Hardeep Singh Nagra vs State & Another
2011 Latest Caselaw 1280 Del

          THE HIGH COURT OF DELHI AT NEW DELHI

%                           Judgment Reserved on: 25.2.2011
                            Judgment Pronounced on: 4.3.2011

+Crl.   M.A.     No.2039/2010             in   Crl.   M.C.     No.3200/2009
+Crl.   M.A.     No.1965/2010             in   Crl.   M.C.     No.3678/2009
+Crl.   M.A.     No.2037/2010             in   Crl.   M.C.     No.3693/2009
+Crl.   M.A.     No.1963/2010             in   Crl.   M.C.     No.3694/2009

#             HARDEEP SINGH NAGRA                                  .....Petitioner

                                       - versus -

              State & Another                                    .....Respondents

Advocates who appeared in this case:

For the Petitioner:Mr. Harpreet Singh, Mr. Kuldip Singh and Mr. Sanjay Bhardwaj, Advs.

For the Respondent:Mr. Janender Kumar Chumbak for R-2.

CORAM:-

HON'BLE MR JUSTICE V.K. JAIN

1. Whether Reporters of local papers may Yes be allowed to see the judgment?

2. To be referred to the Reporter or not? Yes

3. Whether the judgment should be reported Yes in Digest?

V.K. JAIN, J

1. Vide these applications, the applicant is seeking

recall of the order dated 21st January, 2010 whereby the

criminal complaints filed by it, to the extent they pertained

to the petitioner Hardeep Singh Nagra, were dismissed.

Criminal complaints under Section 138 of the Negotiable

Instruments Act were filed by the applicant/complainant

M/s Kotak Mahindra Prime Ltd. against Routes Car Rental

Pvt. Ltd. and 3 others, including the petitioner Hardeep

Singh Nagra, who was impleaded as Accused No.4 in the

complaint. It was alleged in para 3 of the complaint that

Accused Nos. 2 and 3 i.e. Sukhdev Dhillon and Syed Akthar

Arshad were the directors of Accused No.1 company and

were officers engaged in day to day affairs of the company.

As regards, the petitioner/accused No.4 Hardeep Singh

Nagra, it was alleged in para 4 of the complaint that he had

given personal guarantee to the complainant for the

repayment of the loan advanced by the complainant

company. The case of the complainant before the learned

Metropolitan Magistrate was that the cheques, which had

been issued to it towards partial discharge of the liability,

when presented to the bank were dishonoured for want of

sufficient funds and the accused persons had failed to make

payment of the amount of the cheques despite notice to

them.

2. When the petitions filed by Hardeep Singh Nagra

were taken up for consideration on 21st January, 2010, no

one appeared for the complainant/applicant. This Court

while allowing the petitions, inter alia, observed as under:-

"3. The petitioner committed no offence punishable under Section 138 of Negotiable Instruments Act, merely by giving guarantee for the loans taken by accused No. 1 and 2. It is the drawer of the cheque who is liable to punishment in case the cheque used by him towards discharge in full or in part of a debut or liability, when presented to his bank for encashment, is dishonoured for want of funds and he fails to make payment within 15 days of receipt of notice envisaged in proviso (b) to Section 138 of the Act. There is no allegation in the complaint that the cheques in question were drawn by the petitioner. Section 138 of Negotiable Instruments Act does not fasten any criminal liability on the guarantor of a loan secured or sought to be paid by way of a cheque, which, when presented to the bank for encashment is dishonoured for want of funds. Of course, the guarantor incurs a civil liability to pay the debt guaranteed by him and his liability may be joint as well as several, but, he is not liable to be punished under Section 138 of Negotiable Instruments Act.

4. Though learned counsel for the petitioner fairly conceded that the petitioner is a Director in M/s Routes Car Rentals (India) Pvt. Ltd which has been arraigned as accused no. 1, there is no averment to this effect in the complaint. If the offence under Section 138 of Negotiable Instruments Act is committed by a company, every person who is in- charge of and responsible to the company for conduct of its business, at the time of

commission of offence, is also liable to punishment on account of vicarious liability created by Section 141 of the Act. This is not the case of the complainant that petitioner No.4 was also a person in- charge of and responsible to the company M/s Routes Car Rentals (India) Pvt. Ltd. for conduct of its business. In the absence of such an averment in the complaint it also cannot be said that the petitioner is vicariously liable for the offence committed by the company under Section 138 of the Negotiable Instruments Act on account of dishonor of the cheques issued by it and its failure to make payment even after the receipt of notice from the complainant."

3. It is alleged in the applications under consideration

that though the complainant did not make any averment in

the complaint to the effect that petitioner was incharge of

business and responsible for conduct of the day to day

affairs of the company at the time of commission of offence,

an application for amendment was filed by it in which it was

specifically stated that he was one of the directors of the

company, who was also incharge of day to day affairs of the

company at the time when the cheques were handed over to

the complainant, were presented for payment and were

dishonoured and the learned Metropolitan Magistrate had

taken cognizance only thereafter.

4. A perusal of the record of the trial Court shows

that an application was filed by the complainant alleging

therein that the accused No.4 was also one of the directors

of the company, who was also incharge of day to day affairs

of the company at the time when cheques in question were

handed over to the complainant company, were presented

for payment and were dishonoured. A perusal of the order

of learned Metropolitan Magistrate dated 19th March, 2009

shows that the application was considered by him while

taking cognizance and summoning the accused persons. In

his affidavit filed initially by way of evidence, the sole

witness produced by the complainant did not claim that

respondent No.4 was a director of accused No.1 company

and was also incharge of its day to day affairs when the

offence under Section 138 of the Negotiable Instruments Act

was committed. An additional affidavit dated 19th March,

2009 was filed by the complainant, which also finds

mention in the order passed by the learned Metropolitan

Magistrate on that date and was thus considered by him

before taking cognizance. It was averred in the affidavit that

accused No.4 was involved in day to day affairs of accused

No.1 company, when the cheques were issued and

dishonoured.

5. The order passed by the learned Metropolitan

Magistrate on 19th March, 2009 does not indicate that

amendment of the complaint sought by the applicant was

allowed by him, though the averments made therein as also

in the additional affidavit filed by the complainant were

considered. In any case, there is no provision in the Code of

Criminal Procedure for amendment of a written complaint

made to the Magistrate. Unlike Code of Civil Procedure, the

Code of Criminal Procedure does not confer any inherent

power on the Magistrate and he can exercise only those

powers, which have been conferred on him under the Code.

6. The question whether amendment of a complaint

can be allowed or not, came to be considered by the

Supreme Court in Subodh S. Salaskar v. Jayprakash M.

Shah & Another, VII (2008) SLT 127. In that case, the

complaint petition was sought to be amended by adding

Section 420 of IPC in the complaint. It was held by the

Court that the Magistrate had no jurisdiction to allow the

amendment of the complaint petition at a later stage.

Similar view was taken by the Kerala High Court in

T.J. Joy. s/o Joseph and Ors. V. Food Inspector and

Anotheri, 2008 Crl. L.J. 4643.

In Kunstocom Electronics (I) Ltd. v. Stae of M.P.

& Others, 2002(5) MPLJ 178, Madhya Pradesh High

Court, noticing lack of any provision in the Code of Criminal

Procedure giving right to the parties to file an application for

amendment of pleadings and power to lower Courts to allow

such an application, held that the trial Court committed an

error in entertaining an application for amendment of the

complaint. The Court was of the view that if there was any

misstatement of fact in the complaint because of bona fide

mistake or intention, the same could be explained in the

court statement by the complainant.

7. In Adalat Prasad v. Rooplal Jindal and Others,

(2004(7 SCC 338, Supreme Court held that in the absence

of specific power given to him by the Code, the Magistrate

did not have power to recall the process issued by him

against an accused. The Court did not agree with the

contention that no specific provision of law was required for

recalling an erroneous order and felt that recalling the

process issued against the accused runs counter to the

scheme of the Code, which had not provided for review of

his order by the Magistrate. This view was reiterated by

Supreme Court in Subramanium Sethuraman v. State of

Maharashtra and another, (2004) 13 SCC 324.

In Bharat Parikh v. Central Bureau of

Investigation and another, (2008) 10 SCC 109, Supreme

Court held that the Magistrate had no jurisdiction in law to

recall an order framing charge against an accused.

8. In Dharmeshbhai Vasudevbhai and others v.

State of Gujarat and others, (2009) 6 SCC 576, Supreme

Court observed that the Magistrate does not possess any

inherent power.

9. In Ramrajsingh v. State of M.P. and another,

(2009) 6 SCC 729, Supreme Court, inter alia, held as

under:-

"8. To launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction. There should be clear and unambiguous allegation as to how the Directors are incharge and responsible for the conduct of the business of the company. The description should be clear. It is true that precise words from the provisions of the Act need not be reproduced and the court can always come to a conclusion in facts of each case. But still in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable."

10. However, there is no legal bar on the Magistrate

taking the additional affidavit/evidence of the complainant

before taking cognizance and proceeding against the

accused persons. Section 200 of the Code of Criminal

Procedure provides that a Magistrate taking cognizance of

an offence on complaint shall examine upon oath the

complainant and the witnesses present, if any. Section 2(d)

of the Code of Criminal Procedure, which defines „complaint‟

makes it clear that the complaint can be made orally or in

writing. Therefore, making an oral complaint to the

Magistrate is not prohibited in law. While taking cognizance

and deciding whether there is sufficient ground for

proceeding, the Magistrate needs to take into consideration

not only the averments made in the written complaint made

to him, but also the statement made by the complainant

and his witnesses before him under Section 200 of the Code

of Civil Procedure. If the complainant has omitted some

facts from the written complaint, nothing in law prevents

him from including those facts in his statement to the

Magistrate. The Magistrate is duty bound to consider those

factual averments even if they are not contained in the

written complaint made to him. Therefore, while passing

the order dated 19th March, 2009, the learned Metropolitan

Magistrate has rightly taken the additional affidavit filed by

the complainant by way of evidence, into consideration.

11. The main issue, which comes up for consideration

in this case, is whether the averments made in the

additional affidavit filed by the complainant disclose

commission of offence under Section 138 read with Section

141 of the Negotiable Instruments Act.

12. In N.K. Wahi vs. Sekhar Singh & others (2007)

9 SCC 481, the Hon‟ble Supreme Court, inter alia, held as

under:-

"5. To launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction. There should be clear and unambiguous allegation as to how the Directors are incharge and responsible for the conduct of the business of the company. The description should be clear. It is true that precise words from the provisions of the Act need not be reproduced and the court can always come to a conclusion in facts of each case. But still in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable."

13. In K.K. Ahuja vs. V.K. Vora and Anr., 2009 (3)

JCC (NI) 194, the appellant before the Hon‟ble Court had

impleaded 9 persons as accused. They included, the

company, its Chairman, four Directors, Vice-President

(Finance), General Manager and Deputy General Manager. It

was alleged in the complaint that "at the time of the

commission of offence, accused 2 to 9 were in-charge of and

responsible for the conduct of day to day business of

accused No. 1" and therefore they were deemed to be guilty

of offence under Section 138 read with Section 141 of the

Act and Section 420 of the Indian Penal Code. The appellant

also alleged that "respondents 2 to 9 were directly and

actively involved in the financial dealings of the company"

and that the accused had failed to make payment of the

cheques which were dishonoured. In the pre- summoning

evidence, the appellant "reiterated that accused 2 to 9 were

responsible for the conduct of day to day business of first

accused company at the time of commission of offence".

The Supreme Court, after considering its earlier

decisions on the subject, inter alia, observed as under:

"The prevailing trend appears to require the complainant to state how a Director who is sought to be made an accused, was in charge of the business of the company, as every director need not be and is not in charge of the business of the company. If that is the position in regard to a director, it is needless to emphasise that in the case of non-director officers,

there is all the more the need to state what his part is with regard to conduct of business of the company and how and in what manner he is liable."

On the question as to who would be persons

responsible to the company for conduct of its business, the

Court inter alia held as under:

"A company though a legal entity can act only through its Board of Directors. The settled position is that a Managing Director is prima facie in charge of and responsible for the company's business and affairs and can be prosecuted for offences by the company. But insofar as other directors are concerned, they can be prosecuted only if they were in charge of and responsible for the conduct of the company's business. A combined reading of Sections 5 and 291 of Companies Act, 1956 with the definitions in clauses (24), (26), (30), (31), (45) of Section 2 of that Act would show that the following persons are considered to be the persons who are responsible to the company for the conduct of the business of the company :

(a) the managing director/s;

(b) the whole-time director/s;

(c) the manager;

(d) the secretary;

(e) any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act;

(f) any person charged by the Board with the responsibility of complying with that provision (and who has given his consent in that behalf to the Board); and

(g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors."

"15. Section 141 uses the words "was in charge of, and was responsible to the company for the conduct of the business of the company". It is evident that a person who can be made vicariously liable under Sub-section (1) of Section 141 is a person who is responsible to the company for the conduct of the business of the company and in addition is also in charge of the business of the company..."

"....The meaning of the words "person in charge of the business of the company" was considered by this Court in Girdhari Lal Gupta v. D.N. Mehta [1971 (3) SCC 189] followed in State of Karnataka v. Pratap Chand [1981 (2) SCC 335] and Katta Sujatha v. Fertiliser & Chemicals Travancore Ltd. [2002 (7)SCC655] . This Court held that the words refer to a person who is in overall control of the day to day business of the company. This Court pointed out that a person may be a director and thus belongs to the group of persons making the policy followed by the company, but yet may not be in charge of the business of the company; that a person may be a Manager who is in charge of the business but may not be in overall charge of the business; and that a person may be an officer who may be in

charge of only some part of the business.

16. Therefore, if a person does not meet the first requirement, that is being a person who is responsible to the company for the conduct of the business of the company, neither the question of his meeting the second requirement (being a person in charge of the business of the company), nor the question of such person being liable under Sub-section (1) of Section 141 does not arise. To put it differently, to be vicariously liable under Sub-section (1) of Section 141, a person should fulfill the 'legal requirement' of being a person in law (under the statute governing companies) responsible to the company for the conduct of the business of the company and also fulfill the 'factual requirement' of being a person in charge of the business of the company."

"(iii) In the case of a Director, Secretary or Manager (as defined in Section 2(24) of the Companies Act) or a person referred to in clauses (e) and (f) of Section 5 of Companies Act, an averment in the complaint that he was in charge of, and was responsible to the company, for the conduct of the business of the company is necessary to bring the case under Section 141(1). No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under Section 141(2) by making necessary averments relating to consent and connivance or negligence, in the complaint, to bring the matter under that Sub-section".

14. In the cases before this Court, this is not the case

of the complainant in the additional affidavit filed by it that

the petitioner Hardeep Singh Nagra was the Managing

Director, Joint Managing Director or a whole time director of

the accused company. Therefore, the petitioner is not one of

the persons who falls under the category of "persons who

are responsible to the company for the conduct of the

business of the company", listed in the above quoted para of

the judgment. Therefore, even if it is stated that he was

incharge of the business of the company or that he was

incharge of day to day management of the company or that

he was incharge and responsible to the company for

conduct of the business of the company that by itself would

not make him vicariously liable under Sub-section (1) of

Section 141 of the Negotiable Instruments Act. In the

additional affidavit filed by the complainant on 19th March,

2009, there is no averment that the petitioner Hardeep

Singh Nagra was incharge of the business of Routes Car

Rental Pvt. Ltd. There is no averment in this affidavit that

he was incharge of day to day management of the company.

There is no averment that he was incharge of and

responsible to the company for conduct of the business of

the company. The only averment made against him is that

he was also one of the directors of accused No.1 company,

who was engaged in day to day affairs of the company.

Being engaged in day-today affairs of the company is

altogether different from being incharge of the business of

the company or being responsible to the company for the

conduct of its business or even being incharge of day to day

management of the company. The applicant/complainant

was required to meet the twin requirement of Section 141 of

the Act firstly by alleging that the petitioner was a person

responsible for business of the company and secondly by

alleging that he was incharge of the business of the

company. Neither of these two ingredients is made out from

the bald averment that he was engaged in day to day affairs

of the company. Being engaged in day-today affairs of the

company does not make a person incharge of those affairs

since more than one person can be involved in conducting

day to day affairs of the company and everyone of them

cannot be said to be incharge of the business of the

company or of its day to day affairs.

15. In Nitin Kumar and others v. NCT of Delhi

through its Standing Counsel and another, 2010(1) JCC

[NI] 9, it was found that the complainant had generally

alleged in the plaint that the accused had been actively

involved in the affairs of accused No.1. Noticing that there

was no allegation in the complaint that the petitioner was in

overall control of the day to day business of the company

nor are there any such factual averment from which such a

control could be inferred nor there was any allegation in the

complaint that the petitioner was party to any decision to

issue cheque in question or to get it dishonoured, it was

held by this Court that the case could not be brought within

the purview of sub-Section 2 of Section 141 of the

Negotiable Instruments Act.

In the cases before this Court, there is no

allegation either in the complaint or in the affidavit filed by

the complainant that the petitioner Hardeep Singh Nagra

was party to a decision to issue the cheques which, when

presented to the bank, were dishonoured or to get those

cheques dishonoured. Admittedly, none of the cheques was

signed by him. There is no averment in the complaint that

the cheques were issued and then dishonoured with the

consent or connivance of the petitioner or that the same was

attributable to any negligence on his part. Therefore, the

case against the petitioner cannot be brought within the

purview of sub-Section (2) of Section 141 of the Negotiable

Instruments Act.

For the reasons given in the preceding paragraphs,

I see no good reason to recall the order dated 21 st January,

2010. The applications are devoid of any merit and are

hereby dismissed.

(V.K. JAIN) JUDGE MARCH 04, 2011 vk