Delhi High Court

Smt. Bina Sharma vs Hdfc Bank Ltd. on 10 August, 2009

Author: V.K.Shali

*             THE HIGH COURT OF DELHI AT NEW DELHI

+                      Crl.M.C. No.194/2008

                                       Date of Decision : 10.8.2009

SMT. BINA SHARMA                                    ......Petitioner
                                 Through:     Mr.Amand Anand,
                                              Advocate

                                  Versus

HDFC BANK LTD.                                       ...... Respondent
                                 Through:     Mr. Manish Paliwal,
                                              Advocate

CORAM :
HON'BLE MR. JUSTICE V.K. SHALI

1.     Whether Reporters of local papers may be
       allowed to see the judgment?                    YES
2.     To be referred to the Reporter or not ?         YES
3.     Whether the judgment should be reported
       in the Digest ?                                 YES

V.K. SHALI, J. (Oral)

1. This is a petition filed by the petitioner for quashing the

summoning order dated 18.10.2006 passed the learned

MM, Patiala House Courts in respect of Complaint case No.

615/1 under Section 138 of the Negotiable Instruments

Act.

2. Briefly stated the facts of the case are that the respondent

filed a complaint under Section 138 r/w Section 141 of the

Negotiable Instruments Act alleging therein that the

petitioner being the Director of a company known as M/s

Vardan Agrotech Pvt. Ltd. Dwarka Vihar, 43 Km Stone,

NH1, G T Road, District Sonepat, Haryana had borrowed a

sum of Rs.30 lacs by way of loan. M/s Vardan Agrotech

Pvt. Ltd. was made accused no.2, Dwarka Nath, Chairman-

cum-Managing Director stood a corporate guarantor to

secure the aforesaid facility on the basis of a Board

Resolution dated 11.8.2005. It is alleged that the said

company towards the repayment of the said loan had

issued a cheque bearing No.031079 dated 28.7.2006 drawn

on Bank of India Branch Sonepat for a sum of Rs.

20,60,000/- in favour of the respondent /bank. However,

on presentation, the said cheque was dishonoured on 9th

August, 2006 on the ground that the account in question

did not have sufficient funds. A legal notice dated

22.8.2006 is purported to have been sent to the Company

M/s Vardan Agrotech Pvt. Ltd. its Chairman cum Managing

Director Dwarka Nath, Mrs.Indira Sharma and Mrs. Bina

Sharma, the petitioner herein.

3. It is alleged in the complaint that since no payment was

made to liquidate the aforesaid liability despite service of

notice, accordingly, the complaint in question was filed

against all the aforesaid persons including the petitioner.

4. The allegations against the present petitioner in the

complaint were contained in para 12 of the complaint

which stated that the petitioner was the Director of accused

company and responsible to the said company for the

conduct of business and also being incharge of the day to

day affairs of the said company and was thus jointly and

severely liable for all the acts of the accused company.

The exact averment made in para 12 is reproduced as

under:-

"That Accused No.3 and 4 being the Directors of Accused No.2 Company are responsible to the Accused No.2 Company for the conduct of business and also being in charge of the day to day affairs of Accused No.2 Company are thus, jointly and severally liable for the acts and liabilities of the Accused No.2 Company."

5. On the basis of the aforesaid complaint, the respondent

/complainant filed an affidavit by way of evidence of one

Sh.S.K.Jha constituted attorney of the bank. In this

affidavit also so far as the averment made against the

petitioner are concerned, they are nothing but reproduction

of the averment made in the complaint itself.

6. A perusal of the complaint and the affidavit by way of

evidence shows that the affidavit is nothing but a

reproduction of the averment made in the complaint itself.

7. On the basis of the aforesaid facts and prima facie

evidence, the learned Magistrate passed an impugned order

of summoning the petitioner.

8. The petitioner feeling aggrieved by the order of summoning

has chosen to file the present petition against the

impugned order of summoning dated 18.10.2006 and has

also prayed for quashing of the complaint qua the

petitioner.

9. I have heard the learned counsel for the petitioner as well

as the learned counsel for the respondent/bank.

10. The main contention of the learned counsel for the

petitioner has been that the respondent /bank apart from

making a bald averment in the complaint with regard to the

petitioner being the Director and incharge of day to day

business of the company in question, there is not even an

iota of evidence adduced by the complainant at the pre-

summoning stage to establish as to how the petitioner was

incharge and responsible and what were the different acts

and functions which were being discharged by her so as to

bring her within the ambit of law under Section 141 of the

Act. In the absence of such an evidence, the counsel

submitted that the order of summoning could not be

sustained. The learned counsel in order to support his

submission placed reliance on the following judgments,

which are :-

"N.K.Wahi Vs. Shekhar Singh & Ors. AIR 2007 SC1454 Ramraj Singh Vs. State of M.P. & Anr. 2009 (5) SCALE 670 Saroj Kumar Poddar Vs. State (NCT of Delhi) & Anr. AIR 2007 SC 912"

11. The learned counsel has also referred to a judgment of this

Court in Harmeet Singh Paintal Vs. State (NCT of Delhi)

& Ors. 2007 (4) JCC (NI) 396 wherein the facts were

somehow akin to the averments made in the case in hand.

12. The learned counsel for the respondent contested the

submission of the learned counsel for the petitioner and

contended that so far as prima facie proof of showing the

petitioner as incharge in respect of day to day affairs of the

business is concerned, the initial onus has been discharged

by the respondent and therefore, it was essentially for the

petitioner to adduce evidence during the course of trial to

establish that she was not incharge and responsible for the

conduct of the business of the company. The learned

counsel has tried to distinguish the judgment in Saroj

Kumar Poddar's case both on facts with regard to the

averments made in the complaint in the said case as well

as on the question that the petitioner in that case was

alleged to be the Director of a Public Limited Company as

against the Private Limited Company in the instant case

where all the Directors including the petitioner were

essentially family members. Thus the learned counsel for

the respondent tried to distinguish the liability of a Director

in a Public Ltd. Company by contending that in a Public

Limited Company, there is a possibility of somebody being

an independent Director who may not be aware of the day

to day functioning of the company in question, as against a

company which is essentially a closely held family company

where each and every member of the family who is the

Director will be invariably be aware of the day to day

functioning of the company.

13. On the basis of these facts, it was urged that the order of

summoning was perfectly justified and there is no merit in

the prayer of the petitioner for quashing of the complaint.

14. I have carefully considered the respective submissions and

gone through the record. There is no dispute about the fact

that by virtue of Section 141 of the Act a Director of a

company who is incharge and responsible for the day to

day functioning of the company is made liable for the

offence under Section 138 of the Negotiable Instruments

Act but before a person is brought within the ambit of

vicarious liability as envisaged under Section 141 of the

Act, two things must be clearly established. Firstly, there

must be an averment in the petition to the effect that the

person sought to be enroped in the capacity of a Director is

incharge and responsible for the day to day functioning of

the company and secondly, that the averment should be

made good by the complainant by adducing pre-

summoning evidence or from the documents proved during

the course of pre summoning evidence that a person

should be actually incharge and responsible for the day to

day functioning of the company.

15. It has been seen that in complaint, the complainant simply

reproduced the language of Section 141 of the Act so as to

enrope a Director. The Supreme Court in both Saroj

Kumar Poddar's case as well as in N.K.Wahi's case has

specifically observed that it is not necessary that the exact

language of Section 141 of the Act must be reproduced in

the complaint but there is no harm in case a person

reproduces the exact language of Section 141 of the Act so

as to bring a Director within the ambit of vicarious liability,

but then he is expected either to mention in the complaint

itself as to how a person is incharge and responsible or if

that is omitted at least by adducing pre summoning

evidence which may be either by way of an affidavit or

otherwise as to how a Director is incharge and responsible

for the conduct of the business of a company. Thereby

meaning that merely because an averment is made by a

complainant or that there is reproduction of the ingredients

mentioned of Section 141 of the Act would not be sufficient

to bring a Director within the ambit of Section 141 of the

Act unless and until the complainant shows either by way

of documents or by way of a evidence prima facie that the

Director is incharge and responsible for the day to day of

business it is only when such initial onus is discharged by

the petitioner that the said Director can be enroped under

vicarious liability under Section of 141 of the Act and the

onus will shift on to the said Director to show that either he

was not incharge and responsible for the conduct of the

business of the firm or the said cheque was issued without

his knowledge or he had exercised all due diligence to

prevent the commission of such an offence.

16. In the instant case, the order of summoning which has

been passed by the learned Magistrate in my view is not

sustainable on account of the fact that the petitioner

although he has made an averment that the petitioner was

incharge and responsible for the day to day conduct of the

business of the company but the respondent/complainant

failed to show by any evidence either in the shape of his

own affidavit or even from the documents which have been

proved during the course of recording of pre-summoning

evidence that she was incharge and responsible and

therefore, the order is not legal and sustainable in the eyes

of law.

17. The contention of the learned counsel for the respondent

/bank is that there is a distinction between a Public

Limited company and a Private Limited Company so far as

the Directors are concerned, does not impress this Court

for the simple reason that in matters of a criminal liability

under Section 141 of the Act and vicarious liability as

envisaged under the said Section, no distinction can be

made between the Director of a Public Imitated Company

and the Director of a Private Ltd. Company. In case we

make such a distinction between two sets of Directors that

is no permissible in law and would be reading something in

the statute which is not in existence.

18. The learned counsel for the respondent is right in observing

that the facts in Saroj Kumar Poddar's case were

distinguishable from the facts of the case in hand so far as

the averments qua the Director of that case in comparison

to the averments made in the present complaint qua the

petitioner are concerned. Merely because the averments

made in two different cases do not match, does not in any

manner detract from the ratio which has been laid down in

the said case which is contained in para 16 of the said

judgment, which reads as under:-

"16. The question came up for consideration before a 3-Judge Bench of this Court in S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla & Anr. (2005) 8 SCC 89, wherein upon consideration of a large number of decisions this Court opined :

"While analyzing 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 persons 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 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 provisions. The liability arises from being in charge of and responsible for 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 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 persons" 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."

19. Similar is the view expressed by the Supreme Court in

Ramraj Singh's case (supra) as well as the learned Single

Judge of this Court in Harmeet Singh's case (supra).

20. For the reasons mentioned above, I am of the considered

opinion that the order of summoning which has been

passed in the instant case is not sustainable in the eyes of

law inasmuch as the petitioner has not established by any

iota of evidence that the petitioner was incharge and

responsible of the conduct of the business of the firm nor

any document has been placed on record to show that as to

how she was the incharge except that the affidavit of the

respondent/complainant reproduce the averments made in