Calcutta High Court (Appellete Side)

Rahul Tantia vs The State Of West Bengal & Anr on 4 September, 2023

                     IN THE HIGH COURT AT CALCUTTA

                     (Criminal Revisional Jurisdiction)

                              Appellate Side

Present:

The Hon'ble Justice Shampa Dutt (Paul)

                             CRR 977 of 2020

                               Rahul Tantia

                                       Vs.

                      The State of West Bengal & Anr.


For the petitioner                     :     Mr. Ayan Bhattacharjee,
                                             Mr. Aditya Ratan Tiwary,
                                             Mr. Suman Majumder.

For the Opposite Party                 :     Mr. K. C. Garg,
                                             Ms. Sumita Agarwal.


Hearing concluded on               :         07.08.2023

Judgment on                            :     04.09.2023



Shampa Dutt (Paul), J.:

1.   The present revision has been preferred praying for quashing of the

     proceedings of Case No. CS/104729 of 2018 under Sections 138/141

     of the Negotiable Instruments Act, 1881, pending before the Court of

     the learned Metropolitan Magistrate, 15th Court at Calcutta, including

     the orders dated December 18, 2018, February 01, 2019 and August

     14, 2019 passed in connection therewith.

2.   On December 18, 2018, the opposite party no.2 herein filed a petition

     of complaint along with the pre-summoning evidence in the Court of
                                      2


     learned Chief Metropolitan Magistrate at Calcutta being Case No.

     CS/104729 of 2018 under Sections 138/141 of the Negotiable

     Instruments Act, 1881 (hereinafter referred to as 'the NI Act') against

     M/s. Tantia Constructions Ltd. Of Block-DD 30, Sector-I, Salt Lake

     City, Salt Lake, Police Station Bidhannagar, Kolkata-700 064 and

     others including the present petitioner who was arrainged as accused

     no.2 therein with a prayer for issuance of process.

3.   After receipt of the complaint and the affidavit under Section 145 of

     the NI Act, vide Order dated December 18, 2018 the learned Chief

     Metropolitan Magistrate at Calcutta was pleased to take cognizance

     and transferred the case to the Court of the learned Metropolitan

     Magistrate, 15th Court, Calcutta (hereinafter referred to as the

     'learned Trial Magistrate').

4.   After receipt of the case record, vide order dated February 1, 2019,

     the learned Trial Magistrate was pleased to issue process.

5.   From the petition of complaint it would be evident that the cheque in

     question issued by M/s. Tantia Construction Ltd. was signed by the

     accused no.3 viz. Ishwari Prasad Tantia. Neither has the petitioner

     herein signed the said cheque nor had he any transaction with

     the opposite party no.2.

6.   Mr. Ayan Bhattacharjee, learned counsel for the petitioner has

     submitted that Section 141 of the NI Act incorporates the concept of

     'vicarious liability' in respect of officers of a company who are engaged

     in the day to day affairs of the company when the company becomes

     an accused. It is thus apparent that such officers need to be officers
                                     3


     of the offending company at the time of commission of the offence and

     such officer must also be factually involved in the day to day

     functioning of the company. It is only if such preconditions are

     complied with that the offence under Section 138 of the NI Act can be

     said to be committed by such officers.

7.   It is further stated that in the instant case the petition of

     complaint lacks basic averments to attract the legal fiction

     infused under Section 141 of the NI Act qua the petitioner

     herein. The law laid down by the Hon'ble Supreme Court in upteem

     number of cases has consistently laid down while considering the

     question of vicarious liability of a Director of a Company that merely

     being a Director would not make a person liable for an offence that

     may have been committed by the Company.

8.   For launching a prosecution against the Directors of a Company

     under Section 138 read with Section 141 of the NI Act, there had to

     be a specific allegation in the complaint in regard to the part played

     by them in the transaction in question. It is also laid down that the

     allegations has to be clear and unambiguous showing that the

     Directors were in charge of and responsible for the business of the

     Company. This was done to discourage frivolous litigation and to

     prevent abuse of the process of law.

9.   It is further submitted that it is trite law that in a petition of

     complaint, the complainant is required to aver as to how and in what

     manner a director was in charge of the business of the accused

     company and was responsible for the conduct of the accused
                                       4


      company's business. Every Director need not be and is not in fact, in

      charge of the business of the accused company. In absence of the

      specific role qua the participation of a director in the alleged

      transaction with the complainant, no director can be implicated by

      virtue of Section 141 of the NI Act.

10.   From the impugned complaint and the pre-summoning evidence filed

      by the opposite party no.2, it would be evident that there is no

      averment regarding the personal knowledge of the representative of

      the opposite party no.2 regarding the facts and circumstances of the

      instant case. In order to file a complaint under Section 138 of the NI

      Act, the representative of the complainant has to have his

      personal/direct knowledge.

11.   In view of the fact that no such statement regarding the personal

      and/or direct knowledge of the representative of the opposite party

      no.2 is either forthcoming from the petition of complaint nor from the

      exhibits, the learned Trial Magistrate ought not to have taken

      cognizance of the petition of complaint and therefore, the entire

      proceeding is an abuse of the process of law and thus liable to be

      quashed.

12.   Mr. Bhattacharya has relied upon the following judgments:-

      i)    Pawan Kumar Goel v. State of U.P & Anr. reported in 2022

            (16) SCALE.


              "22. The observations made in the aforesaid judgment is
              also a complete answer to the arguments advanced by
              learned counsel for the appellant that in the absence of
              any prohibition under the NI Act, the amendment in the
                          5


complaint is permissible and the impleadment of an
additional accused subsequent to filing of the complaint,
would not be barred. At this juncture, we may also refer
to the following observations made in the case of N.
Harihara Krishnan Vs. J. Thomas (Supra):-

"26. The scheme of the prosecution in punishing
under Section 138 of the Act is different from the scheme
of CrPC. Section 138 creates an offence and prescribes
punishment. No procedure for the investigation of the
offence is contemplated. The prosecution is initiated on
the basis of a written complaint made by the payee of a
cheque. Obviously such complaints must contain the
factual allegations constituting each of the ingredients of
the offence under Section 138. Those ingredients are: (1)
that a person drew a cheque on an account maintained
by him with the banker; (2) that such cheque when
presented to the bank is returned by the bank unpaid; (3)
that such a cheque was presented to the bank within a
period of six months from the date it was drawn or within
the period of its validity whichever is earlier; (4) that the
payee demanded in writing from the drawer of the
cheque the payment of the amount of money due under
the cheque to payee; and (5) such a notice of payment is
made within a period of 30 days from the date of the
receipt of the information by the payee from the bank
regarding the return of the cheque as unpaid. It is obvious
from the scheme of Section 138 that each one of the
ingredients flows from a document which evidences the
existence of such an ingredient. The only other ingredient
which is required to be proved to establish the
commission of an offence under Section 138 is that in
spite of the demand notice referred to above, the drawer
of the cheque failed to make the payment within a period
of 15 days from the date of the receipt of the demand. A
fact which the complainant can only assert but not prove,
the burden would essentially be on the drawer of the
cheque to prove that he had in fact made the payment
pursuant to the demand.


27. By the nature of the offence under Section 138 of the
Act, the first ingredient constituting the offence is the fact
that a person drew a cheque. The identity of the drawer
of the cheque is necessarily required to be known to the
complainant (payee) and needs investigation and would
not normally be in dispute unless the person who is
alleged to have drawn a cheque disputes that very fact.
The other facts required to be proved for securing the
                         6


punishment of the person who drew a cheque that
eventually got dishonoured is that the payee of the
cheque did in fact comply with each one of the steps
contemplated under Section 138 of the Act before
initiating prosecution. Because it is already held by this
Court that failure to comply with any one of the steps
contemplated under Section 138 would not provide
"cause of action for prosecution". Therefore, in the context
of a prosecution under Section 138, the concept of taking
cognizance of the offence but not the offender is not
appropriate. Unless the complaint contains all the
necessary factual allegations constituting each of the
ingredients of the offence under Section 138, the Court
cannot take cognizance of the offence. Disclosure of the
name of the person drawing the cheque is one of the
factual allegations which a complaint is required to
contain. Otherwise in the absence of any authority of law
to investigate the offence under Section 138, there would
be no person against whom a court can proceed. There
cannot be a prosecution without an accused. The offence
under Section      138 is    person     specific.  Therefore,
Parliament      declared     under Section     142 that   the
provisions dealing with taking cognizance contained in
the CrPC should give way to the procedure prescribed
under Section 142. Hence the opening of non obstante
clause under Section 142. It must also be remembered
that Section 142 does not either contemplate a report to
the police or authorise the Court taking cognizance to
direct the police to investigate into the complaint.


28. The question whether the respondent had sufficient

cause for not filing the complaint against Dakshin within the period prescribed under the Act is not examined by either of the courts below. As rightly pointed out, the application, which is the subject-matter of the instant appeal purportedly filed invoking Section 319 CrPC, is only a device by which the respondent seeks to initiate prosecution against Dakshin beyond the period of limitation stipulated under the Act."

31. The Bench answered the questions posed in the reference as under:-

"19. (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 question posed in sub-para (b) has to be in negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for 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 affirmative. The question notes that the Managing Director or Joint Managing Director would be admittedly in charge of the company and responsible to the company for 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 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."

ii) Shaleen Khemani & Ors. Vs. The State of West Bengal &

Anr. reported in (2018) 1 C Cr. LR (Cal) 515.

"13. In view of the aforesaid discussion, I am unable to accept the contentions of the learned Counsel for the opposite party no. 2 that merely because the petitioners were directors/additional directors of the company it has to be inferred that they were in-charge of the affairs of the company. It is also pertinent to note that specific overt acts of the petitioners have also not been articulated in the petition of complaint so as to establish the extent of their involvement in the affairs of the said company."

13. Mr. K. C. Garg, learned counsel for the opposite party no.2 on

filing the affidavit of opposition has submitted that the averments

made in the petition are complete and as such the complaint case

should be permitted to proceed towards trial. A reply to the said

affidavit has been filed by the petitioner, denying all the statements

made in the affidavit in opposition, wherein it appears that the

oposite party has tried to fill in the lacuna in the complaint

petition, by making clear and specific averments against the

petitioner, which are totally absent in the petition of complaint.

The relevant part in the petition of complaint is:-

i) That the accused no.1 is a Limited by Public Share Company and accused no.2 to 3 are the Directors of accused no.1. At all material time they were looking after the day to day affairs of accused no.1 and actively participated in its functioning.

ii) That the accused persons took accommodation loan of Rs.1,00,00,000/-(One Crore Only) from the complainant Company in the name of accused no.1 @10% interest per annum and in discharge of their legal existing liabilities towards refund of principal amount, they issued one A/c Payee Cheque in favour of the complainant. The particular of cheque is given below:-

             Sl      Date        Cheque No.       Drawn on       Amount
            No.
            1     01.08.2018    007720          Allahabad    1,00,00,000.00
                                                Bank P-214
                                                C.I.T. Road,
                                                Scheme No.IV
                                                Beliaghata
                                                Branch
                                                Kolkata-WB

iii) That the accused no.1 to 2 received the said demand notice on 19.11.2018 and accused no.3 received the said demand notice on 20.11.2018.

iv) That in spite of receiving the said demand notice the accused persons have intentionally, deliberately and willfully failed and neglected to pay the aforesaid amount covered with the said dishonoured cheque.

v) That the accused persons have thus committed the offences punishable under Section 138 read with Section 141 Negotiable Instruments Act as amended up to date.

14. This Court relies upon the judgment of the Supreme Court:-

(i) In Sunil Todi & Ors. V. State of Gujarat & Anr. reported in

2021(14) SCALE, wherein the Court held:-

"42. Section 141 of the NI Act stipulates that if a company is alleged to have committed an offence under Section 138, then every person who „was in charge of, and responsible to, the company for the conduct of the business of the company‟ shall also be deemed guilty of the offence. The proviso provides an exception if she proves that the offence was committed without her knowledge or that she had exercised due diligence. In Sunil Bharati Mittal v. CBI, (2015) 4 SCC 609, a three judge Bench of this Court observed that the general rule is that criminal intent of a group of people who undertake business can be imputed to the Company but not the other way around. Only two exceptions were provided to this general rule: (i) when the individual has perpetuated the commission of offence and there is sufficient evidence on the active role of the individual; and (ii) the statute expressly incorporates the principle of vicarious liability. Justice Sikri writing for a three-judge Bench observed:

"43. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision. 44. When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect. One such example is Section 141

of the Negotiable Instruments Act, 1881. In Aneeta Hada [Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241] , the Court noted that if a group of persons that guide the business of the company have the criminal intent, that would be imputed to the body corporate and it is in this backdrop, Section 141 of the Negotiable Instruments Act has to be understood. Such a position is, therefore, because of statutory intendment making it a deeming fiction. Here also, the principle of "alter ego", was applied only in one direction, namely, where a group of persons that guide the business had criminal intent, that is to be imputed to the body corporate and not the vice versa. Otherwise, there has to be a specific act attributed to the Director or any other person allegedly in control and management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company."

44. The test to determine if the Managing Director or a Director must be charged for the offence committed by the Company is to determine if the conditions in Section 141 of the NI Act have been fulfilled i.e., whether the individual was in-charge of and responsible for the affairs of the company during the commission of the offence. However, the determination of whether the conditions stipulated in Section 141 of the MMDR Act have been fulfilled is a matter of trial. There are sufficient averments in the complaint to raise a prima facie case against them. It is only at the trial that they could take recourse to the proviso to Section 141 and not at the stage of issuance of process."

In the present case there is no sufficient averments nor a

prima facie case against the accused person.

(ii) In Sunita Palita vs M/s. Panchami Stone Quarry, Criminal

Appeal No.....of 2022 (arising out of SLP (Crl.) No. 10396 of

2019) on 1 August, 2022, the Supreme Court held:-

"36. The High Court rightly held that when a complaint was filed against the Director of a company, a specific averment that such person was in charge of and responsible for the conduct of business of the company was an essential requirement of Section 141 of the NI Act. The High Court also rightly held that merely being a

Director of the company is not sufficient to make the person liable under Section 141 of the NI Act. The requirement of Section 141 of the NI Act was that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company. This has to be averred as a fact.

37. The High Court also rightly held that the Managing Director or Joint Managing Director would admittedly be in charge of the company and responsible to the company for the conduct of its business by virtue of the office they hold as Managing Director or Joint Manging Director. These persons are in charge of and responsible for the conduct of the business of the company and they get covered under Section 141 of the NI Act. A signatory of a cheque is clearly liable under Section 138/141 of the NI Act.

41. There can be no doubt that in deciding a Criminal Revisional Application under Section 482 of the Cr.P.C. for quashing a proceeding under Section 138/141 of the NI Act, the laudable object of preventing bouncing of cheques and sustaining the credibility of commercial transactions resulting in enactment of the said Sections has to be borne in mind. The provisions of Section 138/141 of the NI Act create a statutory presumption of dishonesty on the part of the signatory of the cheque, and when the cheque is issued on behalf of a company, also those persons in charge of or responsible for the company or the business of the company. Every person connected with the company does not fall within the ambit of Section 141 of the NI Act.

43. Liability depends on the role one plays in the affairs of a company and not on designation or status alone as held by this Court in S.M.S. Pharmaceuticals Ltd. (supra). The materials on record clearly show that these Appellants were independent, non-executive Directors of the company. As held by this Court in Pooja Ravinder Devidasani v. State of Maharashtra and Anr. (supra) a non-Executive Director is not involved in the day-to-day affairs of the company or in the running of its business. Such Director is in no way responsible for the day-to-day running of the Accused Company. Moreover, when a complaint is filed against a Director of the company, who is not the signatory of the dishonoured cheque, specific averments have to be made in the pleadings to substantiate the contention in the complaint, that such Director was in charge of and responsible for conduct of

the business of the Company or the Company, unless such Director is the designated Managing Director or Joint Managing Director who would obviously be responsible for the company and/or its business and affairs.

46. As held by this Court in National Small Industries Corporation Ltd. v. Harmeet Singh Paintal4 quoted with approval in the subsequent decision of this Court in Pooja Ravinder Devidasani v. State of Maharashtra and Anr. (supra) the impleadment of all Directors of an Accused Company on the basis of a statement that they are in charge of and responsible for the conduct of the business of the company, without anything more, does not fulfil the requirements of Section 141 of the NI Act."

15. Thus, it is clear from the materials on record, that the statements in

the petition of complaint are only general in nature. It has also not

been stated as who/which of the accuseds signed the cheque in

this case. Disclosure of the name of the person drawing the

cheque is one of the factual allegations which a complaint is

required to contain (N. Harihara Krishnan vs. J. Thomas, (2018)

13 SCC 663).

16. The petitioner has also relied upon the judgment in Ashok

Shewakramani & Ors. vs. State of Andhra Pradesh & Anr. reported

in 2023 INSC 692.

"19. Section 141 is an exception to the normal rule that there cannot be any vicarious liability when it comes to a penal provision. The vicarious liability is attracted when the ingredients of sub-section 1 of Section 141 are satisfied. The Section provides that 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 shall be deemed to be guilty of the offence under Section 138 of the NI Act. In the light of sub-section 1 of Section 141, we have perused the averments made in the complaints subject matter of these three appeals. The allegation in paragraph 1 of the complaints is that the appellants are managing the company and are busy with day to day

affairs of the company. It is further averred that they are also in charge of the company and are jointly and severally liable for the acts of the accused No.1 company.

The requirement of sub-section 1 of Section 141 of the NI Act is something different and higher. Every person who is sought to be roped in by virtue of sub-section 1 of Section 141 NI Act must be a 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. Merely because somebody is managing the affairs of the company, per se, he does not become in charge of the conduct of the business of the company or the person responsible for the company for the conduct of the business of the company. For example, in a given case, a manager of a company may be managing the business of the company. Only on the ground that he is managing the business of the company, he cannot be roped in based on sub-section 1 of Section 141 of the NI Act. The second allegation in the complaint is that the appellants are busy with the day-to-day affairs of the company. This is hardly relevant in the context of subsection 1 of Section 141 of the NI Act. The allegation that they are in charge of the company is neither here nor there and by no stretch of the imagination, on the basis of such averment, one cannot conclude that the allegation of the second respondent is that the appellants were also responsible to the company for the conduct of the business. Only by saying that a person was in charge of the company at the time when the offence was committed is not sufficient to attract sub- section 1 of Section 141 of the NI Act. Sub-section 1 of Section 141 reads thus:

"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 deeded 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.]"

20. On a plain reading, it is apparent that the words "was in charge of" and "was responsible to the company for the conduct of the business of the company" cannot be read disjunctively and the same ought be read conjunctively in view of use of the word "and" in between.

21. Therefore, even by giving a liberal construction to what is averred in paragraph 1 of the complaints, we are unable to accept the submission made by the learned counsel appearing for the second respondent that these averments substantially comply with sub-section (1) of Section 141 of the NI Act."

Wherein the court has once again cleared the position and the

requirements under Section 141 of the N.I. Act.

17. From the petition of complaint it is clear that the requirements under

Section 141 of the Negotiable Instruments Act as laid down by the

Supreme Court in Pawan Kumar Goel v. State of U.P & Anr.

(Supra) (para 31) are totally absent in this case and allowing the

proceedings to continue in respect of the petitioner in such

circumstances, would clearly amount to abuse of the process of law.

18. The revisional application being CRR 977 of 2020 is allowed.

19. The proceedings of Case No.CS/104729 of 2018 under Sections

138/141 of the Negotiable Instruments Act, 1881, pending before the

Court of the learned Metropolitan Magistrate, 15th Court at Calcutta,