Delhi High Court

C.P. Vohra vs Panalpina World Transport I.P. on 12 July, 2010

Author: Sanjiv Khanna

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+      CRL.M.C. 2233/2007
                                         Date of decision: 12th July, 2010

       RAJAN MAYOR & ANR.                  .... Petitioner
                      Through             Mr. Manish Gandhi, Advocate.

                      versus

       PANALPINA WORLD TRANSPORT            .... Respondent
                        Through      Mr. Mike Desai, Adv.
+      CRL.M.C. 1881/2007
       C.P.VOHRA              .... Petitioner
                        Through      Mr. Manish Gandhi, Advocate.

                      versus

       PANALPINA WORLD TRANSPORT I.P.    .... Respondent
                      Through     Mr. Mike Desai, Advocate.
       CORAM:
       HON'BLE MR. JUSTICE SANJIV KHANNA

                                      ORDER

1. These two petitions under Section 482 of the Code of Criminal

Procedure, 1973 have been filed by M/s Mayor International Ltd, Mr.

Rajan Mayor and Mr. C.P. Vohra for setting aside the order dated 25th

July, 2006 by which cognizance of offence under Section 138 of

Negotiable Instruments Act, 1882 was taken and the petitioners were

summoned to appear in a criminal complaint filed by M/s Panalpina

World Transport (India) Private Limited, the respondent No.1 herein.

2. Learned counsel for the petitioners submits that statutory

CRL.M.C. Nos. 2233/2007 & 1881/2007 Page 1 notice was not issued and served on M/s Mayor International

Limited. The petitioners have, however, filed a copy of the notice

dated 23rd June, 2006 with additional documents filed on 30th

September, 2009. The said notice has been addressed to M/s Mayor

International Limited at 39/7 Milestone, Delhi Jaipur Highway, Sector

35, Gurgaon, which admittedly is a registered address of the said

company. In view of the Section 51 of the Companies Act, 1956, I do

not think that the summoning order can be quashed in view of the

above factual matrix. The notice was sent by registered post. The

acknowledgement card or the envelope containing the letter may

have mentioned the name of Mr. C.P. Vohra along with M/s Mayor

International Limited but from the heading of notice itself it is clear

that the same was addressed to M/s Mayor International Limited.

3. In the complaint Mr. Rajan Mayor has been described as a

Managing Director of M/s Mayor International Limited. He has also

signed the cheque which had bounced and is the subject matter of

the criminal proceedings. In these circumstances, I do not see any

reason to interfere with the summoning order passed by the trial

court. The petition CRL.M.C. 2233/2007 under Section 482 of the

Code of Criminal Procedure, 1973 filed by M/s Mayor International

CRL.M.C. Nos. 2233/2007 & 1881/2007 Page 2 Limited and Mr. Rajan Mayor is accordingly dismissed.

4. Mr. C.P. Vohra is not a Director of M/s Mayor International

Limited. The only allegation made against him in the complaint is that

he at that time was the Vice President-Marketing of M/s Mayor

International Limited and was in-charge of and responsible for

conduct of day-to-day functioning of the said company. The relevant

paragraph of the complaint reads as under:-

"5. The Accused have deliberately caused the said cheque to dishonor with the intention to cheat and cause substantial loss to the Complainant. Accused No.2 is the Managing Director and Accused No.3 is the Vice President- Marketing, respectively of Accused No.1 Company and are in-charge of and responsible for conduct of day-to-day functioning of the Accused No.1 Company".

5. The allegations made in the complaint do not make out a case

for summoning of Mr. C.P. Vohra and satisfy the requirements of

Section 141 of the Negotiable Instruments Act, 1882. A similar

provision under the Foreign Exchange Regulation Act, 1973 has been

interpreted by the Supreme Court in the case of Girdhari Lal Gupta v.

D.H. Mehta, (1971) 3 SCC 189 and it has been observed:-

"6. What then does the expression "a person in-charge and responsible for the conduct of the affairs of a company" mean? It will be noticed that the word "company" includes a firm or other association, and the same test must apply to a

CRL.M.C. Nos. 2233/2007 & 1881/2007 Page 3 director in-charge and a partner of a firm in- charge of a business. It seems to us that in the context a person "in-charge" must mean that the person should be in over-all control of the day to day business of the company or firm. This inference follows from the wording of Section 23-C(2). It mentions director, who may be a party to the policy being followed by a company and yet not be in-charge of the business of the company. Further it mentions manager, who usually is in charge of the business but not in over-all charge. Similarly the other officers may be in-charge of only some part of business."

6. Reference also can be made to the recent judgment of the

Supreme Court in the case of National Small Industries Corpn. Ltd. v.

Harmeet Singh Paintal, (2010) 3 SCC 330 where it has been observed

as under:-

"13. Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent 1 was in charge of or was responsible to the accused Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability.

14. A company may have a number of Directors and to make any or all the Directors as accused in a complaint merely 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 is not a sufficient or adequate fulfilment of the requirements under Section 141.

15. In a catena of decisions, this Court has held that for making Directors liable for the offences committed by the company under Section 141 of the Act, there must be specific averments against the Directors, showing as to how and in what manner the Directors were

CRL.M.C. Nos. 2233/2007 & 1881/2007 Page 4 responsible for the conduct of the business of the company.

XXXX

20. Section 141 of the Act has been interpreted by this Court in various decisions. As to the scope of Section 141 of the Act, a three- Judge Bench of this Court considered the following questions which had been referred to it by a two-Judge Bench of this Court in S.M.S. Pharmaceuticals Ltd. (1) v. Neeta Bhalla:

"(a) Whether for purposes of Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the allegation read as a whole fulfil the requirements of the said section and it is not necessary to specifically state in the complaint that the person accused was in charge of, or responsible for, the conduct of the business of the company.

(b) Whether a Director of a company would be deemed to be in charge of, and responsible to, the company for conduct of the business of the company and, therefore, deemed to be guilty of the offence unless he proves to the contrary.

(c) Even if it is held that specific averments are necessary, whether in the absence of such averments the signatory of the cheque and or the Managing Directors or Joint Managing Director who admittedly would be in charge of the company and responsible to the company for conduct of its business could be proceeded against."

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39. From the above discussion, the following principles emerge:

(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.

(ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.

CRL.M.C. Nos. 2233/2007 & 1881/2007 Page 5

(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.

(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred.

(v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.

(vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint.

(vii) 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."

7. Learned counsel for the respondent has submitted that Mr.

C.P. Vohra has filed a suit on behalf of M/s Mayor International

Limited in the Delhi High Court against the said respondent. He has

drawn my attention to the plaint of the said suit. In paragraph 1 of

the plaint it is mentioned that M/s Mayor International Limited is a

company registered under the Companies Act and Mr. Rajan Mayor is

its Managing Director. It is further stated that Mr. C.P. Vohra being

CRL.M.C. Nos. 2233/2007 & 1881/2007 Page 6 Vice President-Marketing has been authorized to file the plaint vide

resolution dated 3rd October, 2006 passed by the Board of Directors

of the said company. This, does not shows that Mr. C.P. Vohra was in-

charge of and responsible for conduct of day-to-day functioning of

the said company. He had followed the instructions of the Board of