Delhi High Court

Dr. N.K.Sengupta vs State Of Nct Of Delhi & Ors. on 6 November, 2008

Author: Aruna Suresh

                  Reportable
*     HIGH COURT OF DELHI AT NEW DELHI


+     Crl.M.C. 3991/2007 & Crl.M.A.14672-73/2007


                                  Date of decision: 06.11.2008


      DR.N.K.SENGUPTA              ...... Petitioner
                    Through : Mr. Asim Naeem, Advocate

                                Versus

      STATE OF NCT DELHI & ORS. ..... Respondents
               Through : Mr. O.P. Saxena, APP.

%
      CORAM:
      HON'BLE MS. JUSTICE ARUNA SURESH

     (1) Whether reporters of local paper may be
         allowed to see the judgment?

     (2) To be referred to the reporter or not?                Yes

     (3) Whether the judgment should be reported
         in the Digest ?                                       Yes

                          JUDGMENT

ARUNA SURESH, J. (Oral)

1. Respondent No.2, complainant Mr. M.N. Vatsa had

filed a complaint under Section 138/142 Negotiable

Instruments Act (hereinafter referred to as

„N.I.Act‟) read with Section 406/420 Indian Penal

Code (IPC) against M/s. Global Finance

Corporation Ltd. accused No.1 and the present

Petitioner who has been arrayed as accused No.2 in

the said complaint. Case of the complainant as

asserted in the complaint is that he was lured by

the terms and conditions of the Fixed Deposit

Scheme floated by accused No.1. He deposited a

sum of Rs.15,000/- with accused No.1 on 21.5.97

vide FDR No.C0004727 for a period of 12 months

at the interest rate of 15% per annum and the

maturity amount payable was Rs.17,412/-. For

repayment of the said amount, accused company

issued Post dated cheque No.216882 dated 20.5.98

drawn on Vijaya Bank, Barakhamba Road, New

Delhi. However, this cheque on presentation was

dishonoured with the remarks „insufficient funds‟.

Thereafter complainant sent a notice on 13.6.98

which was duly received by the accused company

and in reply accused company assured payment of

the dishonoured cheque but accused No.1 failed to

make the payment of the impugned cheque.

Hence, complainant filed this complaint before the

court.

2. Learned trial court after considering the affidavit of

the complainant filed in evidence, was pleased to

summon the petitioner and the other accused for

offence under Section 138 of the Act vide his order

dated 30.4.2002. Since petitioner did not appear in

the court, the trial court was constrained to issue

NBW against the Petitioner and since thereafter

petitioner has been appearing in the said

complaint, however accused No.1 company has not

yet been served of the summons issued by the

court. Aggrieved by the order dated 30.4.2002,

petitioner has filed the present petition before this

court. Respondent was duly served with the notice

of the petition but has not appeared either in

person or through counsel.

3. Petitioner was admittedly working as Chairman of

the company. However, he resigned from the

company vide his letter dated 20.01.1997.

Petitioner has also placed on the record letter

issued by Reserve Bank of India addressed to the

Managing Director of accused No.1 company

whereby it issued prohibitory order under Section

45 MB of Reserve Bank of India Act, 1934 against

the company. In para 2 of this letter, the Reserve

Bank of India has specifically mentioned the name

of the petitioner who was working as Chairman in

company having resigned w.e.f. 28.2.1997.

4. After his resignation, the petitioner seized to have

any interest as Chairman or Director in accused

No.1 company. As per the complainant himself, he

had deposited Rs.15,000/- on 21.5.1997. In other

words, this deposit was made after the petitioner

had already resigned from accused No.1 company.

The impugned cheque which was issued by the

company was dated 20.5.1998 and the maturity

period of the FDR was 12 months. Therefore, at

the time when the cheque was issued and was

presented with his banker by the complainant for

encashment, the petitioner had no interest of any

nature in the accused No.1 company and was not

responsible for day to day business of the company

as a Director or Chairperson as the case may be. A

person who was neither the Chairman nor the

Director of the company at the time of issuance of

the cheque, cannot be made liable for offence

under Section 138 of the Act. If the cheque on

presentation is dishonoured, such vicarious liability

cannot be enforced against a person who seized to

be a Director of the company at that time.

5. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla

and Anr. (2005) 8 SCC 89, while considering the

scope of Section 141 of the Act, it was observed:-

"10. While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. The key words which occur in the section are „every person‟. These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words: „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, etc.‟

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 with the commission of a crime at the relevant time have been subjected to action.

11. A reference to sub-section (2) of Section 141 fortifies the above reasoning because sub-section (2) envisages direct involvement of any Director, Manager, Secretary or other officer of a company in the commission of an offence. This section operates when in a trial it is proved that the offence has been committed with the consent or connivance or is attributable to neglect on the part of any of the holders of these offices in a company. In such a case, such persons are to be held liable. Provision has been made for directors, managers, secretaries and other officers of a company to cover them in cases of their proved involvement..........

18. To sum up, there is almost unanimous judicial opinion that

necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of Section 141 has to be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within Section 141, he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of Section

141. Even a non-director can be liable under Section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial."

6. Thus, it is clear that under Section 141 of the Act, a

person although is not personally liable for

commission of such an offence would be vicariously

liable therefor. Such vicarious liability can be

inferred so far as a company registered or

incorporated under the Companies Act is

concerned only if the requisite statements, which

are required to be averred in the complaint

petition, are made so as to make the accused

persons vicariously liable for the act of the

company. In this case the petitioner was neither

the chairman nor the Director nor was responsible