Vallurupalli Raja Sekhar Reddy ... vs The State Of Maharashtra And Anr
2021 Latest Caselaw 14135 Bom

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

              CRIMINAL APPELLATE JURISDICTION

              WRIT PETITION NO. 3710 OF 2018

                      ALONGWITH

              WRIT PETITION NO. 3711 OF 2018



Vallurupalli Raja Sekhar Reddy
& Ors.                                    .....Petitioners
       V/s.
The State of Maharashtra
and anr.                                  .....Respondents


                           *****
Ms. Shilpa Kapil a/w. Chidanand Kapil, Advocate for
       the petitioners.
Mr. A.R. Patil, APP for State-respondent no.1.
Mr. Anand Poojari a/w. Ms. Nikita Pawar and Ms. Jalpa
       Shah i/by. S.I. Joshi & Co., Advocate for
       respondent no.2.


                  Coram : Sandeep K. Shinde, J.
                  Reserved On : 21st September, 2021.
                  Pronounced On : 30th September, 2021.
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JUDGMENT :

1. Rule. By consent of the parties, taken up for

hearing forthwith.

2. Petitioners in these two petitions, fled under

Article 227 of the Constitution of India challenge the

order dated 13th October, 2017 (In Writ Petition No.

3710/2018) and order dated 11th September, 2017 (in

Writ Petition No. 3711/2018) passed in C.C. No.

7854/SS/2016 and C.C. No.9698/SS/2016 respectively

by the Metropolitan Magistrate, Mumbai by which the

petitioners were summoned as accused in the

complaint fled by the respondent no.2 for alleged

offences punishable under Section 138 read with

Section 141 of the Negotiable Instruments Act ("Act"

for short).

3. This Court vide order dated 16th August, 2019

rejected the petition qua petitioners no.1 to 6 and 8.

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4. Insofar as, petitioners no.7, 9 and 10 are

concerned, it was argued that these petitioners being

"Independent Directors" could not have been

prosecuted under Section 138 read with Section 141 of

the Act. On this point, the complainant was directed to

verify the position and submit. Accordingly, the

respondent no.2 fled an Affdavit of one, Snehal Sane

and submitted that petitioners no.7, 9 and 10 are

"Independent Directors" of accused-Company and

therefore the complainant is not desirous of pursuing

the subject complaint fled against them.

5. In the fact situation, it is to be ascertained

whether the complaint against petitioner no.11 a

Company Secretary of the accused Company, were

maintainable or not.

6. Heard Counsel for the parties. Perused the

complaints.

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7. Learned Counsel for the petitioners would

submit that under Section 141 of the Act, when a

cheque issued by a company is dishonoured, in addition

to company, following persons are deemed to be guilty

of the offence and shall be liable to be proceeded against

and punished;

(i)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;

(ii)any Director, manager, secretary or other

offcer of the company with whose consent and

connivance, the offence under Section 138 has

been committed; and

(iii)any Director, manager, secretary or other

offcer of the company whose negligence resulted Rane 5/14 WP-3710-2018 WP-3711-2018

in the offence under Section 138 of the Act, being

committed by the company.

8. It is argued that, a person who is responsible

to the company for the conduct of business of the

company and is in-charge of the business of the

company is vicariously liable by reason only of his

fulflling the requirements of sub-section (1). It is thus

submitted, if the person responsible to the Company

for the conduct of business, was not in charge, of

conduct of the business of the Company, then he can be

made liable under Section 141(2) of the Act, only if the

offence was committed with his consent or connivance

or as a result of negligence. It is argued that, the

complaint, does not aver that either the offence was

committed with consent, knowledge or connivance of

petitioner no.11 nor it is alleged that, offence was result

of negligence on the part of petitioner no.11 nor there is

a specifc averment, that petitioner was in charge of

conduct of business of the company and therefore, Rane 6/14 WP-3710-2018 WP-3711-2018

complaint against petitioner no.11 were

unsustainable.

9. Learned Counsel, in support of her

contentions relied on the judgment of the Hon'ble

Supreme Court in the case of K.K. Ahuja Versus. V.K.

Vora & Another, reported in (2009) 10 Supreme Court

Cases 48 wherein position under Section 141 of the Act

has been 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 suffcient, if averment is made that accused

was the Managing Director or Joint Managing

Director at the relevant time;

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(ii) in the case of Director or an offcer of the

company, who signed the cheque on behalf of the

company, there is no need to make a specifc

averment that, he was in charge of and was

responsible to the company, for the conduct of

the business of the company. 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 case of a Director, Secretary or Manager

[as defned in Section 2(24) 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 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 Rane 8/14 WP-3710-2018 WP-3711-2018

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 offcers of a company cannot be made

liable under sub-section (1) of Section 141.

Other offcers 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.

10. In this case, petitioner no.11 is a Company

Secretary. Therefore, he is a person, responsible to the

company for the conduct of the business, of the

company within the meaning of Companies Act, 1956.

To ascertain factual position, whether petitioner no.11,

being Company Secretary was 'in charge' of and was Rane 9/14 WP-3710-2018 WP-3711-2018

responsible to the company for conduct of business, let

me read and reproduce relevant averments made in

the complaint.

11. The averments in paragraphs no. 2, 3 and 5

of the complaint are :

"2. The Complainant states that Accused no.1 is a Limited Company is in the business of Infrastructure. Accused no.2 to 12 are the Directors and CFO and Accused No.13 is Company Secretary of Accused No.1. The

are looking after and responsible for the day to day affairs, conduct and management of business of Accused No.1. (emphasized)

"3. The Complainant states that Accused No.1, through Accused No.9 being Authorised Signatory entered into Facility Agreement dt.28-Mar-2010 with L&T Infrastructure Finance Co. Ltd. For sum of Rs.100 Crores [hereinafter referred to as the 'said agreement']. Under the said Rane 10/14 WP-3710-2018 WP-3711-2018

Facility Agreement L & T Infrastructure Finance Co. Ltd. sanctioned a Finance Facility of Rs.100 Crores to Accused No.1 and have disbursed a sum of Rs.100 Crores. The Complainant craves leave to refer to and rely upon the said Facility agreement, as and when produced before this Hon'ble Court."

"5. The Complainant states that vide Assignment Agreement dt.31-July-2013 by and between L&T Infrastructure Finance Co. Ltd. and the Complainant; L&T Infrastructure Finance Co.Ltd., being Assignor, has assigned the Loan of Rs.68,97,39,582/- (out of Loan of Rs.100 Crores) to the Complainant being Assignee. The Complainant further states that vide letter dt.01-Aug-2013, the Complainant informs to Accused No.1 regarding execution of the Assignment Agreement and Accused No.9 being Authorised Signatory of Accused No.1 and with the

and 10 to 13 has acknowledged the same.

The Complainant further states that there Rane 11/14 WP-3710-2018 WP-3711-2018

was no dispute about the repayment terms and conditions of the Assignment Agreement entered into between Complainant and L&T Infrastructure Finance Co.Ltd." (emphasized)

12. Thus, the averments are not to the effect that

petitioner no.11 was 'in charge' of, but to the effect that,

he was looking after and responsible for the day-to-day

affairs, conduct and management of accused no.1-

Company. Expression 'in charge' and 'looking after' the

affairs, conduct of respondent company, are distinct.

Section 141 uses the words "was in-charge of, and was

responsible to the company for the conduct of the

business of the company". In the case of K.K. Ahuja

(supra), the Apex Court has held that the, person who

can be made vicariously liable under sub-section (1) of

Section 141 is a person who is responsible to the

company for the conduct of the business of the

company, and in addition, is also in-charge of the

business of the company (emphasized). However, the Rane 12/14 WP-3710-2018 WP-3711-2018

averments in the complaint are only to say that,

petitioner no.11 (accused no.13) was looking after and

responsible for the day-to-day affairs, conduct and

management of the accused-company with accused

nos.2 to 12.

13. In K.K. Ahuja (supra), the Apex Court in

para-23 has observed as under :

"Therefore, if a person does not meet the frst requirement, that is being a person who is responsible to the company for the conduct of the business of the company, neither the question of his meeting the second requirement (being a person in charge of the business of the company), nor the question of such person being liable under sub- section (1) of section 141 arises. To put it differently, to be vicariously liable under sub- section (1) of Section 141, a person should fulfll the 'legal requirement' of being a person in law (under the statute overning companies) responsible to the company for the conduct of the business of the company and also fulfll the 'factual requirement' of Rane 13/14 WP-3710-2018 WP-3711-2018

being a person in charge of the business of the company."

14. Therefore, in my view, in absence of

averments in the complaint, that petitioner no.1 is also

"in charge" of the business of the company, the case

could not fall under Section 141(1) of the Act. This

takes me to fnd out whether, petitioner no.11 being

Offcer of the Company could be made liable under sub-

section 2 of Section 141. When verifed, the averments

in the complaint, as reproduced hereinabove, are

vague and general in nature and do not particularize

the role of the petitioner in regard to facility agreement

dated 28th March, 2010 executed by the Company with

the complainant; nor the complaint discloses that the

alleged offence was committed by the Company in

connivance or was a result of the negligence of the

petitioner no.11. As a consequence, petitioner cannot

be made liable under sub-section (2) of Section 141 of

the Act.

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15. Thus for the foregoing reasons, the petitions

succeed. Consequently, Criminal Case No.7854/SS/2016

and Criminal Case No.9698/SS/2016 pending on the fle

of Metropolitan Magistrate, 33rd Court, Ballard Pier,

Mumbai are quashed qua petitioner no.11-accused

no.13 in the complaints.

16. Rule is made absolute in the aforesaid terms.

Petitions are allowed and disposed off.

NEETA SHAILESH SAWANT Digitally signed by NEETA SHAILESH SAWANT (Sandeep K. Shinde, J.) Date: 2021.09.30 17:39:20 +0530