Arun Garg vs Delhi Paints And Oil Traders
2013 Latest Caselaw 5754 Del

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*     IN THE HIGH COURT OF DELHI AT NEW DELHI

                                       Date of Decision: 13th December, 2013

+               CRL.M.C. 2679/2013 & Crl.M.A.10254/2013


      ARUN GARG                                              ..... Petitioner
                                     Through:   Mr. Kshitij Shakhdar, Adv.

                            versus

      DELHI PAINTS AND OIL TRADERS          ..... Respondent
                        Through: Mr. Rakesh Malhotra, Adv.

      CORAM:
      HON'BLE MS. JUSTICE SUNITA GUPTA


     SUNITA GUPTA, J. (Oral)

1. By virtue of the present petition, petitioner seeks quashing of

the summoning order dated 22.08.2005 whereby petitioner has been

summoned for an offence u/s 138 of the Negotiable Instruments Act,

1881 (for short "N.I Act") in Complaint Case No.546/1/13 titled as

Delhi Paints and Oil Traders v. M/s Mega Lube India Ltd & Ors.

2. The grievance of the petitioner is that the petitioner had

joined the company as a Director in the year 2001 and resigned from

the said post on 27.07.2002. Form 32 was signed and submitted with

the Registrar of Companies to this effect on 31.07.2002. Since the

date of resignation, the petitioner was not involved in any affairs of

the company. The cheques which were dishonoured were dated

18.05.2003, 16.05.2003 and 27.05.2003 which were much later than

the time when the petitioner was a Director, therefore, no liability can

be accorded against him by the respondent and he has been falsely

and maliciously implicated in the matter. Even otherwise, he was not

managing the affairs of the company at any point of time. Therefore,

no liability can be fastened on him. No notice of dishonour of the

cheque was ever sent to the petitioner or was received by him. The

petitioner came to know about the complaint case only when non-

bailable warrants were issued against him. Immediately he moved the

Court for cancellation of the warrant on 21.12.2012. On inspection of

Court file, the counsel came to know that some of the other accused

persons have also been discharged by this Court, as such it was

submitted that the summoning order is bad in law and proceedings

qua the petitioner be quashed.

3. I have heard Mr. Kshitij Shakdhar, Advocate for the petitioner

and Mr. Rakesh Malhotra, Advocate for the respondent and have

perused the record.

4. Learned counsel for the petitioner submits that the petitioner

ceased to be Director of the Company much prior to the issuance of

the cheque in question, which was allegedly dishonoured. The

petitioner even did not receive any legal notice. One of the co-

accused Kavita Aggarwal has also challenged the summoning order

and the same was quashed by this Court. Copy of the order has been

placed on record.

5. Learned counsel for the respondent, on the other hand,

contends that the challenge to the impugned order is highly belated

inasmuch as, the summons were issued on 22.08.2005 and the

petitioner has filed the present petition on 15.07.2013. Thus the

petition deserves to be dismissed on this short ground itself.

However, it was not disputed that the petition filed by one of the co-

accused Kavita Aggarwal was allowed by this Court and the

proceedings qua her has been quashed.

6. As regards the delay in approaching the Court, it was

submitted by learned counsel for the petitioner that the petitioner

came to know about the pendency of the complaint against him only

on 21.12.2012 when non-bailable warrants were issued against him

and immediately thereafter he has approached the Court, as such,

there is no delay on his part in approaching the Court.

7. I have given my considerable thoughts to the respective

submissions of learned counsel for the parties.

8. Although it is true that the order of summoning was issued on

22.08.2005 and the present petition for quashing the complaint qua

the petitioner has been filed on 15.07.2013 but there is an averment in

the petition that the petitioner came to know about the filing of the

complaint only on 21.12.2012 when non-bailable warrants was issued

against him and thereafter he immediately approached the Court.

That being so, it cannot be said that there was any delay on the part of

the petitioner in seeking the legal remedy available to him under law.

9. Coming to the factual matrix of the case, the allegations so far

as the petitioner is concerned find mentioned in para 2 of the

complaint which is reproduced as under:-

"That accused No.1 herein is the Limited Company named as M/s Mega Lube India Ltd., a company incorporated under the Companies Act and having its office at A-46, Hauz Khas, New delhi-110016. The accused No. is Managing Director, accused No. is Authorised Signatory, Accused No. is Chairman, and Accused No and are Directors of the Accused No. is the Vice President and Accused No. is General Manager and Accused No. is Deputy General Manager, and who are directly and actively involved in the financial dealings of the accused company with accused No.2 to 10. Hence all the accused are liable for action under section 138 read with 141 of the Negotiable Instruments Act."

10. Though the name of the petitioner has been mentioned at

serial no.4 in the memo of parties of the Criminal Complaint,

however, a perusal of the averment made in para 2 of the complaint

which are reproduced above shows that after the word "accused No.",

blanks have been left, as such, what is the specific role of the

petitioner cannot be deciphered.

11. The vicarious liability in case of a company or firm u/s 141 of

the N.I Act would arise if the person is in charge and responsible for

the conduct of the business of the company or the firm. What

necessary averments are required to be made in the complaint to hold

any Director or other post holder in the company as vicariously liable

for an offence committed u/s 138 of the N.I Act, 1881 by the

company has been the subject matter of discussion in a number of

cases. The legal position is now well settled with a catena of

pronouncements of the Apex Court. Despite that the complainants

normally implicate all the Directors, Company Secretaries etc of the

accused company, irrespective of whether they are actually involved

in the commission of alleged offence or not. Hon'ble Supreme Court

in S.M.S.Pharmaceuticals Ltd vs. Neeta Bhalla and Anr., (2005) 8

SCC 89 observed as follows:-

"a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.

(b)...Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for conduct of its business. The requirement of Section 141 is that 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.

(c)...the Managing Director or Joint Managing Director would be admittedly in charge of the company and responsible to the company for conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as Managing Director or Joint Managing Director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under Sub-section (2) of Section 141."

12. This view was reiterated in K.K.Ahuja v. V.K.Vora and

Another, V(2009) SLT 429; National Small Industries Corpn., Ltd

v. Harmeet Singh Paintal, (2010) 3 SCC 330; Harshendra Kumar D

v. Rebatilata Koley etc. (2011) 3 SCC 351; N.K.Wahi v. Shekhar

Singh and Ors, (2007) 9 SCC 481.

13. A bare perusal of the relevant para of the complaint

reproduced above goes to show that there is no allegation that the

petitioner is the Director and is responsible and in -charge for the day

to day affairs of the company by virtue of which vicarious liability

could be imposed upon him. As per the guidelines given in the

aforesaid legal pronouncements, it is clear that if the accused is

Managing Director or Joint Managing Director, then it is not

necessary to make specific averments in the complaint and by virtue

of their position they are liable to be proceeded with. Similarly if

accused is a Director or an officer of a company who signed the

cheque on behalf of the company then also it is not necessary to make

specific averments in the complaint. However, if any other person is

sought to be made liable on the ground that he is in charge and

responsible for the conduct of the business of the company at the

relevant time then it has to be averred as a fact as there is no deemed

liability of a Director in such cases. Problem arises where all the

persons holding office in the company are sought to be prosecuted by

the complainant, irrespective of whether they played any specific role

in the incriminating act. Issuing summons to all persons named in the

complaint without ascertaining whether they played any actual role

causes much harassment to the innocent Directors/employees named

in the complaint. With a view to ensure that while issuing summons,

the Metropolitan Magistrates dealing with the complaint cases filed

u/s 138 read with Section 151 of the N.I Act have a clear and

complete picture of the persons arrayed by the complainant so as to

hold them vicariously liable for the commission of offence by the

accused company, this Court in Sudeep Jain vs. ECE Industries Ltd.,

201(2013) DLT 461 directed that the Magistrates must seek copy of

Form 32 from the complainant to prima facie satisfy as to who were

the Directors of the accused company at the time of commission of

alleged offence and on the date of filing of the complaint case. In

addition, the Magistrate must also seek information as given in the

following table which is to be annexed by the complainant on a

separate sheet accompanying the complaint:-

a. Name of the accused Company;

b. Particulars of the dishonoured cheque/cheques;

 Person /Company in whose favour the cheque/cheques were issued  Drawer of the cheque/cheques  Date of issuance of cheque/cheques  Name of the drawer bank, its location  Name of the drawee bank, its location  Cheque No./Nos.

 Signatory of the cheque/cheques

c. Reasons due to which the cheque/cheques were dishonoured;

d. Name and Designation of the persons sought to be vicariously liable for the commission of the offence by the accused Company and their exact role as to how and in what manner they were responsible for the commission of the alleged offence;

e. Particulars of the legal notice and status of its service; f. Particulars of reply to the legal notice, if any.

14. If these directions are complied with, then the litigation can be

curtailed to the maximum extent. Moreover, it is the case of the

petitioner that he has joined the company as Director in the year 2001

and resigned from the said position on 27.07.2002. Certified copy of

Form 32 has been placed on record to show that it was submitted to

the Registrar of Companies on 31.07.2002 and date of resignation is

27.07.2002. The cheques in question were issued in the year 2003

when he ceased to be a Director and ,therefore, ceased to be managing

the affairs of the company. Had this fact been disclosed in the

complaint itself, there would have been no occasion for issuance of

summons to him.

15. Harshendra Kumar (supra) was also a case where the

appellant had resigned from the post of Director on 02.03.2004. The

dishonoured cheques were issued by the company on 30.04.2004 i.e

much after the appellant had resigned from the post of Director of the

company. Then in prescribed Form 32 the company informed the

Registrar of Companies about the appellant's resignation. Thus on

the date when the offence was committed by the company, the

appellant was not the Director; he had nothing to do with the affairs

of the company. That being so, it was observed that if the criminal

complaints are allowed to be proceeded against the appellant, it would

result in gross injustice to the appellant and tantamount to an abuse of

the process of the Court. Things are substantially the same in the

instant case. Since the complaint itself was lacking in material

particulars and in any case the petitioner had already resigned from

the post of Director of the company much before the issuance of the

cheques in question, which were dishonoured, continuance of

criminal proceedings against him would be an abuse of process of

Court.

16. One of the co-accused Kavita Aggarwal also had approached

this Court and the order dated 22.08.2005 issuing summons against

her was also set aside by this Court vide order dated 21.09.2011.

Record also reveals that the complainant withdrew the complaint

against accused Nos. 9 and 10 as arrayed in the complaint on the

ground that the matter has been compromised with them. As per the

certified copy of the complaint placed on record, it seems that

complaint against three other accused was also dismissed. Under the

circumstances, it was all the more required on behalf of the

complainant to have disclosed the complete address along with their

specific role in the complaint itself for holding them vicariously

liable, which was not done, with the result the complaint which was

filed in the year 2003, seems to have not proceeded further and is still

at the stage of securing the presence of the accused persons.

17. In the facts and circumstances of the case, the petition and the

application are allowed. The order dated 22.08.2005 issuing

summons against the petitioner for offence u/s 138 of N.I. Act in

complaint case titled as M/s Delhi Paints and Oil Traders v. M/s

Mega Lube India Ltd. is set aside.

SUNITA GUPTA, J DECEMBER 13, 2013 as