2007) 5 SCC 103."

(emphasis added)

34. Therefore, in the present case, pleadings in complaint and allegations contained therein clearly attracts criminal liability of petitioner as one of the Director of Company justifying summons issued by Magistrate. Further defence taken by petitioner that she had already resigned from the post of Director, is a seriously disputed a question of fact and, therefore, can be examined by Magistrate concerned after petitioner put in appearance and place her defence alongwith evidence. It is not to be examined at this stage.

35. In the facts and circumstances, I am clearly of the view that orders impugned in this writ petition cannot be said to be faulty in any manner and no interference is called for.

36. The writ petition lacks merit. Dismissed.

37. Interim order, if any, stands vacated.

Order Date :- 27.11.2015

RKM/AK