Ashok Newatia vs State And Anr.
2007 Latest Caselaw 621 Del

ORDER

S. Ravindra Bhat, J.

1. The petitioner seeks a quashing order in respect of proceedings filed by the respondent/complainant for commission of offences under Sections 138/141, Negotiable Instruments Act.

2. The complainant had alleged that in the course of commercial transactions M/s. Viniyoga Clothex Ltd. had issued cheques in the sum of Rs. 25 lakh to it and that those cheques, when presented, were returned with the remark "exceeds arrangement". The drawer of the cheque namely the company and Ors. such as Managing Director and Directors, of whom the petitioner as one at that stage, were issued with notice. It was alleged that in spite of notice, the amounts were not paid. Consequently, the complaint was filed.

3. A summoning order was issued. In the course of the proceedings the Court issued notice under Section 251 to the accused. The petitioners arrayed as accused No. 4 challenge the proceedings. The principal contention raised is that the complaint does not disclose any specific role to the petitioner and that an omnibus averment has been made in para 10 to the effect that they along with others Directors were in control and in charge of its day-to-day affairs of the accused company.

4. Learned Counsel for the petitioner relied upon the decision of the Supreme Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Anr. . He also relied upon the subsequent judgment of the Supreme Court in Saroj Kumar Paddar v. State (NCT of Delhi) and Anr. , and contended that the respondent could not have maintained the proceedings as far as the petitioners are concerned, in the absence of specific averments, particularly, in view of the requirements under Section 141, which casts vicarious liability only on those directors and named officials.

5. Counsel for the respondent opposed the petition and contended that the averments in para 10 are sufficient to meet the requirements of law. He sought to place reliance upon the judgment of the Supreme Court, Raj Lakshmi Mills v. Shakti Bhakoo , to say, as well as the judgment in Shri Pankaj Narang v. State and Anr. , to say that at the stage of summoning and when evidence is yet to be led by the parties, the High Court ought not to act on assumptions of facts, which render findings that one more accused is responsible for the conduct of business of a company. He also submitted that the decision in S.M.S. Pharmaceuticals Ltd.'s case (supra), has to be read in a liberal manner and sought to place reliance while co-relating with the findings/declaration of law in para 19 of the judgment.

6. The issue as to the precise nature of and what are the ingredients to be averred in a complaint, is far too well settled. If the contentions of the complainant are to be accepted then the mere allegation that one or other directors imp leaded in the proceedings were in charge or in control of the management and affairs of the company would be sufficient to maintain the proceedings and seek to cast vicarious liability on them. Apparently, that was not the intention of the Supreme Court, which reviewed and restated the law after going through the previous decisions, in S.M.S. Pharmaceuticals Ltd.'s case (supra). The question in any event is no longer open to debate as in the subsequent judgment in S.M.S. Pharmaceuticals Ltd.'s case (supra), rendered on facts after the decision by the three Judges (which had answered the reference) recorded that the complaint has to specifically show as to how and in what manner the accused/alleged director was responsible for the conduct of business of the accused company or otherwise responsible to it in regard to its function.

7. From the above perspective, the allegations in so far as the petitioners are concerned cannot pass muster. They are bland and general in nature. It is not disputed that the petitioners did not issue two cheques, and none of them is the Managing Director.

8. In this view of the above findings the petition is entitled to succeed. The proceedings arising out of the complaint preferred by the respondent, against M/s. Viniyoga Clothex Ltd., pending before the Metropolitan Magistrate, to the extent they concern the petitioners are hereby quashed.

9. The petition is allowed to the above extent. No costs.