Madhya Pradesh High Court
Baba Chandrashekhar vs Meenakshi Kotex Sendhwa Through ... on 7 August, 2024
1 MCRC-26853-2018
IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE BINOD KUMAR DWIVEDI
ON THE 7 th OF AUGUST, 2024
MISC. CRIMINAL CASE No. 26853 of 2018
BABA CHANDRASHEKHAR AND OTHERS
Versus
MEENAKSHI KOTEX SENDHWA THROUGH GIRDHARILAL AND
OTHERS
Appearance:
Shri Siddharth Jain, counsel for the Petitioners
ORDER
This is a petition under section 482Cr.P.C. for quashment of complaint case
No. 75/2017 filed under section 138 of Negotiable Instruments Act (in short 'the
Act), 1881.
2. Facts in nutshell are that complainant/respondent No.1 is doing the
business of cotton bales in the name of Meenakshi Kotex in Sendhwa and Georai
(Maharashtra). The complainant is acting as partner of the aforesaid Meenakshi
Kotex and signatory of the complainant. Respondent No.1 is registered Private
Ltd. Company and earlier respondent No.2(now deceased) was the Managing
Director of the respondent No.2-V.R.Textiles Pvt. Ltd. and accused Nos.3 to 5
(applicants before this Court) were Directors of the respondent No.2-company.
Respondent No.2-company purchased cotton bales on credit from the
complainant/respondent No.1 and for the aforesaid transaction issued cheque
No.410855 dated 15.3.2014 drawn at Canara Bank Branch, Openkara Koimbatore
for Rs. 19,77,599/-. The cheque was dishonored with a note "account blocked". A
demand notice dated 24.5.2014 was issued demanding the cheque amount but
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within a statutory period of 15 days the cheque amount was not paid, therefore, the
complaint was filed against the applicants and the deceased respondent No.2 which
was registered as criminal case No. 75/2017 under section 138 of the Act.
3. Counsel for applicants submits that applicant Nos.1 and 2 are Directors of
the company, V.R.Textiles (now liquidated). The impugned cheque was issued on
13.2.2014 and before issuance of the cheque, the aforesaid applicants had resigned
from the Directorship of the company on 3.12.2013 and 6.11.2013 respectively.
Their resignations were also accepted by the Board of Directors of the aforesaid
company and same was duly notified by the Registrar of Companies on form No.
32. Even otherwise, there are no averments in the complaint as per section 141 of
the Act that the aforesaid Directors/applicants were at the time of offence were
incharge of the company and were responsible to the company for the business of
the company, therefore, no cognizance for the offence under section 138 of the Act
for dishonor of the cheque No. 410855 could have been taken against these
applicants and in absence of similar accusation against the applicant No.2 the
cognizance taken against her is also bad in law.
4. Counsel for applicants instead of relying on the provisions of section 141
of the Act, 1881 have also place reliance on the judgment of Apex Court in the
matter of Harshendra Kumar D. Vs. REbatilata Koley and others, (2011) 3 SCC
351. The relevant paragraph Nos.10,11 and 27 are reproduced herein :
10. The legal position concerning the vicarious liability of a
director in a company which is being prosecuted for the
offence under Section 138, NI Act has come up for
consideration before this Court on more than one occasion. In
the case of S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and
Another, the following questions were referred to a 3-Judge
Bench for determination : (SCC pp.93-94, para 1)
"(a) Whether for purposes of Section 141 of the Negotiable
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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.
The 3-Judge Bench of this Court answered the aforesaid
questions thus:
11. The three- Judge Bench of this Court answered the
aforesaid questions thus; (S.M.S. Pharmaceuticals Ltd. case,
SCC p.103, para 19)
"(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 the question posed in sub-para (b) has to
be in the 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 the 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 the 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 the 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 the
signatory of a cheque which is dishonoured is concerned, he
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is clearly responsible for the incriminating act and will be
covered under sub-section (2) of Section 141"
27. As noticed above, the appellant resigned from the post of
Director on 2-3-2004. 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. The
acceptance of the appellant's resignation is duly reflected in
the Resolution dated 02/03/2004. Then in the prescribed form
(Form 32), the Company informed to the Registrar of
Companies on 04/03/2004 about the appellant's resignation.
It is not even the case of the complainants that the
dishonoured cheques were issued by the appellant. These
facts leave no manner of doubt that on the date the offence
was committed by the Company, the appellant was not the
Director; he had nothing to do with the affairs of the
Company. In this view of the matter, if the criminal
complaints are allowed to proceed against the appellant, it
would result in gross injustice to the appellant and
tantamount to an abuse of process of the Court.
On the aforesaid grounds, learned counsel urges the Court to allow the
petition and to quash the criminal case under section 138 of the Act pending
against the applicants.
5. None appeared on behalf of respondent No.2/complainant even after
service of notice.
6. I have heard learned counsel for applicants and perused the record.
7. Resignation of applicant No.1-Baba Chandrashekhar and applicant No.3-
Radhakrishnan Santosh have been placed on record vide Annx.P/3. The
resignation of Baba Chandrashekhar is w.e.f 3.12.2013 and resignation of
applicant No.3-Radhakrishnan is w.e.f. 6.11.2013. These resignations have been
accepted by the Company- V.R.Textiles Pvt. Ltd. by resolution dated 9.12.2013.
These resignations have been notified on form No.32 by the Registrar of
Companies. Thus, there is no doubt that before issuance of disputed cheque on
13.2.2014, applicant No.1 and applicant No.3 had resigned from the company and
therefore, they cannot be held responsible for issuance and bounce of the impugned
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cheque. So far as applicant No.2 is concerned, she was allegedly Director in the
V.R.Textiles. For holding her vicarious responsible for bounce of the cheque, the
averment should be in place as per section 141 of the N.I. Act which reads as
under :-
S.141 Offences by companies - (1) If the person committing an offence
under section 138 is a company, every person who, at the time the
offence was committed, was incharge of, and was responsible to the
company for the conduct of the business of the company, shall be
deemed to be guilty of the offence and shall be liable to be proceeded
against and punished accordingly:
Provided that nothing contained in this sub-section shall render any
person liable to punishment if he proves that the offence was committed
without his knowledge, or that he had exercised all due diligence to
prevent the commission of such offence.
(Provided further that where a person is nominated as a Director of a
company by virtue of his holding any offence or employment in the
Central Government or State Government or a financial corporation
owned or controlled by the Central Government or the State
Government, as the case may be, he shall not be liable for prosecution
under this Chapter).
(2) Notwithstanding anything contained in sub-section (1), where any
offence under this Act has been committed by a company and it is
proved that the offence has been committed with the consent or
connivance of, or is attributable to, any neglect on the part of, any
director, manager, secretary or other officer of the company, such
Director, Manager, Secretary or other officer shall also be deemed to be
guilty of that offence and shall be liable to be proceeded against and
punished accordingly.
Explanation - For the purposes of this section -
(a) "company" means any body corporate and includes a firm or other
association of individuals; and
(b) "director" in relation to a firm, means a partner in the firm]"
8. From perusal of the aforesaid provision, it is manifest that there must be
pleadings in the complaint that applicant No.2 at the time of offence was incharge
of the company and was responsible to the company for conduct and business of
the company. It has also not been brought to the notice of this Court that the
6 MCRC-26853-2018
offence has been committed with the consent or connivance of applicant No.2. In
catena of judgments and also in the case of Harshendra(supra), the Apex Court
held that the date when the offence was committed by the company, the appellant
was neither Director of the company nor had anything to do with the affairs of the
company, such Director cannot be held responsible for the criminal offence and if
such complaints are lodged to proceed against such Director, it would result in
gross injustice and tantamount to abuse of process of Court. In para 11 of the said
judgment, relying on the judgment in the case of S.M.S. Pharmaceuticals Ltd. Vs.
Neeta Bhalla, 2007(5) SCC 108, it has been reiterated that essential requirement of
section 141 are to be complied with for holding the Director of the company
vicarious responsible. In the light of the aforesaid, in the instant case, neither
necessary averment as per section 141 of the Act have been made nor it has been
mentioned that even after resignation from the company, the applicant Nos.1 and 3
were anyhow connected with the affairs of the company, therefore they cannot be
held vicarious liable for the offence if any committed by the company.
9. In view of foregoing, the petition is allowed and complaint case No.
75/2017 is hereby quashed. The applicants are discharged from the charge under
section 138 of the N.I. Act.
Copy of the order be also sent to the concerned court for compliance and
necessary action.
C.c. as per rules.
(BINOD KUMAR DWIVEDI)
JUDGE
MK
7 MCRC-26853-2018
