Sanjeev R. Apte vs Govt. Of Nct Of Delhi And Ors.
2002 Latest Caselaw 1226 Del

JUDGMENT

Mahmood Ali Khan, J.

1. By this petition filed under Section 482 of the Code of Criminal Procedure the petitioner is seeking quashing of order of a Metropolitan Magistrate dated 25.11.2000 by which he had served a notice in accordance with Section 251 Cr .PC asking the petitioner whether he pleaded guilty or not or has he any defense to make.

2. Succinctly stated the facts are that the respondent has filed a complaint for prosecution and punishment of the petitioner herein, co-accused M/s. AEC (India) Limited and Mr. R.D. Apte for committing offence under Section 138 read with Section 141 of the Negotiable Instruments Act (the Act). The allegations made in the complaint, briefly, are that M/s AEC (India) Limited, (hereinafter accused No.1) entered into a lease agreement dated 30.9.1994 with the complainant company agreeing to pay rent every quarter and for discharging its liability for the quarter June, 1998 to August, 1998 it issued a cheque dated 30.6.1998 for Rs. 5,43,765/- drawn on Bank of Maharashtra, Karol Bagh, New Delhi. Accused No. 1 entered into another lease agreement with the complainant on 30.3.1996 undertaking to pay rent every quarter. It defaulted in paying the rent. For discharging its liability it issued a cheque dated 30.6.1998 for Rs. 1,30,207/- towards rent for the quarter from June, 1998 to August, 1998. Both these cheques when deposited with the banker of the accused were dishonoured vide memo dated 1.7.1998 with the remarks payment stopped by the drawer. Petitioner bank intimated about the dishonour of these cheques on 4.7.1998. The complainant served three separate demand notices dated 4.7.1998 on all the three accused persons demanding the amount of the dishonoured cheques within fifteen days of the receipt of the notice. The notices were sent by registered post and under the certificate of posting and were duly served on the accused persons but they failed to comply with it. The cheques were dishonoured by the banker of the accused because the money standing to the credit in the account of the respondent No. 1 was insufficient to honour them. The accused No. 1 was a company and the accused No. 2 & 3 (accused No.3 is the petitioner herein) were "in charge and were responsible to the accused No. 1 for the conduct of its business at the time when the offence was committed". All the three accused as such were liable to be prosecuted against and punished for committing the offence. The offence had also been committed by the accused No. 1 with the consent and connivance of other two accused (including the petitioner herein).

After preliminary evidence was recorded the learned Magistrate issued summons to the accused. The petitioner put in appearance and in accordance with the provisions of Section 251 of the Civil Procedure Code he was stated the particulars of the offence and was asked to state as to whether he pleaded guilty or had any defense to make, which is commonly known as notice served under this provision. The petitioners pleaded not guilty to this notice and claimed to be tried.

The petitioner has challenged the notice dated 25.11.2000. The relevant portion of it is extracted below:-

"Notice under Section 251 Cr.PC.

It is alleged against you Sanjeev R. Apte s/o Director AEC (India) Limited.

That you issued     the   cheque
No. 084732  dated  30.06.98   for   a  sum
of   Rs. 5,43,765/- and   cheque
No. 241485  dated  30.06.98   for   a  sum
of   Rs. 1,30,207 in   favor   of
complainant in  discharge  of your
liability       and       when
present........ The     cheques were/was   dishonoured   by   your bankers and  you  also  did  not  make the payment of cheques despite notice thus you have committed an offence punishable under Section 138 of the Negotiable Instruments Act.
 

Show cause why you should not be punished for the above said offence.
 

sd/- 

MM/ND
 

The abovementioned notice has been read over and explained to the accused and he/she is questioned as under:.

Q. Do you plead guilty or claim trial?

A. I plead not guilty and claim trial .

sd/-

MM/ND

25 .11.2000

sd/-

Accused.

3. The above said notice was challenged in the petition on the ground firstly that the cheques were issued in discharge of the liabilities of the rent arising out the two lease agreements dated 30.9.1994 and 30.3.1996 but the complainant has failed to place on record the copies of those agreements. The second ground is that in the complaint only allegation against the petitioner is that he is the director of the accused No. 1 company i.e. the drawer of the two dishonoured cheques and that no specific role is assigned to him and only a general allegation is made that he was in charge of and was responsible to the company for the conduct of the business of the company to fasten vicarious liability on the petitioner.

4. At the hearing the counsel for the petitioner submitted that the copies of the two agreements have been placed on the file. The presumption at this stage can be inferred under Section 118 of the Act that the cheque was made or drawn for consideration on the date which the cheque bears. Section 139 of the Act raises a presumption that holder of the cheque received it for the discharge of any debt or liability. The complainant, therefore, was not required to place on record the lease agreement with the criminal complaint. The notice envisaged under Section 251 of the Cr.PC would not become legally bad or infirm for non filing of the lease agreements dated 30.6.1994 and 30.3.1996, referred to in the complaint, or at the time of the service of the notice under Section 251. Counsel for the petitioner has not pursued his ground further for obvious reasons.

5. The main plank of the argument of the counsel for the petitioner is that the petitioner has been made an accused on account of his vicarious liability as a director. Though not denied that the petitioner is a director of the accused No. 1 company but it is argued by the counsel for the petitioner that mere allegation in the criminal complaint that the accused-petitioner was director of the accused No. 1 company and that he was in charge of and responsible to the company for the conduct of the business of the company and further that the offence was committed by the accused company with the consent and connivance of the said accused will not be enough to prosecute the accused/petitioner. It was contended that complainant was further required to allege in the criminal complaint as to what functions or duties were being discharged by him as director in the management of the affairs and business of the accused company. It was argued that in the absence of such allegation bare allegation that the petitioner was in charge of and responsible to the accused company for the conduct of the business of the company will not fasten vicarious liability of the offence under Section 138 of the Act allegedly committed by the accused No. 1 company. Before dealing with this argument of the petitioner the provision of Section 141 being relevant, may be set out below : -

"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.

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 purpose of this section,

a) "company" means anybody corporate and includes a firm or other association of individuals; and

b) "director", in relation to a firm, means a partner in the firm.

6. In case a company commits an offence under Section 138 of the Act 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 punished accordingly. It is a legal fiction which imposes vicarious liability upon a person who himself may not have committed an offence under Section 138 but if he being in charge of and responsible to a company for the conduct of the business of the company, which had been guilty of committing offence under Section 138 of the Act, would also be guilty of the same offence and would be punished Along with the company. In order to make a person liable for the offence committed by a company, as noticed, the person should be in charge of and responsible to the company for the conduct of the business of the company. Furthermore if it is proved that the company had committed the offence 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 a person would also be deemed to be guilty of the offence which was committed by the company and would be liable to be punished accordingly. In this case the contention raised on behalf of the petitioner is that in the absence of specific allegations in the complaint as to what functions and duties were being discharged by him and how he was involved in the management and affairs of the accused company to make him (as director) in charge of and responsible to the company for the conduct of the business of the accused No. 1 company, service of notice under Section 251 Cr.PC will be bad in law and the petitioner will be liable to be discharged at the threshold of trial.

The crucial question is whether the necessary allegation which fastens the vicarious liability for the commission of the offence upon the petitioner have been made in the complaint. Relevant averment are made in para 10 of the complaint. It will be necessary to reproduce that paragraph. It is as under:-

"That the accused No.1 is a company and the accused Nos. 2 & 3 were in charge of and were responsible to the accused No. 1 for the conduct of its business at the time when the offence was committed. Hence, the accused Nos. 2 & 3, in addition to the accused No. 1, are liable to be proceeded against and punished by this Hon'ble Court, as provided by Section 141 of the Negotiable instruments Act 1881, further, the offence has been committed by the accused No. 1 with the consent and connivance of the accused Nos. 2 & 3."

7. The petitioner was not required to reproduce the language of Section 141(1) of the Act verbatins in the complaint. It was suffice if the contents of the criminal complaint read as a whole showed that the petitioner, who was accused No. 3, was director of the accused No. 1 company and he was in charge of and responsible to the accused company for the conduct of its business at the time when the offence was committed and further the offence is committed by the accused No. 1 company with his consent and connivance. It was not necessary for the complainant to have further alleged as to what were the functions and duties of the petitioner accused No. 1 and in what manner he was responsible for the conduct of the business of the respondent No. 1 accused. Clause 10 of the complaint, already reproduced, satisfied the requirement of the ingredient of the provision of Section 141(1) of the Act completely.

8. Counsel for the petitioner has referred to K.P.G. Nair v. Jindal Menthol India Ltd, 2000(6) SCALE 578. In paragraphs 8 & 9 of the judgment Supreme Court referred to Section 141 of the Act and summed up the principle of law as under:-

"8. From a perusal of Section 141 it is evident that in a case where a company committed offence under Section 138 then not only the company but also every person who at the time when the offence was committed was in charge of and was responsible to the company for the conduct of the business of the company shall be deemed to be guilty of the offence and liable to be proceeded against and punished accordingly. It follows that a person other than the company can be proceeded against under those provisions only if that person was in charge of and was responsible to the company for the conduct of its business.

9. It is true as submitted by Mr. Arora that the words of Section 141(1) need not be incorporated in a complaint as magic words but it cannot also be disputed that substance of the allegations read as a whole should answer and fulfill the requirements of the ingredients of the said provision for being proceeded against for an offence which he is alleged to have committed. On the above premise, it is clear that the allegations made in the complaint do not either in express words or with reference to the allegations contained therein make out a case that at the time of commission of the offence the appellant was in charge of and was responsible to the company for the conduct of its business ."

9. The allegations which were made in the case before the Supreme Court have also been mentioned in paragraph 6. They are not identical to para 10 of the criminal complaint of the instant case. The averment of the criminal complaint which has been cited in paragraph 6 of the cited judgment did not expressly or impliedly stated that at the time of commission of the offence the appellant of the case was in charge of and was responsible to the company in the conduct of its business. It is not the case here. Therefore, the judgment instead of advancing the case of the petitioner has strengthened the case of the respondent herein.

10. The counsel for the petitioner then referred to Girdhari Lal Gupta v. D.N. Mehta, in which the meaning of the expression "a person in charge and responsible for the conduct and the affairs of the company" were explained. It was held that in the context a person 'in charge" means that the person should be in overall control of the day to day business of the company or firm. This inference was drawn from the wording of Section 23(C)(2) of Foreign Exchange Regulation Act. Section 23(C)(2) is identical to Sub-section (2) of Section 141 of the Act. It was argued that as per averment in the complaint the petitioner was a mere director and bare allegation of his being a director would not make him in charge of and responsible for the conduct of the business of the company. But it is not the stage for deciding this contention. As noted above the contention is that the complainant had not disclosed in the complaint as to what duties were assigned to the petitioner in the conduct of the business of the accused company which made him also guilty of the offence which the accused company was charged with. Such allegations are not necessary to be made in the complaint. It is a question to be decided after evidence at the trial. The judgment cited, therefore, does not advance the case of the petitioner at this stage.

11. The counsel for the petitioner then relied upon State of Haryana v. Bru Lal Mittal and Ors., . Paragraph 8 of the judgment being relevant is extracted as under:-

"Nonetheless, we find that the impugned judgment of the High Court has got to be upheld for an altogether different reason.

Admittedly the three respondents were being prosecuted as directors of the manufacturers with the aid of Section 34(1) of the Act which reads" as under :

1) where an offence under this Act has been committed by 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 such person liable to any punishment provided in this Act if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.

It is thus seen that the vicarious liability of a person for being prosecuted for an offence committed under the Act by a company arises if at the material time he was in charge of and was also responsible to the company for the conduct of its business. Simply because a person is a director of the company it does not necessarily mean that he fulfills both the above requirements so as to make him liable. Conversely without being a director a person can be in charge of and responsible to the company for the conduct of its business.

From the complaint in question we, however, find that except a bald statement that the respondents were directors of the manufacturers, there is no other allegation to indicate, even prima facie, that they were in charge of the company and also responsible to the company for the conduct of its business".

12. In this connection it may be stated that Section 34(1) reproduced in the above paragraph is parimeteria with the provision of Section 141(1) of the Act. It is laid down by the Supreme Court that the vicarious liability of a person for his being prosecuted for an offence committed by a company would arise if at the material time he was in charge and was also responsible to the company for the conduct of its business. He will not become guilty of the offence committed by the company simply because of being the director of the said company. Even without being a director a person could be in charge , of and responsible to the company for the conduct of its business. The Supreme Court considered the allegations made in the complaint and found that except the bald statement that the respondents were directors of the manufacturers there was no allegation to indicate even prima facie that they were in charge of the company and responsible to the company for the conduct of its business. It is not the fact of the case in hand. In the criminal complaint of the case in hand it is clearly alleged that the petitioner, accused No. 3 in the complaint, was ' a director in charge of and responsible to the accused company for the conduct of the business of the company and further the accused company had committed offence with his consent and connivance. This judgment also does not come to the rescue of the petitioner .

13. Counsel for the petitioner has also relied upon Pepsi Food Ltd. and Anr. v. Special Judicial Magistrate and Ors., 1998 Criminal Law Journal 1 in support of his argument that the notice under Section 251 Cr.PC was served by the learned Magistrate without application of mind since the petitioner was not a drawer of the two dishonoured cheques but in the notice under Section 251 Cr.PC served on the petitioner the learned Magistrate has averred that the petitioner had signed the cheques. Copy of the notice in question has been filed by the petitioner as annexure P-2 and has been reproduced in the foregoing paragraphs. There is no allegation in the notice that the cheques were signed by the petitioner. What is stated therein is that the two cheques particulars of which were given were issued by him in favor of the complainant in discharge of his liability and the cheques were dishonoured and thereafter the amount of the cheque was not paid despite service of demand notice in time so an offence under Section 138 of the Act has been committed. Section 141, as noticed, raises a legal presumption of the commission of the same offence which the company, of which the petitioner is in charge of and responsible to the conduct of the business of the company. Therefore the notice sufficiently stated the facts which make out the accusations against the accused. Particulars of the offence for which he is required to plead guilty or not have been stated. Argument that the notice was the result of non application of the mind by the learned Magistrate is not tenable. In the cited case the Supreme Court in para 28 of the judgment held as under:-

"28. Summoning of an accused in a criminal case is a serious matter.

Criminal law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into motion . The order of the Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and would that be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused.

Magistrate has to carefully scrutinise the evidence brought on record and may even himself put questions to the complainant and has witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused."

14. The law laid down by the Supreme Court in the judgment above cannot be said to have been not followed by the learned Magistrate while serving notice under Section 251 of the Cr.PC on the petitioner. All material particulars/facts are stated giving sufficient notice of the accusation made against him for which he would be tried.

15. Counsel for the respondent complainant reinforced his contentions by citing the case law. The first case is S.C. Chabbra v. Gontermann Peipers, 2002 Cri. L.J. 642 in which it was held that criminal complaints and the summoning orders passed by the Magistrate cannot be quashed merely on the ground that the complainant has not alleged in the complaint as to what duties were being discharged by the accused in handling the affairs of the company. In Gyan Chand Koti v. Indian Renewable Energy Development Agency Ltd, 2001 (2) AIR 146 a Bench of this court considered averments similar to the averments made in paragraph 10 of the complaint of this case and observed that the reading of the complaint would show that there was specific allegation in the complaint that the petitioner director was also responsible for taking of the decision on behalf of the offending company and that further cheques in question were issued under the consideration of the company and from the averments a reasonable inference could be drawn that the petitioner could be vicariously liable for the offence under Section 138 of the Act which is alleged to have been committed by the company. Counsel also referred to Smt. Suniana R. Mathani v. National Capital Territory of Delhi and Ors. 1 (2002) CCR 414 (DB) where the Division Bench of this court has held that the contention that the director that he had ceased to be director of the company cannot be gone into in a petition under Section 482 Cr.PC for quashing proceedings under Section 138 of the Act. In that case also there was allegation in the complaint that the accused petitioner of the said case was in charge of and responsible to the conduct of the business of the company.

16. The result of the above discussion is that the arguments of the petitioner that there is illegality and infirmity in the notice served on him under Section 251 Cr.PC and that the complainant in the criminal complaint has failed to disclose as to how he is in charge of and responsible to the company for the conduct of the business of the company, therefore he was not vicariously liable to the offence which the company had committed under Section 133 of the Act are without any merit.

17. Counsel for the respondent, however, at the fag end also argued that the petitioner by challenging the notice under Section 251 of the Cr.PC is in fact challenging the order of the Magistrate issuing summons to him for his prosecution. He argued that the petitioner had not filed any application before the Magistrate for recalling the order of the summoning, therefore, the petition itself was not maintainable. The view which the court has taken on the merit of the petition is sufficient to dislodge the petition. Therefore, the contention about its maintainability on the ground raised by the counsel for the respondent need not be considered.

The result of the above discussion is that the petition has no merit. It is dismissed.