Advocate For vs Unknown
2013 Latest Caselaw 171 Bom

                                               1                 APPLICATION NO.4003.2013.odt


            IN THE HIGH COURT OF JUDICATURE OF BOMBAY
                             BENCH AT AURANGABAD




                                                                            
                 CRIMINAL APPLICATION NO. 4003 OF 2013




                                                    
                             MALA UMESH MEHTA 
                                    VERSUS
                    AVR LOGISTIC PVT. LTD. AND OTHERS 




                                                   
                                        ...
                   Advocate for Applicant : Mr. P.K. Lakhotiya  
                    APP for Respondents : Mr. S.R.Palnitkar
                       Mr. A.S. Gandhi advocate For R/1 




                                      
                                        ...
                       CORAM : ABHAY M. THIPSAY, J.

ig Dated: November 20, 2013 ...

ORAL ORDER :-

1. By consent of the learned counsel for the parties,

heard finally.

2. The applicant is one of the accused - accused No.4 -

in SCC No.232/2012 pending before the Judicial Magistrate First

Class, at Aurangabad. The said case is in respect of an offence

punishable under section 138 of the Negotiable Instruments Act

and arises on a complaint filed by the respondent no.1 herein.

The respondent nos.3,4 and 5 herein are the other accused -

accused nos.1,2 and 3 respectively, in the said SCC No.232/2012.

The applicant is aggrieved by the order issuing process against her

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as passed by the Magistrate and has approached this Court

invoking its inherent powers and praying that the order issuing

process against her be quashed and set aside.

3. I have heard Mr. P.K.Lakhotiya, the learned counsel

for the applicant. I have heard Mr.Amol Gandhi the learned

counsel for the respondent no.1. I have heard Mr.P.N.Muley, the

learned APP for the respondent no.2.

4. It is the contention of the learned counsel for the

applicant, that the applicant, though a director of the accused

company, is only a nominal director and does not participate in

the affairs or business of the accused company. It is submitted

that averments made in the complaint are insufficient for

proceeding against the applicant. Reliance has been placed on

some reported decisions of the Apex Court in support of the

contention that the averments made in the complaint are

insufficient for proceeding against the applicant. Reliance is also

placed on certain documents which are annexed to the petition, to

contradict the version given in the complaint.

5. I have considered the matter.

3 APPLICATION NO.4003.2013.odt

6. It may be appropriate to examine what are the

averments in the complaint against the present applicant. In

paragraph No.1 of the complaint it is averred as follows :-

Accused nos.3 and 4 (applicant) are the directors of the accused no.1 and are actively involved in the day

to day business of the company and are fully aware about the transaction done with the complainant Company.

7. In paragraph No.5 of the complaint it is averred that :-

The complainant says that as the accused nos. 3 and 4 being Director of accused No.1 are actively involved in the business of the company are fully aware about

the transaction done with the complainant company and only on their approval cheque was issued to the complainant and the same was duly signed by accused

no.2.

8. Thus, there are categorical averments to the effect

that the applicant is one of the Directors and is actively involved

in the business of the company and is fully aware of the

transaction between the complainant company and accused

company.

9. The learned counsel for the applicant submitted that

these averments are not sufficient and a complainant must show

how a particular Director is responsible for the alleged offence.

4 APPLICATION NO.4003.2013.odt

He placed reliance on a decision of the Supreme Court of India in

the case of Mrs. Anita Malhotra Vs. Apparel Export Promotion

Council and Another. reported in AIR 2012 Supreme Court 31

to support such a contention. He relied upon the observations

made in paragraph No.15 of the Reported Judgment which were

based on a previous judgment delivered by Their Lordships of the

Supreme Court of India in National Small Industries Corporation

Limited Vs. Harmeet Singh Paintal and another reported in (2010) 3

SCC 330 : (AIR 2010) SC (Supp) 569 : 2010 AIR SCW 1508.

10. I have gone through the decision delivered by the

Supreme Court of India in the aforesaid case of National Small

Industries Corporation (supra). In my opinion, the contention

advanced by the learned counsel for the applicant is not

supported by any of the observations made by Their Lordships in

the case of National Small Industries (cited supra) and/or in the

case of Mrs. Anita Malhotra.

11. In fact, the question of vicarious liability of the

Directors of a company with respect to an offence punishable

under section 138 of the Negotiable Instruments Act was

5 APPLICATION NO.4003.2013.odt

specifically dealt with by the Supreme Court of India in S.M.S.

Pharmaceuticals Limited Vs. Neeta Bhalla and another

reported in 2005 (8) SCC 89). The matter arose from a

reference made by a two Judge Bench of the Supreme Court of

India for determination of the following questions by a Larger

Bench.

"(a) Whether for purposes of Section 141 of the Negotiable Instruments Act, 1881 it is sufficient

if the substance of the allegation read as a whole fulfill the requirements of the said

section and it is not necessary to specifically state in the complaint that the person accused was in charge of, or responsible for, the conduct of the business of the company.

(b) Whether a director of a company would be deemed to be in charge of and responsible to, the company for conduct of the business of the company and, therefore, deemed to be guilty of

the offence unless he proves to the contrary.

(c) Even if it is held that specific averments are necessary, whether in the absence of such

averments the signatory of the cheque and or the managing directors or joint managing director who admittedly would be in charge of the company and responsible to the company for conduct of its business could be proceeded against."

6 APPLICATION NO.4003.2013.odt

The Larger Bench of Three Judges after considering

the matter from all the angles, answered the questions posed as

follows :-

"(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.

(b). The answer to the question posed in sub-para

(b) has to be in the negative. Merely being a

director of a company i snot 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 a joint managing director would be

7 APPLICATION NO.4003.2013.odt

admittedly in charge of the company and responsible to the company for 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."

12. Thus, it is clear that though merely being a director of

a company would not make a person liable for an offence

punishable under Section 138 of the Negotiable Instruments Act

read with Section 141 of the Act and though a director cannot be

deemed to be in charge of, and responsible to the company for the

conduct of its business only because he is a director, when that a

particular director was in charge of and responsible for the conduct

of the business of the company is averred as a fact, he would be

liable to be prosecuted.

13. Clearly, as per the law laid down in the aforesaid

judgment, the (only) requirement to make a director liable for

8 APPLICATION NO.4003.2013.odt

prosecuting/proceeding with respect to the offence punishable

under section 138 of the Negotiable Instruments Act by virtue of

section 141 of the said Act is that, that, such director was in

charge of, and was responsible to the conduct of the business of

the company should be averred as a fact. The question is whether

this proposition can be stretched further to claim 'that precise

duties of the director must be averred in the complaint; and that

without such specific averments about the nature of the duties and

what was the precise act/acts performed by such director towards

the commission of offence, he cannot be made liable for the alleged

offence.'

14. It is not possible to hold that the legal propositions

laid down by the Larger Bench of the Apex Court stand diluted or

modified, or stretched further by the observations made in either

the case of Mrs. Anita Malhotra (supra), or National Small

Industries Corporation Ltd., (supra). A few sentences, out of the

context, cannot be extracted from the reported judgments in these

cases, to claim that for proceeding against the Directors of a

Company not only a specific averment to the effect that they were

9 APPLICATION NO.4003.2013.odt

incharge of, and responsible to the Company for the conduct of its

business should be made, but it should further be stated, as to in

what manner they were responsible, which would necessarily

involve averments about their duties, the specific role played by

them in the alleged offence and as to how they could have

prevented the offence from taking place and how they failed to do

so, etc. In Anita Malhotra's case (supra), based on a certified

copy of the annual return of the accused company, which had

been placed on record, it was claimed that the appellant before the

Supreme Court - Mrs. Anita Malhotra - had ceased to be a

director of the accused company before the offence in question

came to be committed. The High Court had declined to place

reliance on the annual returns of the company on the ground that

it was not a public document. Their Lordships of the Supreme

Court did not agree with it and held that the certified copy of the

annual return of a company would be a public document and as

such, could be looked into at that stage, as laid down in some

other previous decisions of the Supreme Court of India. It is in

the context of the existence of such a document, - which was felt

10 APPLICATION NO.4003.2013.odt

to be beyond suspicion or doubt and which did not show the

appellant before the Supreme Court to be a director of the accused

company at the material time, - that the averments in the

complaint in that case were examined. The observation that 'the

bald assertions against the appellant were not sufficient,' was

made in the context of the prima facie disbelief about her

involvement in the day to day affairs of the company, generated by

the contents of the certified copy of the annual return. These

observations can not be construed so as to mean that even when

there are no documents which could be accepted as beyond

suspicion or doubt and which would exonerate a particular

director, still, the complainant must assert how a particular

director is responsible for the offence, which as aforesaid, would

necessarily involve elaboration of the duties of that director and

the specific act and role played by him in the specific offence. The

'bald assertion' about the involvement of the appellant before the

Court was held to be insufficient to remove the effect of the

contents of the annual return, which indicated the non-

     involvement   of   the   appellant   before   the   Supreme   Court.    As   a 





                                                 11                APPLICATION NO.4003.2013.odt

matter of fact, the observations made in para 15 of the reported

judgment in the said case clearly indicate that even after

considering the contents of the annual returns which exonerated

the appellant, Their Lordships felt the necessity of examining the

averments made in the complaint; and this indicates that had the

role of the appellant in the affairs of the company would have been

specified or elaborated, the things could have been different . That

the lack of a specific assertion was taken as an additional ground

in favour of the appellant before Their Lordships, is clear from

paragraph No.15 of the Reported Judgment.

15. In the case of National Small Industries Corporation

Ltd., (supra) also, the conclusions about the legal position arrived

at are found in para 25 of the reported judgment. The principles

laid down therein state that a director, who is neither the Managing

director nor a Joint Managing director nor a signatory to the cheque

would be liable for the offence committed by the company only if he

would be incharge and responsible to the company for the conduct

of its business at the material time. Their Lordships have made it

a fact ; but Their Lordships clear that this must be averred as

12 APPLICATION NO.4003.2013.odt

have not further stated that there should be any further elaborate

averments giving the details as to how such a director was

incharge of and responsible for the conduct of the business of the

company. To 'aver as a fact', is different from stating the evidence

by which the fact averred is supported.

16. A perusal of decided authorities, in the light of the legal

propositions laid down by Their Lordships in the aforesaid case of

S.M.S. Pharmaceuticals Ltd., (supra), shows that the

observations about the necessity of showing a specific and precise

role performed by a director, showing as to how and in what

manner he was liable, have been made in the context of the facts of

those cases. Where on the face of the documents, which can be

accepted as beyond suspicion or doubt, the very fact that a

particular accused was, at the material time, a director, or an

active director, is open to doubt it would be necessary to examine

the averments in the complaint more closely or minutely. In such

cases something more than a mere assertion - which can be

properly termed as a bald assertion - would be necessary.

However, to deduce a principle that, the assertion that a particular

13 APPLICATION NO.4003.2013.odt

Director was in charge of and responsible to the company for the

conduct of its business (or words conveying the same) can, by itself

never be sufficient for the purpose of proceeding against a Director;

and that there must be some further averments, would be clearly

erroneous.

17. In this case, the learned counsel for the applicants

has placed reliance on two documents, copies of which are

annexed to the application. He placed reliance on a discharge

certificate purportedly issued by the Principal, Juhu Parle

Education Society's Junior College, where the applicant was

supposedly working from the period from 1987 to 1.5.2012.

Apparently, this has been produced to show that the applicant

could not have been an active or whole time director in the

accused company. The other document is a certificate issued by

the accused company itself to the effect that the applicant is only

a nominal director of the accused company without any authority

to act for the company. Both these documents are private

documents.

18. So far as the certificate issued by the accused

14 APPLICATION NO.4003.2013.odt

company is concerned, it would be extremely doubtful, in

principle, whether the same can be taken into consideration at

all, in as much as, it is only a certification by a co-accused about

non involvement of another co-accused. As regards the other

document, it being a private document would need to be proved in

a satisfactory manner and this can be done only if a trial is held.

Thus, on the claim of existence of such documents, is not possible

to hold that the categorical assertion about the applicant being a

Directors, he being actively involved in the business and day to day

activities of the accused company; of fully being aware of the

transaction; and of the cheque in question having been issued also

with the approval of the applicant, etc, is insufficient for proceeding

against the applicant; and that the Court should examine the

complaint further to see whether further details about the role or

duties of the applicant have been mentioned in the complaint.

19. It is not possible to hold that there was no case for

proceeding against the applicant on the basis of the averments in

the complaint. If the averments made in the complaint are taken

at face value, a case for proceeding against the applicant - apart

15 APPLICATION NO.4003.2013.odt

from the other accused - is also made out.

20. No case for quashing the prosecution of the applicant,

by exercising the inherent powers of this Court is made out.

21. The learned counsel for the applicant submitted that

applicant is a woman and would be subjected to considerable

hardship on being required to remain present before the trial

court on all dates of hearing. In my opinion, looking to the nature

of offence, the personal presence of the applicant would not be

necessary before the trial court, and therefore, the applicant can

very well be exempted by the Magistrate from remaining present in

person before him during the course of trial. It would be in the

interest of justice to give appropriate directions in that regard.

22. The application is rejected.

However, it is directed that the learned Magistrate, on

an application made by the applicant for that purpose, shall

exempt her from personal appearance during the trial and shall

permit her to remain present through an advocate, unless her

personal presence would be essential at a particular stage of the

trial, for making further progress therein. This indulgence is

16 APPLICATION NO.4003.2013.odt

shown to the applicant on the understanding that no

adjournment on the ground of her not being present before the

Court in person shall be sought by her, or on her behalf, during

the trial; and that she would not require the evidence to be

recorded in her personal presence, and permit it to be recorded in

the presence of her Advocate.

23. Application is disposed of in the aforesaid terms.

                      ig                                  ( ABHAY M. THIPSAY )
                                                                   JUDGE.
                    
     aaa/-                        .......................