Delhi High Court
Bhupinder Singh vs Tarun Puri & Anr on 12 February, 2013
Author: G.P. Mittal
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 11th February, 2013
Pronounced on: 12th February, 2013
+ CRL.M.C. 2386/2012 & Crl.M.A.12582/2012
BHUPINDER SINGH ..... Petitioner
Through: Mr.R.M.Bagai & Ms.Damini Kaira,
Advocates
versus
TARUN PURI & ANR ..... Respondent
Through: Mr.Vikas Arora, Mr.Manish Sharma &
Mr.Mohit Taneja, Advocates
+ CRL.M.C. 2387/2012 & Crl.M.A.12584/2012
BHUPINDER SINGH ..... Petitioner
Through: Mr.R.M.Bagai & Ms.Damini Kaira,
Advocates
versus
TARUN PURI & ANR
..... Respondent
Through: Mr.Vikas Arora, Mr.Manish Sharma &
Mr.Mohit Taneja, Advocates
+ CRL.M.C. 2388/2012 & Crl.M.A.12586/2012
BHUPINDER SINGH
..... Petitioner
Through: Mr.R.M.Bagai & Ms.Damini Kaira,
Advocates
Versus
TARUN PURI & ANR
..... Respondent
Through: Mr.Vikas Arora, Mr.Manish Sharma &
Mr.Mohit Taneja, Advocates
Crl.M.C.Nos.2386/12, 2387/12, 2388/12, 2792/12 , 2793/12, 2794/12, 2795/12, 2796/12, 2797/12 & 2798/12 Page 1 of 12
+ CRL.M.C. 2792/2012 & Crl.M.A.14013/2012
BHUPINDER SINGH ..... Petitioner
Through: Mr.R.M.Bagai & Ms.Damini Kaira,
Advocates
versus
KULWANT RAI KANWAL RETD.BRIGADIER
..... Respondent
Through: Mr.Vikas Arora, Mr.Manish Sharma &
Mr.Mohit Taneja, Advocates
+ CRL.M.C. 2793/2012 & Crl.M.A.14015/2012
BHUPINDER SINGH
..... Petitioner
Through: Mr.R.M.Bagai & Ms.Damini Kaira,
Advocates
versus
KULWANT RAI KANWAL RETD. BRIGADIER
..... Respondent
Through: Mr.Vikas Arora, Mr.Manish Sharma &
Mr.Mohit Taneja, Advocates
+ CRL.M.C. 2794/2012 & Crl.M.A.14017/2012
BHUPINDER SINGH
..... Petitioner
Through: Mr.R.M.Bagai & Ms.Damini Kaira,
Advocates
versus
KULWANT RAI KANWAL RETD. BRIGADIER
..... Respondent
Through: Mr.Vikas Arora, Mr.Manish Sharma &
Mr.Mohit Taneja, Advocates
Crl.M.C.Nos.2386/12, 2387/12, 2388/12, 2792/12 , 2793/12, 2794/12, 2795/12, 2796/12, 2797/12 & 2798/12 Page 2 of 12
+ CRL.M.C. 2795/2012 & Crl.M.A.14019/2012
BHUPINDER SINGH ..... Petitioner
Through: Mr.R.M.Bagai & Ms.Damini Kaira,
Advocates
versus
KULWANT RAI KANWAL RETD.BRIGADIER ..... Respondent
Through: Mr.Vikas Arora, Mr.Manish Sharma &
Mr.Mohit Taneja, Advocates
+ CRL.M.C. 2796/2012 & Crl.M.A.14021/2012
BHUPINDER SINGH ..... Petitioner
Through: Mr.R.M.Bagai & Ms.Damini Kaira,
Advocates
versus
KULWANT RAI KANWAL RETD. BRIGADIER ..... Respondent
Through: Mr.Vikas Arora, Mr.Manish Sharma &
Mr.Mohit Taneja, Advocates
+ CRL.M.C. 2797/2012 & Crl.M.A.14023/2012
BHUPINDER SINGH ..... Petitioner
Through: Mr.R.M.Bagai & Ms.Damini Kaira,
Advocates
versus
KULWANT RAI KANWAL RETD. BRIGADIER ..... Respondent
Through: Mr.Vikas Arora, Mr.Manish Sharma &
Mr.Mohit Taneja, Advocates
+ CRL.M.C. 2798/2012 & Crl.M.A.14025/2012
BHUPINDER SINGH ..... Petitioner
Through: Mr.R.M.Bagai & Ms.Damini Kaira,
Advocates
versus
KULWANT RAI KANWAL RETD. BRIGADIER ..... Respondent
Through: Mr.Vikas Arora, Mr.Manish Sharma &
Mr.Mohit Taneja, Advocates
Crl.M.C.Nos.2386/12, 2387/12, 2388/12, 2792/12 , 2793/12, 2794/12, 2795/12, 2796/12, 2797/12 & 2798/12 Page 3 of 12
CORAM:
HON'BLE MR. JUSTICE G.P.MITTAL
JUDGMENT
G. P. MITTAL, J.
1. In these ten Petitions, the Petitioner Bhupinder Singh who is one of the
directors of Incentive Travels Pvt. Ltd. seeks quashing of the ten
complaints on the grounds:
(i) The cheque in question were dated 20.02.2010, whereas the
Petitioner had tendered his resignation on 27.11.2009 and the
same was accepted by the Respondent No.2(the Managing
Director of the company) on 28.11.2009 and
(ii) That the complaints lack averments as to how the Petitioner
was in charge of and responsible for the conduct of the business
to the company, that is, Incentive Travels Pvt. Ltd.
2. By an order dated 29.07.2010, the Petitioner and the other accused
persons were ordered to be summoned to face prosecution for an offence
under Section 138 of the Negotiable Instruments Act, 1881, (the Act).
3. It is urged by the learned counsel for the Petitioner that normal rule in
criminal offences is against vicarious liability. The provisions of Section
141 of the Act are an exception to the general rule and to make a director
liable for the act of the company the requirement of the section must be
strictly satisfied. He argues that in order to make a director vicariously
liable under Section 138 of the Act for dishonour of the cheque mere
averments in the complaint that the director was in charge of and
responsible for the conduct of the business of the company will not be
enough. To make a director liable, it has to be stated as to how the
director who is sought to be prosecuted was in charge of and responsible
for the conduct of the business. The learned counsel places reliance on
paras 8 and 10 of the judgment of Supreme Court in S.M.S.
Pharmaceuticals Ltd. v. Neeta Bhalla & Anr., (2005) 8 SCC 89, which
are extracted hereunder:
"8. ...There is a whole chapter in the Companies Act on
directors, which is Chapter II. Sections 291 to 293 refer to
powers of Board of Directors. A perusal of these provisions
shows that what a Board of Directors is empowered to do in
relation to a particular company depends upon the role and
functions assigned to Directors as per the Memorandum and
Articles of Association of the company. There is nothing which
suggests that simply by being a director in a Company, one is
supposed to discharge particular functions on behalf of a
company. It happens that a person may be a director in a
company but he may not know anything about day-to-day
functioning of the company. As a director he may be attending
meetings of the Board of Directors of the Company where
usually they decide policy matters and guide the course of
business of a company. It may be that a Board of Directors may
appoint sub-committees consisting of one or two directors out
of the Board of the Company who may be made responsible for
day-to-day functions of the Company. These are matters which
form part of resolutions of Board of Directors of a Company.
Nothing is oral. What emerges from this is the role of a director
in a company is a question of fact depending on the peculiar
facts in each case. There is no universal rule that a director of a
company is in charge of its everyday affairs. We have discussed
about the position of a Director in a company in order to
illustrate the point that there is no magic as such in a particular
word, be it Director, Manager or Secretary. It all depends upon
respective roles assigned to the officers in a company. A
company may have Managers or Secretaries for different
departments, which means, it may have more than one Manager
or Secretary. These officers may also be authorised to issue
cheques under their signatures with respect to affairs of their
respective departments. Will it be possible to prosecute a
Secretary of Department-B regarding a cheque issued by the
Secretary of Department-A which is dishonoured? The
Secretary of Department-B may not be knowing anything about
issuance of the cheque in question. Therefore, mere use of a
particular designation of an officer without more, may not be
enough by way of an averment in a complaint. When the
requirement in Section 141, which extends the liability to
officers of a company, is that such a person should be in charge
of and responsible to the company for conduct of business of
the company, how can a person be subjected to liability of
criminal prosecution without it being averred in the complaint
that he satisfies those requirements? Not every person
connected with a Company is made liable under Section 141.
Liability is cast on persons who may have something to do with
the transaction complained of. A person who is in charge of and
responsible for conduct of business of a Company would
naturally know why the cheque in question was issued and why
it got dishonoured.
xxx xxx xxx xxx xxx
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."
4. The learned counsel for the Respondent No.1 also relies para 4 of the
judgment in S.M.S. Pharmaceuticals earlier referred to by the learned
counsel for the Petitioner, which is extracted hereunder:
"4. In the present case, we are concerned with criminal liability
on account of dishonour of cheque. It primarily falls on the
drawer company and is extended to officers of the Company.
The normal rule in the cases involving criminal liability is
against vicarious liability, that is, no one is to be held
criminally liable for an act of another. This normal rule is,
however, subject to exception on account of specific provision
being made in statutes extending liability to others.
Section 141 of the Act is an instance of specific provision which
in case an offence under Section 138 is committed by a
Company, extends criminal liability for dishonour of cheque to
officers of the Company. Section 141 contains conditions which
have to be satisfied before the liability can be extended to
officers of a company. Since the provision creates criminal
liability, the conditions have to be strictly complied with. The
conditions are intended to ensure that a person who is sought to
be made vicariously liable for an offence of which the principal
accused is the Company, had a role to play in relation to the
incriminating act and further that such a person should know
what is attributed to him to make him liable. In other words,
persons who had nothing to do with the matter need not be
roped in. A company being a juristic person, all its deeds and
functions are result of acts of others. Therefore, officers of a
Company who are responsible for acts done in the name of the
Company are sought to be made personally liable for acts
which result in criminal action being taken against the
Company. It makes every person who at the time the offence
was committed, was incharge of and was responsible to the
Company for the conduct of business of the Company, the
Company, liable for the offence. The proviso to the sub-section
contains an escape route for persons who are able to prove that
the offence was committed without their knowledge or that they
had exercised all due diligence to prevent commission of the
offence."
5. The learned counsel for the Respondent No.1 states that there were
sufficient averments in the complaints to show as to how the Petitioner
was in charge of and responsible for the conduct of the business of the
company. He draws my attention to the averments made in the
complaints and contends that the authenticity of these averments is to be
tested only during the course of the trial. He submits that the power
under Section 482 Cr.P.C. can be used to give effect to any order under
the Code or to prevent abuse of the process of any Court or otherwise to
secure the ends of justice. The learned counsel pleads that the Petitioner
has utterly failed to prove that on the basis of the averments made, the
Petitioner cannot be prosecuted.
PLEA OF RESIGNATION:
6. The Petitioner has placed on record a copy of Form 32 which shows that
the Petitioner resigned from the directorship of the company w.e.f.
27.11.2009. The authenticity of the Form 32 is disputed by the
Respondent No.1 saying that the resignation was ante-dated. The alleged
resignation was received in the office of Registrar of Companies only on
01.07.2010. The resignation will take effect only from the date of its
receipt in the office of Registrar of Companies. The cheque issued by
Incentive Travels Pvt. Ltd. was dishonoured much before the receipt of
Form 32. Thus, it will be a matter of trial as to when exactly the
Petitioner had resigned and the effect of its communication to the ROC
on 01.07.2010. The complaints, therefore, cannot be quashed on this
ground.
7. Turning to the alternative plea of the Petitioner of not being in charge of
and responsible for the conduct of the business of the company which is
strongly refuted by the Respondent No.1, it would be worthwhile to
extract some of the paragraphs of the complaints which are the subject
matter of the instant Petitions. Paras 2, 3, 5 and 9 of the complaints reads
as under:
"2. That the accused Nos.2 to 5 are the Directors of the
Incentive Travels Pvt. Ltd. i.e. accused No.1 having its office at
189, Flyover Market, Defence Colony, New Delhi. The accused
Nos.2 to 5 are in charge and responsible for the day to day
conduct and affairs of the company at the relevant time and
also at present.
3. That the accused Nos.2 to 5 introduced themselves as the
Directors of the Incentive Travels Pvt. Ltd. i.e. accused No.1
and painted a wonderful business prospect in the business of
accused no.1. To further their plan to gain the trust of the
complainant, the accused persons also showed financial results
of the Incentive Travels Pvt. Ltd. i.e. accused No.1 and created
an impression that the business got good past and is sure to
have better future.
5. That feeling concerned the complainant started
approaching the accused persons for the return of his money
but the accused persons kept on delaying the same on one
pretext or the other. However, finally to again make fool of
the complainant, and to commit further fraud and cheating with
the complainant, the accused persons executed a deed of
settlement with the complainant and also issued cheques to
return the loan amount to the complainant. The complainant
insisted to pay either through cash or through draft but the
accused persons again assured the complainant that the
cheques would be encashed on presentation. Again believing
the words of the accused persons, the complainant accepted the
cheques. The cheques were signed by the accused NO.2 being
the authorized signatory of M/s. Incentive Travels i.e. accused
No.1. Copy of deed of settlement is annexed herewith as
Annesure A.
9. That the accused persons have cheated and defrauded
the complainant by deceiving the complainant by their false
promises and assurances and without having any intention to
repay. It is to mention here that the accused no.2 to 5 were
responsible to ensure sufficient balance or other arrangements
in the bank account of the accused No.1 company to ensure the
encashment of the cheques on presentation but the accused
persons have miserably failed to do so which further clearly
show mala fide intentions of the accused persons from the very
beginning to cheat and defraud the complainant and to cause
wrongful loss to the complainant and wrongful gain to
themselves. Further by not returning the money advanced to
the accused persons despite repeated demands by the
complainant, the accused persons have also committed breach
of trust."
8. Thus, it may be seen that in para 2 of the complaint, it was averred that
accused Nos.2 to 5 were in charge of and responsible for the day to day
conduct of the affairs of the company at the relevant time. The Petitioner
is accused No.4 in the complaint. It is then alleged that accused Nos.2 to
5 painted a rosy picture about the business of the accused company and
lured the Respondent No.1 to advance loan to Incentive Travels Pvt. Ltd.
In para 5 of the complaint, the allegations are the complainant approached
the accused persons for return of money, but they kept delaying the same
on one pretext or the other. It is stated that ultimately, the accused
persons executed a deed of settlement with the complainant and issued
cheques to return the loan amount to the complainant, that is, Respondent
No.1. It is further stated in the complaint that the accused persons(which
includes the present Petitioner) assured the complainant that the cheques
would be encashed on presentation. In para 9 of the complaint, it is
averred that accused Nos.2 to 5 were responsible to ensure that there is
sufficient balance and make arrangement for the same in the bank
account of the accused company to ensure encashment of the cheque on
presentation.
9. All these allegations, taken together, would be enough to conclude that
there were ample averments against the Petitioner to hold at this stage
that there were sufficient grounds for proceeding against him and holding
that he was in charge of and responsible for the conduct of business of
Incentive Travels Pvt. Ltd.
10. The Petitions are devoid of any merit; the same are accordingly
dismissed.
11. Pending applications stand disposed of.
(G.P. MITTAL)
JUDGE
FEBRUARY 12, 2013
pst
