Delhi High Court
P P Mainra vs State & Anr. on 14 September, 2016
$~1 & 2
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision : September 14, 2016
+ CRL.M.C. 7/2013
P P MAINRA ..... Petitioner
Represented by: Mr.Vineet Tayal, Advocate
versus
STATE &ANR. ..... Respondents
Represented by: Mr.Akshai Malik, APP
Ms.Chandni Mehra, Advocate for R-2
CRL.M.C. 564/2014
P P MAINRA ..... Petitioner
Represented by: Mr.Vineet Tayal, Advocate
versus
STATE &ANR. ..... Respondents
Represented by: Mr.Akshai Malik, APP
Ms.Chandni Mehra, Advocate for R-2
CORAM:
HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
PRADEEP NANDRAJOG, J. (Oral)
1. The matter was listed for September 13, 2016 which was declared a
holiday and therefore is being taken up today.
2. The petitioner by way of present petition prays quashing of the
criminal complaint bearing CC No.1780/1 (old number CC 3864/11) and CC
No.1781/1 (old number CC 3864/11/2011) under Section 138 read with
Section 141 of the Negotiable Instruments Act (hereinafter referred to as
'Act'), titled Countrywide Promoters Pvt. Ltd. Vs. Era Landmarks Ltd. &
Ors and the summoning order(s) dated March 01, 2011 and May 14, 2013
and all proceedings arising there from.
3. The brief facts necessitating the disposal of the present petitions are
that the accused company, in which the petitioner was alleged to be a
director, entered into an MOU with the Complainant Company/respondent
No.2 for development of a parcel of land in Haryana. Pursuant to the MOU,
a Development Rights Agreement dated April 13, 2007 was entered into
between the parties and subsequently a Share Purchase Agreement dated
May 05, 2008 was entered into between the parties. It is the case of the
complainant that vide letter dated August 14, 2010 the accused company
communicated to the complainant company that an amount of `2458.39
Lacs shall be paid by the complainant company as External Development
Charges to the Government Department on behalf of the accused company,
which shall be repaid by the accused company along with 18% interest to
the complainant company. It is alleged that in lieu of part payment of the
aforesaid liability in sum of `2458.39 Lacs, post dated cheques bearing
Cheque No.291473 dated December 31, 2010, Cheque No.291474 dated
December 31, 2010, Cheque No.291477 dated December 31, 2010 and
Cheque No.291476 dated December 31, 2010 of the amounts `500 Lacs,
`500 Lacs, `229.195 Lacs and `74.196 Lacs respectively totalling
`13,03,39,100/-, were handed over by the accused company to the
complainant company on August 14, 2010 itself. The cheques were
presented for encashment on January 07, 2011 but were returned unpaid by
the banker vide return memo dated January 08, 2011 stating the reason for
dishonour of the cheque as 'payment stopped by the drawer'. The
complainant company sent a demand notice to the accused company vide
letter dated January 17, 2011 demanding the payment of the aforesaid
amount of `13,03,39,100. The accused company replied to the demand
notice stating that the cheques were handed over to the complainant merely
as security and not for the satisfaction of any debt or liability. It resulted in
above noted complaints as also another complaint, with which I am not
concerned, being filed by the complainant in the Court of the learned
Metropolitan Magistrate, in which after recording pre-summoning evidence
the company and its Directors, including the petitioner have been
summoned.
4. It is the case of the petitioner that at the time when the alleged
offences were committed he had ceased to be a director of the company
evidenced by Form No.32 submitted to the Registrar of Companies which
shows that the petitioner ceased to be a director of the company with effect
from November 12, 2009.
5. It is the further case of the petitioner that the complaint contains bald
allegations against the petitioner that he had interacted and participated in
various negotiations between the parties in regard to the land development
project. Relying upon the decision reported as 2007 (9) SCALE 371 K.
Srikanth Singh Vs. North East Securities, it is the case of the petitioner that
mere participation in the transaction does not infer that the director was
responsible for the day-to-day affairs of the company. Vicarious liability has
to be pleaded and proved and cannot be inferred. It is further the case of the
petitioner that since there is no specific allegations qua the petitioner as to
the role played by him in the subject matter the requirements of Section 141
of the Act are not satisfied. The petitioner relies upon the decisions reported
as AIR 2007 SC 1454 N.K. Wahi Vs. Shekhar Singh & Ors., (2008) UITR
276 (Delhi) (PG 84) J.N Bhatia & ors. Vs. State & Anr. and Crl.MC
4110/2011 Bikash Chakrborty Vs. Reliance Structures, to substantiate his
arguments.
6. Per Contra the case of the complainant company is that the allegations
in the complaint stating that the petitioner had participated in the
negotiations to the agreements between the parties were not vague so as to
discharge the petitioner from the ambit of Section 141 of the Act. Relying
upon the decision reported as AIR 2005 SC 3512 S.M.S Pharmaceuticals
Ltd. Vs. Neeta Bhalla & Anr., it is the case of the complainant company that
liability under Section 141 of the Act can be cast on the persons who may
have something to do with the transaction complained of. A person who is
incharge of and responsible for conduct of business of the company would
naturally know why the cheque in question was issued and why it got
dishonoured. It is the case of the complainant company that in the present
case the complaint clearly states that the petitioner played an active role in
the transaction between the parties and hence can be held vicariously liable
under Section 141 of the Act.
7. It is the case of the complainant company that whether the petitioner
ceased to be a director of the accused company is a matter of evidence.
8. Needless to state the facts of each case have to be considered. In SMS
Pharmaceutical's case (supra) the Supreme Court had held:-
"15. To sum up, there is almost unanimous judicial opinion
that necessary averments ought to be contained in a complaint
before a persons can be subjected to criminal process. A
liability under Section 141 of the Act is sought to be fastened
vicariously on a person connected with a Company, the
principal accused being the company itself. It is a departure
from the rule in criminal law against vicarious liability. A clear
case should be spelled out in the complaint against the person
sought to be made liable. Section141 of the Act contains the
requirements for making a person liable under the said
provision. That respondent fails within parameters of Section
141 has to be spelled out. A complaint has to be examined by
the Magistrate in the first instance on the basis of averments
contained therein. If the Magistrate is satisfied that there are
averments which bring the case within Section 141 he would
issue the process. We have seen that merely being described as
a director in a company is not sufficient to satisfy the
requirement of Section 141. Even a non director can be liable
under Section 141 of the Act. The averments in the complaint
would also serve the purpose that the person sought to be made
liable would know what is the case which is alleged against
him. This will enable him to meet the case at the trial.
16. In view of the above discussion, our answers to the
questions posed in the Reference are as under:
(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) The answer to question posed in sub-para (b) has to be
in negative. 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 answer to question (c) has to be in affirmative. The
question notes that 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 Section141 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."
9. In Crl.A.No.592/2007 N.Rangachari Vs. BSNL, the Supreme Court
had held:-
"A person in the commercial world having a transaction with a
Company is entitled to presume that the Directors of the
Company are in charge of affairs of the Company. If any
restrictions on their powers are placed by the memorandum or
Articles of the Company, it is for the Directors to establish it at
the trial. It is in that context that Section 141 of the Negotiable
Instruments Act provides that when the offender is a Company,
every person, who at the time when the offence was committed
was in charge of and was responsible to the company for the
conduct of the business of the Company, shall also be deemed
to be guilty of the offence along with the Company. It appears
to us that an allegation in the complaint that the named
accused are Directors of the Company itself would usher in the
element of their acting for and on behalf of the company and of
their being in charge of the Company. A person normally
having business or commercial dealings with a Company,
would satisfy himself about its creditworthiness and reliability
by looking at its promoters and Board of Directors and the
nature and extent of its business and its memorandum or
articles of association. Other than that, he may not be aware of
the arrangements within the Company in regard to its
management, daily routine, etc. Therefore, when a cheque
issued to him by the Company is dishonoured, he is expected
only to be aware generally of who are in charge of affairs of
the Company. It is not reasonable to expect him to know
whether the person who signed the cheque was instructed to do
so or whether he has been deprived of his authority to do so
when he actually signed the cheque. Those are matters
peculiarly within the knowledge of the Company and those in
charge of it. So, all that a payee of a cheque that is
dishonoured can be expected to allege is that the persons
named in the complaint are in charge of its affairs. The
Directors are prima facie in that position. In fact, an
advertence to Sections 138 and 141 of the Negotiable
Instruments Act shows that on the other elements of an offence
under Section 138 being satisfied, the burden is on the Board of
Directors or Officers in charge of affairs of the Company to
show that they are not liable to be convicted. Any restriction on
their power or existence of any special circumstance that
makes them not liable is something that is peculiarly within
their knowledge and it is for them to establish at the trial such
a restriction or to show that at the relevant time they were not
in charge of the affairs of the Company."
10. In view of the fact that the petitioner had ceased to be a director of the
accused company on November 12, 2009, which fact is apparent from Form
32 submitted to the Registrar of Companies, the fact that he was a director of
the company when the negotiations took place would be irrelevant.
11. I note that Crl.M.C.No.3060/2011 filed by the instant petitioner
concerning three cheques which were issued to the complainant company
was allowed and summoning order qua him was quashed.
12. Thus, the two petitions are allowed. The two criminal complaints
which have been challenged and quashing whereof is prayed for as also the
two summoning orders qua the petitioner are quashed.
(PRADEEP NANDRAJOG)
JUDGE
SEPTEMBER 14, 2016
mamta
