Calcutta High Court (Appellete Side)
Mr.Vivek Bhaskaran vs State Of West Bengal & Anr on 18 February, 2022
IN THE HIGH COURT AT CALCUTTA
CRIMINAL REVISIONAL JURISDICTION
APPELLATE SIDE
PRESENT:
THE HON'BLE JUSTICE TIRTHANKAR GHOSH
CRR 3525 of 2019
With
CRAN 2 of 2020 (Old No. CRAN 488 of 2020)
Mr.Vivek Bhaskaran
-vs.-
State of West Bengal & Anr.
For the petitioner : Mr. Abhirup Chakraborty.
For the Opposite Party no. 2 : Mr. Ayan Bhattacherjee,
Mr. Karan Dudhwewala,
Mr. Anil Choudhury.
Heard on : 24.08.2021, 17.01.2022, 27.01.2022 &
03.02.2022
Judgment on : 18.02.2022
Tirthankar Ghosh, J:-
The present revisional application has been preferred by the petitioner
challenging the proceedings being Case No. CS-27458 of 2017 under Sections
138/141 of the Negotiable Instruments Act, 1881, pending before the learned
Metropolitan Magistrate, 15th Court, Calcutta.
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The allegations made in the petition of complaint as made by the
complainant are as follows:-
a) M/s. Vision Financial Services Ltd. (hereinafter referred to as the
complainant company) has its registered office at 53-B, Mirza
Ghalib Street, 4th Floor, Kolkata-700016 and is represented by its
authorized representative Mr. Pradip Bhattacharjee.
b) The accused No. 1, M/s. Otto Projects Pvt. Ltd. is a company
having its registered office at 4, Bishop Lefroy Road, Flat No. 4,
Calcutta Mansion, Kolkata-700020 and the accused No. 2 to 5 are
the Directors, accused No. 6 is the Managing Director and accused
No. 7 is whole-time Director of accused No. 1 company, they are
responsible for the day to day affairs of the company that is the
accused No. 1.
c) The accused persons in order to liquidate their liabilities towards
the complainant issued two cheques in favour of the complainant
company aggregating to a sum of Rs. 11,48,500/- (Rupees Eleven
Lakh Forty Eight Thousand and Five Hundred only). The said
cheques were presented for encashment with the complainant's
bankers but the same were dishonoured and after complying with
all the formalities the complainant company filed a complaint case
under Section 200 of the Code of Criminal Procedure for offences
under Section 138/141 of the Negotiable Instruments Act being
Case No. CS/54933/2016 before the Learned Chief Metropolitan
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Magistrate, Calcutta. The Learned Metropolitan Magistrate was
pleased to take cognizance of the offences and transferred the case
to the Learned Metropolitan Magistrate, 15th Court, Calcutta, for
enquiry, trial and disposal of the same. In course of the
proceeding, the accused persons appeared before the learned
Court and were represented under Sections 205 and 305 of the
Code of Criminal Procedure respectively. On 28.10.2016 a terms of
settlement was filed in the complaint case along with a petition
under Section 257 of the Code of Criminal Procedure by the
complainant for withdrawal of the complaint. That in terms of said
settlement the accused persons issued several cheques and pay
order for repayment of their legal debts and existing liabilities. To
that effect the complainant has enclosed the Photostat copies of
the terms of settlement along with the Court's order dated
28.10.2016. The accused persons issued cheque No. 667027 dated
30.11.2016 amounting to Rs. 2,11,500/- (Rupees Two Lakh Eleven
Thousand Five Hundred only) drawn on Syndicate Bank, Kolkata
as part of the said settlement.
d) The complainant presented the said cheque with its bankers
namely, ICICI Bank, Chowringhee Road Branch, P.S.- Shakespeare
Sarani, Kolkata-700016 on 30.11.2016 for encashment within its
validity period but the same was dishonoured by the bankers of
the accused persons with an endorsement "Funds Insufficient".
4
The said information of dishonour was received by the complainant
on 02.12.2016 and pursuant to the request made by the accused
persons the complainant again presented the cheque on
31.01.2017 for encashment and the cheque was again
dishonoured with the same endorsement. The complainant
company lastly on 20.02.2017 presented the cheque with its
banker on the verbal assurance of the accused persons but the
same was again dishonoured with the same endorsement of 'Funds
Insufficient'. The complainant company through its advocate
issued a demand notice dated 20th March, 2017, thereby
demanding the amount covered by the dishonoured cheque i.e.
Rs.2,11,500/- (Rupees Two Lakh Eleven Thousand and Five
Hundred only) within 15 days from the date of receipt of the notice.
The said notice was received by the accused no.2 on 23rd March,
2017 and by all the accused persons on 21st March, 2017. It has
been alleged that in spite of receipt of demand notice the accused
persons did not pay any amount towards the dishonoured cheque,
as such according to the complainant company the accused
persons have committed offences punishable under Section 138 of
the Negotiable Instruments Act read with Section 141 of the
Negotiable Instruments Act.
Records reflect that the learned Magistrate was pleased to take
cognizance of the offence on 05.05.2017 and transferred the case to the learned
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Metropolitan Magistrate, 15th Court, Calcutta for enquiry and disposal
according to law. On 02.08.2017 the learned Magistrate after perusing the
affidavit under Section 145 of the Negotiable Instruments Act along with the
original documents and other papers was pleased to issue summons against
the accused persons fixing 06.09.2017 for service return and appearance. The
order dated 06.09.2017 reflects that some of the accused persons physically
appeared and they were granted bail. The present petitioner (being the accused
no.4 as per complaint) filed an application before the learned Magistrate for
discharging him from the case. The main thrust of contention of the present
petitioner is that since he has resigned from the company he cannot be made
liable for the dishonoured cheque. Learned Magistrate after considering the
materials appearing against him refused to discharge him and dismiss the
petition which was filed on 06.09.2017.
Mr. Abhirup Chakraborty, learned advocate appearing for the petitioner
submits that the petitioner is not a signatory to the subject cheque dated
30.11.2016. Learned Advocate further submits that the averments in the
petition of complaint would reflect that the signatory to the cheque happens to
be accused No. 2 (Muzaffar Shah) and not the petitioner. There is no specific
allegation and averment in the petition of complaint i.e. how and in what
manner the petitioner was in-charge of the company and/or was involved in
the day to day affairs of the company during commission of the alleged offences
by the company. It is emphasised that the petitioner was a director of the
accused/company till 29th September, 2015, the petitioner submitted his
6
resignation from the Board of Directors by letter dated 29th September, 2015
and on 30th September, 2016 the company accepted the resignation of the
petitioner with effect from 29th September, 2015 (attention has been drawn to
pages 32 and 33 of the revisional application) for comparing name of the
petitioner being deleted from the list of Directors. The petitioner has also drawn
the attention of this Court to the certified true copies of statutory form No.11
and 12 which was obtained from the Office of the Registrar of Companies
which would reflect that the resignation of the petitioner was available in the
public domain. Additionally, it has been submitted that the petitioner cannot
be made vicariously liable by invoking the provisions of Section 141 of the
Negotiable Instruments Act which makes a director liable and as the petitioner
was never director of the company at the relevant period of time, he cannot be
made liable as the cause of action of the instant case arose after 20th February,
2017. In order to substantiate his arguments following authorities have been
relied upon by the Rajasekar -Vs.- U.M.S. Radio Factory Limited, (2011) 1
MWN (Cri) DCC 36; Harshendra Kumar D. -Vs.- Rebatilata Koley & Ors.,
(2011)3 SCC 351; K. Srikanth Singh -Vs.- North East Securities Ltd. & Anr.,
(2007)12 SCC 788; Ashoke Mal Bafna -Vs.- Upper India Steel Manufacturing
and Engineering Company Limited, (2018) 14 SCC 202; Anil Khadkiwala -Vs.-
State (Government of NCT of Delhi) & Anr., (2019) 17 SCC 294; Saroj Kumar
Poddar -Vs.- State (NCT of Delhi) & Anr., (2007) 3 SCC 693; DCM Financial
Services Limited -Vs.- J.N. Sareen & Anr., (2008) 8 SCC 1.
7
Mr. Ayan Bhattacherjee, learned Advocate appearing for the
complainant/opposite party refuted the contentions advanced by the learned
Advocate for the petitioner and submitted that it has been categorically averred
in the petition of complain that prior to the initiation of the present complaint
case the accused persons in order to liquidate their part liabilities towards the
complainant issued two cheques aggregating to Rs. 11,48,500/-(Rupees Eleven
Lakh Forty Eight Thousand and Five Hundred only). The present petitioner
(Accused No.4 in the petition of complaint) was the signatory to the said two
cheques. The present complainant initiated a complaint case being C.S. Case
No. 54933/2016 under Sections 138/141 of the Negotiable Instruments Act for
dishonour of the said two cheques before the Learned Chief Metropolitan
Magistrate, Calcutta against the petitioner and other accused persons.
Subsequently, a term of settlement was executed by and between the parties
wherein it was agreed that the complainant/opposite party No.2 would
withdraw the complaint case against the petitioner and other accused persons
and in return the petitioner and other accused persons would issue cheque for
liquidating their liabilities towards the complainant company. It has been
emphasised that the present petitioner had duly signed the said terms of
settlement and the seal of the accused/company would ratify the signature of
the petitioner. When the present cheque which was issued was presented for
encashment within its validity period, and the same was dishonoured with
endorsement "Funds Insufficient", the case being CS-27458/2017 was filed
under Sections 138/141 of the Negotiable Instruments Act. Learned Advocate
8
relied upon Lalit Kumar Sharma & Anr. -Vs.- State of Uttar Pradesh & Anr.,
(2008) 5 SCC 638; NEPC MICON Ltd. & Ors -Vs.- Magma Leasing Ltd., (1999) 4
SCC 253; K.K. Ahuja -Vs.- V.K. Vora & Anr., (2009) 10 SCC 48.
In this case the petitioner has relied upon authorities to stress on the
issue that if the person has resigned as director he/she cannot be construed to
come within the meaning of Section 141 of the Negotiable Instruments Act.
Learned advocate for the petitioner relied upon the following paragraphs
of Rajasekar -Vs.- U.M.S. Radio Factory Limited (supra):
"11. Therefore, 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. The above provision makes
it clear that the persons who are sought to be made vicariously liable
for Criminal offence should be 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.
13. It is well settled that the liability of a Director of a Company
arises when he is in-charge of and responsible for the conduct of the
business of the Company at the relevant time when the offence was
committed and not on the basis of merely holding a designation or office
in a Company. Section 141 of the Act provides for a constructive
liability. Therefore, it requires strict compliance of the provision. In the
matters of post dated cheques which were presented on later dates, the
relevant time, of the Commission of the offence is very important. For
constituting an offence under Section 138 of the Act, the following
ingredients are to be satisfied:
9
(a) a cheque must be drawn;
(b) it must be presented and returned un-paid with a remark
"insufficient fund";
(c) a notice for payment shall be served on the Accused;
(d) the Accused has failed to make the payment of the said amount to
the payee within 15 days from the date of receipt of notice.
15. Therefore, in the case of post dated cheques, the relevant time
of commission of an offence is the date of presentation and dishonour of
the cheque. Any person in-charge of and responsible for the conduct of
the business of the Company at this point of time alone are vicariously
liable and the person who had resigned from the Directorship of the
Company cannot be held responsible unless specific allegations are
made that the said person was incharge of and responsible for the
conduct of the business of the company even after resignation. In DCM
Financial Services Limited v. J.S. Sareen, 2008 (2) MWN (Cr.) DCC 1
(SC) : 2008 (3) SCC (Crl) 401 in a similar situation, it is held "he had no
say in the matter seeing that the cheque is honoured he could not ask
the company to pay the amount". It is also pertinent to note that the
Petitioner was not the signatory of the cheques. Therefore, I am of the
considered view that the Petitioner cannot be held liable for the
dishonour of the cheque."
Reliance was also placed by the petitioner in respect of the following
paragraphs in Harshendra Kumar D. -Vs. - Rebatilata Koley (supra):
"17. In this view of the matter, in our opinion, it must be held that a
Director, whose resignation has been accepted by the company and
that has been duly notified to the Registrar of Companies, cannot be
made accountable and fastened with liability for anything done by the
company after the acceptance of his resignation. The words "every
person who, at the time the offence was committed", occurring in
10
Section 141(1) of the NI Act are not without significance and these
words indicate that criminal liability of a Director must be determined
on the date the offence is alleged to have been committed.
18. On 2-3-2004, the appellant sent a letter of resignation to the
Managing Director of the Company, the relevant part of which reads as
follows:
"Subject: Resignation from the post of Director.
With reference to the above subject I hereby resign to the post of
Director in your company (sic) immediate effect as I am preoccupied
with my other business activities and unable to concentrate, participate
in the affairs of the company.
Therefore it is kind request with you to accept my resignation and
intimate the ROC by filing necessary applications to comply with the
legal formality."
19. The Board of Directors held the meeting on 2-3-2004 and accepted
the appellant's resignation on that day itself. The extract of resolution to
that effect reads as follows:
"Mr Harshendra Kumar D., s/o Rathnavarma Hegde residing at No. 55,
Vittal Mallya Road, Bangalore, due to his personal inconivenceses (sic)
he requested to accept his resignation for the Director, and the Board
accepted the resignation and it will be effected immediately on the date
of resignation."
20. On 4-3-2004, the Company informed the Registrar of Companies in
the prescribed form (Form 32) about the resignation of the appellant
from the post of Director of the Company and, thus, the change among
Directors.
26. Criminal prosecution is a serious matter; it affects the liberty of a
person. No greater damage can be done to the reputation of a person
than dragging him in a criminal case. In our opinion, the High Court fell
into grave error in not taking into consideration the uncontroverted
11
documents relating to the appellant's resignation from the post of
Director of the Company. Had these documents been considered by the
High Court, it would have been apparent that the appellant has
resigned much before the cheques were issued by the Company.
27. As noticed above, the appellant resigned from the post of Director
on 2-3-2004. The dishonoured cheques were issued by the Company on
30-4-2004 i.e. much after the appellant had resigned from the post of
Director of the Company. The acceptance of the appellant's resignation
is duly reflected in the Resolution dated 2-3-2004. Then in the
prescribed form (Form 32), the Company informed to the Registrar of
Companies on 4-3-2004 about the appellant's resignation. It is not even
the case of the complainants that the dishonoured cheques were issued
by the appellant. These facts leave no manner of doubt that on the date
the offence was committed by the Company, the appellant was not the
Director; he had nothing to do with the affairs of the Company. In this
view of the matter, if the criminal complaints are allowed to proceed
against the appellant, it would result in gross injustice to the appellant
and tantamount to an abuse of process of the court."
In case of K. Srikanth Singh v. North East Securities Ltd., (supra)
emphasis was made on the following paragraphs by the petitioners:
"4. It is not in dispute that for showing a vicarious liability of a Director
of a company upon the complaint it is incumbent to plead that the
accused was responsible to the company for the conduct of the
business of the company. No such allegation having been made in the
complaint petition, in our opinion, the High Court was not correct in
passing the impugned judgment. The allegation contained in the
complaint petition was that all the accused Directors participated in the
negotiations for obtaining financial help for Accused 1, which in our
opinion, would not give rise to an inference that the appellant was
12
responsible for day-to-day affairs of the company. An offence envisaged
under Section 138 of the Negotiable Instruments Act contains several
ingredients as has been held by a three-Judge Bench of this Court
in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla [(2005) 8 SCC 89 :
2005 SCC (Cri) 1975] in the following terms: (SCC pp. 98-99, para 10)
"10. ... What is required is that the persons who are sought to be made
criminally liable under Section 141 should be, at the time the offence
was committed, in charge of and responsible to the company for the
conduct of the business of the company. Every person connected with
the company shall not fall within the ambit of the provision. It is only
those persons who were in charge of and responsible for the conduct of
business of the company at the time of commission of an offence, who
will be liable for criminal action. It follows from this that if a director of
a company who was not in charge of and was not responsible for the
conduct of the business of the company at the relevant time, will not be
liable under the provision. The liability arises from being in charge of
and responsible for the conduct of business of the company at the
relevant time when the offence was committed and not on the basis of
merely holding a designation or office in a company. Conversely, a
person not holding any office or designation in a company may be liable
if he satisfies the main requirement of being in charge of and
responsible for the conduct of business of a company at the relevant
time. Liability depends on the role one plays in the affairs of a company
and not on designation or status. If being a director or manager or
secretary was enough to cast criminal liability, the section would have
said so. Instead of 'every person' the section would have said 'every
director, manager or secretary in a company is liable' ..., etc. The
legislature is aware that it is a case of criminal liability which means
serious consequences so far as the person sought to be made liable is
concerned. Therefore, only persons who can be said to be connected
13
with the commission of a crime at the relevant time have been subjected
to action."
5. Negotiation for obtaining financial assistance on behalf of the
company by its Directors itself is not an ingredient for the purpose of
constituting an offence under Section 138 of the Negotiable Instruments
Act. Furthermore, a vicarious liability on the part of a person must be
pleaded and proved. It cannot be a subject-matter of mere inference."
In Ashoke Mal Bafna -Vs.- Upper India Steel Mfg. & Engg. Co. Ltd.,
(supra) the attention of the Court was drawn to the following paragraphs:
"7. In Girdhari Lal Gupta v. D.H. Mehta [Girdhari Lal Gupta v. D.H.
Mehta, (1971) 3 SCC 189 : 1971 SCC (Cri) 279] , this Court observed
that a person "in charge of a business" means that the person should
be in overall control of the day-to-day business of the Company.
9. To fasten vicarious liability under Section 141 of the Act on a
person, the law is well settled by this Court in a catena of cases that
the complainant should specifically show as to how and in what
manner the accused was responsible. Simply because a person is a
Director of a defaulter Company, does not make him liable under the
Act. Time and again, it has been asserted by this Court that only the
person who was at the helm of affairs of the Company and in charge of
and responsible for the conduct of the business at the time of
commission of an offence will be liable for criminal action. (See Pooja
Ravinder Devidasani v. State of Maharashtra [Pooja Ravinder
Devidasani v. State of Maharashtra, (2014) 16 SCC 1 : (2015) 3 SCC
(Civ) 384 : (2015) 3 SCC (Cri) 378 : AIR 2015 SC 675] .)"
14
In Anil Khadkiwala -Vs. - State (NCT of Delhi), (supra) petitioner referred
to the following paragraphs:
"7. The complaint filed by Respondent 2 alleges issuance of the
cheques by the appellant as Director on 15-2-2001 and 28-2-2001. The
appellant in his reply dated 31-8-2001, to the statutory notice, had
denied answerability in view of his resignation on 20-1-2001. This fact
does not find mention in the complaint. There is no allegation in the
complaint that the cheques were post-dated. Even otherwise, the
appellant had taken a specific objection in his earlier application under
Section 482 CrPC that he had resigned from the Company on 20-1-2001
and which had been accepted. From the tenor of the order of the High
Court on the earlier occasion it does not appear that Form 32 issued by
the Registrar of Companies was brought on record in support of the
resignation. The High Court dismissed the quashing application without
considering the contention of the appellant that he had resigned from
the post of the Director of the Company prior to the issuance of the
cheques and the effect thereof in the facts and circumstances of the
case. The High Court in the fresh application under Section 482 CrPC
initially was therefore satisfied to issue notice in the matter after
noticing the Form 32 certificate. Naturally there was a difference
between the earlier application and the subsequent one, inasmuch as
the statutory Form 32 did not fall for consideration by the Court earlier.
The factum of resignation is not in dispute between the parties. The
subsequent application, strictly speaking, therefore cannot be said to a
repeat application squarely on the same facts and circumstances.
9. In Harshendra Kumar D. v. Rebatilata Koley [Harshendra Kumar
D. v. Rebatilata Koley, (2011) 3 SCC 351 : (2011) 1 SCC (Civ) 717 :
(2011) 1 SCC (Cri) 1139 : 2011 Cri LJ 1626] , this Court held : (SCC p.
362, paras 26-27)
"26. Criminal prosecution is a serious matter; it affects the liberty of a
person. No greater damage can be done to the reputation of a person
than dragging him in a criminal case. In our opinion, the High Court fell
into grave error in not taking into consideration the uncontroverted
documents relating to the appellant's resignation from the post of
Director of the Company. Had these documents been considered by the
High Court, it would have been apparent that the appellant has
resigned much before the cheques were issued by the Company.
27. As noticed above, the appellant resigned from the post of Director
on 2-3-2004. The dishonoured cheques were issued by the Company on
30-4-2004 i.e. much after the appellant had resigned from the post of
Director of the Company. The acceptance of the appellant's resignation
is duly reflected in the Resolution dated 2-3-2004. Then in the
prescribed form (Form 32), the Company informed to the Registrar of
Companies on 4-3-2004 about the appellant's resignation. It is not even
the case of the complainants that the dishonoured cheques were issued
by the appellant. These facts leave no manner of doubt that on the date
the offence was committed by the Company, the appellant was not the
Director; he had nothing to do with the affairs of the Company. In this
view of the matter, if the criminal complaints are allowed to proceed
against the appellant, it would result in gross injustice to the appellant
and tantamount to an abuse of process of the court."
In Saroj Kumar Poddar -Vs. - State (NCT of Delhi) (supra) petitioner
stressed on the following paragraph:
"14. Apart from the Company and the appellant, as noticed
hereinbefore, the Managing Director and all other Directors were also
made accused. The appellant did not issue any cheque. He, as noticed
hereinbefore, had resigned from the directorship of the Company. It
may be true that as to exactly on what date the said resignation was
accepted by the Company is not known, but, even otherwise, there is no
averment in the complaint petitions as to how and in what manner the
appellant was responsible for the conduct of the business of the
Company or otherwise responsible to it in regard to its functioning. He
had not issued any cheque. How he is responsible for dishonour of the
cheque has not been stated. The allegations made in para 3, thus, in
our opinion do not satisfy the requirements of Section 141 of the Act."
Attention of the Court was also drawn to the following paragraphs of DCM
Financial Services Ltd. -Vs. - J.N. Sareen, (supra):
"14. The complaint petition did not disclose as to who had signed the
cheque on behalf of the Company. Involvement of the first respondent in
commission of the offence as signatory was neither averred nor stated
by the authorised representative of the complainant. Even the complaint
petition proceeded on the basis that the averments contained in the
complaint petition were sufficient to enable the learned Magistrate to
summon the accused. Even before the High Court such a contention has
not been raised, as noticed hereinbefore. We may notice the concession
made by Mr Patwalia in this behalf that such a contention has been
raised before us for the first time. This itself indicates the manner in
which the complaint proceeded. Fairness on the part of the complainant
is also expected in such a matter. It is now not in dispute that the first
respondent had intimated the complainant as regards his resignation
from the Company.
21. The cheque in question was admittedly a post-dated one. It was
signed on 3-4-1995. It was presented only sometime in June 1998. In
the meantime the first respondent had resigned from the directorship of
the Company. The complaint petition was filed on or about 20-8-1998.
Intimation about his resignation was given to the complainant in writing
by the first respondent on several occasions. The appellant was,
therefore, aware thereof. Despite having the knowledge, the first
respondent was impleaded as one of the accused in the complaint as a
Director in charge of the affairs of the Company on the date of
commission of the offence, which he was not. If he was proceeded
against as a signatory to the cheques, it should have been disclosed
before the learned Judge as also the High Court so as to enable him to
apply his mind in that behalf. It was not done. Although, therefore, it
may be that as an authorised signatory he will be deemed to be person
in-charge, in the facts and circumstances of the case, we are of the
opinion that the said contention should not be permitted to be raised for
the first time before us. A person who had resigned with the knowledge
of the complainant in 1996 could not be a person in charge of the
Company in 1998 when the cheque was dishonoured. He had no say in
the matter of seeing that the cheque is honoured. He could not ask the
Company to pay the amount. He as a Director or otherwise could not
have been made responsible for payment of the cheque on behalf of the
Company or otherwise. [See also Saroj Kumar Poddar v. State (NCT of
Delhi) [(2007) 3 SCC 693 : (2007) 2 SCC (Cri) 135] , Everest
Advertising (P) Ltd. v. State, Govt. of NCT of Delhi [(2007) 5 SCC 54 :
(2007) 2 SCC (Cri) 444] and Raghu Lakshminarayanan v. Fine
Tubes [(2007) 5 SCC 103 : (2007) 2 SCC (Cri) 455] .]
22. Mr Patwalia, however, submitted that a situation may arise where
change in the management is effected only to avoid such constructive
liability. Firstly, we are not concerned with such a hypothetical case.
Secondly, as noticed by this Court in Rangachari case [(2007) 5 SCC
108 : (2007) 2 SCC (Cri) 460] a person normally having business or
commercial dealings with a company would satisfy himself about its
creditworthiness and reliability by looking at its promoters and Board
of Directors and the nature and extent of its business and its
memorandum or articles of association."
On the other hand Mr. Bhattacherjee, learned advocate appearing for the
complainant/opposite party relied upon paragraph 15 of Lalit Kumar Sharma -
Vs. - State of U.P. (supra):
"15. Evidently, therefore, the second cheque was issued in terms of
the compromise. It did not create a new liability. As the compromise did
not fructify, the same cannot be said to have been issued towards
payment of debt."
Learned Advocate for the opposite party emphasized on the following
paragraphs of NEPC Micon Ltd. -Vs. - Magma Leasing Ltd. (supra):
"9. Learned counsel for the appellants, however, submitted that
Section 138 being a penal provision, it should be strictly interpreted
and if there is any omission by the legislature, a wider meaning should
not be given to the words than what is used in the section. In our view
even with regard to penal provision, any interpretation, which
withdraws the life and blood of the provision and makes it ineffective
and a dead letter should be averted. If the interpretation, which is
sought for, were given, then it would only encourage dishonest persons
to issue cheques and before presentation of the cheque close "that
account" and thereby escape from the penal consequences of Section
138.
15. In view of the aforesaid discussion we are of the opinion that even
though Section 138 is a penal statute, it is the duty of the court to
interpret it consistent with the legislative intent and purpose so as to
suppress the mischief and advance the remedy. As stated above,
Section 138 of the Act has created a contractual breach as an offence
and the legislative purpose is to promote efficacy of banking and of
ensuring that in commercial or contractual transactions cheques are not
dishonoured and credibility in transacting business through cheques is
maintained. The above interpretation would be in accordance with the
principle of interpretation quoted above "brush away the cobweb
varnish, and shew the transactions in their true light" (Wilmot, C.J.) or
(by Maxwell) "to carry out effectively the breach of the statute, it must
be so construed as to defeat all attempts to do, or avoid doing, in an
indirect or circuitous manner that which it has prohibited". Hence,
when the cheque is returned by a bank with an endorsement "account
closed", it would amount to returning the cheque unpaid because "the
amount of money standing to the credit of that account is insufficient to
honour the cheque" as envisaged in Section 138 of the Act."
Section 141 of the Negotiable Instruments Act states as follows:-
"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."
Learned Advocate for the petitioner by relying upon the aforesaid
observation and the factual circumstance of the case submitted that the
present petitioner resigned as director of the company on 30th September,
2015. The complaint is based on the foundation that for dishonour of the
cheque on 20th February, 2017, the demand notice was issued and
consequently the cause of action arose in the year 2017 itself, at the relevant
period of time in the year 2017 the present petitioner cannot be said to be a
director or a person in-charge of the company since he had resigned much
earlier in the year 2015. The authorities so relied upon by the petitioner on the
basis of the documents of the Registrar of Company do support such
contention. There is no dispute regarding the authorities placed by the
petitioner so far as a director who has resigned from the company is concerned
when the cause of action arose. However, each case is based on its distinctive
feature and characteristic. To that effect the submission of the learned
Advocate appearing for the complainant/opposite party cannot be ruled out.
The submission of the learned Advocate for the opposite party is that they
initiated a complaint case under Section 138 of the Negotiable Instruments Act
and the subject matter of the said cheque was signed by the present petitioner.
The said case was compromised and terms of settlement were prepared and the
petitioner happened to be a signatory of the terms of settlement also which was
the foundation for withdrawal of the case and the terms of settlement also
incorporated, the issuance of certain post dated cheque which included
amongst others the present cheque. On such assurance the earlier complaint
case was withdrawn. No information at any point of time was communicated to
the complainant company regarding the resignation of the present petitioner.
As such there may be some difficulty in describing the petitioner in the petition
of complaint but the document relied upon and contentions so advanced in the
petition of complaint would go to show the involvement of the present
petitioner.
The contention advanced by the petitioner, prima facie, reflects a design
in view of the documents enclosed along with the revisional application as the
petitioner has tendered his resignation on September 29, 2015 and
subsequently signed the terms of settlement using the office seal of the
company in October, 2016. There was no reason for the petitioner to use the
seal of the company on October, 2016 if at all he has tendered his resignation
in September, 2015.
Having regard to the factual background of the present case and the law
laid down in the case of Lalit Kumar Sharma (supra) that the second complaint
do not create any new debt or liability the provisions of Section 141 of the
Negotiable Instruments Act which refers "every person" and consent and
connivance attributable on the part of "any director" should be extended to the
present petitioner as liability depends on the role played by a person and not
on his designation.
The case is at the initial stage any further interpretation regarding the
conduct of the present petitioner as also the manner of application of
precedents would encourage defaulters to enter into compromise and thereafter
resign from the Company.
On an appreciation of the factual aspect it is reiterated that this opinion
is expressed by this Court as the petitioner has challenged the proceedings at
the very inception regarding the maintainability of the proceedings against him.
However, if in course of proceedings the petitioner is able to rebut the
presumptions so far as the proviso clause of Sub-section 1 is concerned i.e. "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" he would
be entitled to an order of acquittal. The stage at which petitioner has
approached this Court is premature and as such this Court finds no reason to
interfere with the proceedings.
Accordingly, the revisional application being CRR 3525 of 2019 is
dismissed.
Pending application, if any, is consequently disposed of.
Interim order, if any, is hereby vacated.
All parties shall act on the server copy of this judgment duly downloaded
from the official website of this Court.
Urgent Xerox certified photocopy of this judgment, if applied for, be given
to the parties upon compliance of the requisite formalities.
(Tirthankar Ghosh, J.)
