Madras High Court
Nagalakshmi vs S.Thirumalai Samandi on 5 April, 2022
Crl.O.P.(MD)No.14732 of 2020
BEFORE THE MADURAI BENGH OF MADRAS HIGH COURT
DATED: 05.04.2022
CORAM
THE HONOURABLE MR. JUSTICE G.K.ILANTHIRAIYAN
Crl.O.P.(MD)No.14732 of 2020
and
Crl.M.P(MD)No.6957 of 2020
1.Nagalakshmi
2.R.Prasanna Venkatesan
... Petitioners/Accused Nos.5 & 6
Vs.
S.Thirumalai Samandi ... Respondent
Prayer: Criminal Original Petition filed under Section 482 Cr.P.C., to
call for the records from the learned Judicial Magistrate No.VI (Fast
Track Court-Magistrate Level), Madurai in S.T.C.No.46 of 2018 and
quash the same as it has no prima facie case against the
petitioners.
For Petitioners : Mr.H.Velvadhas
For Respondent : Mr.N.Ananthapadmanaban
for M/s.APN.Law Associates
https://www.mhc.tn.gov.in/judis
1/12
Crl.O.P.(MD)No.14732 of 2020
ORDER
This Criminal Original Petition has been filed to quash the
proceedings in S.T.C.No.46 of 2018 on the file of the learned Judicial
Magistrate No.VI (Fast Track Court-Magistrate Level), Madurai, as
against the petitioners.
2.The respondent herein lodged a complaint for the offence
punishable under Section 138 of the Negotiable Instruments Act
alleging that on 20.01.2015, the first accused, which is a
partnership firm, borrowed a sum of Rs.10,00,000/- as loan. Totally
five persons are partners in the first accused firm and in order to
repay the said loan, they issued cheques on behalf of the firm. Two
cheques were presented for collection and both were returned
dishonoured with an endorsement 'present in proper zone'. After
causing statutory notice, the respondent initiated proceedings under
Section 138 of the Negotiable Instruments Act.
3.There are totally six accused, in which the petitioners are
arraigned as Accused Nos. 5 and 6.
4.The learned counsel appearing for the petitioners would
submit that the petitioners were already quitted from the
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Crl.O.P.(MD)No.14732 of 2020
partnership firm even at the time of alleged borrowal of loan namely
on 20.01.2015. As per Section 141 of the Negotiable Instruments
Act, only the partners are liable to be punished for the offence
under Section 138 of the Negotiable Instruments Act, when the
cheques were issued by the partnership firm. Even according to the
respondent, the partnership firm borrowed loan of Rs.10,00,000/-
on 20.01.2015 and even before the said borrowal, the petitioners
quitted from the partnership firm and as such, they are no way
response for the issuance of the alleged cheques. The cheques were
issued on 15.07.2017 and 01.08.2017 for the sum of Rs.5,00,000/-
each. Even at the time of borrowal of loan, the petitioners were not
the partners and at the time of issuance of cheques also they are
not the partners of the first accused firm.
5.In support of his contention, he also relied upon the
Judgment of the Honourable Supreme Court of India in the case of
Ashok Mal Bafna Vs. M/s Upper India Steel Mfg & Engg Co.
Ltd reported in 2017 SCC Online SC 705, wherein the Honourable
Supreme Court of India held as follows:
“Interpreting the provisions of Section
141 this Court in National Small Industries
Corporation v. Harmeet Singh Paintal & Anr.
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Crl.O.P.(MD)No.14732 of 2020
(2010) 3 SCC 330 observed that Section 141 is
a penal provision creating vicarious liability, and
which, as per settled law, must be strictly
construed. It is therefore, not sufficient to make
a bald cursory statement in a complaint that the
Director (arrayed as an accused) is in charge of
and responsible to the Company for the conduct
of business of the Company without anything
more as to the role of the Director. But the
complaint should spell out as to how and in
what manner the accused was in charge of or
was responsible to the Company for the conduct
of its business. This is in consonance with strict
interpretation of penal statutes especially where
such statutes create vicarious liability.
10. To fasten vicarious liability under Section
141 of the Act on a person, the law is well
settled by this Court in a catena of cases that
the complainant should specifically show as to
how and in what manner the accused was
responsible. Simply because a person is a
Director of defaulter Company, does not make
him liable under the Act. Time and again, it has
been asserted by this Court that only the
person who was at the helm of affairs of the
Company and in charge of and responsible for
the conduct of the business at the time of
commission of an offence will be liable for
criminal action [See : Pooja Ravinder
Devidasani v. State of Maharashtra & Ors. AIR
2015 SC 675].
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Crl.O.P.(MD)No.14732 of 2020
The law laid down by this Court is that for
making a Director of a Company liable for the
offences committed by the Company under
Section 141 of the Act, there must be specific
averments against the Director showing as to
how and in what manner the Director was
responsible for the conduct of the business of
the Company. In the above judgments, the
Hon’ble Supreme Court of India repeatedly held
that the complaint has to specifically say as to
how and in what manner Director was
responsible for the conduct of the business of
the company. Unfortunately in the impugned
complaint, the allegations did not satisfy the
requirements of Section 141 of NI Act. That
apart, the petitioner is being implicated as third
accused who is inducted as Non Executive
Director of the first accused company, therefore
the petitioner is not being made responsible for
the day to day affairs of the company and she
cannot be held liable vicariously for the offence
committed by the company. Therefore, in order
to secure ends of justice and to prevent the
abuse of process of court, this Court has to
necessarily interfere with the proceedings in
exercise of its jurisdiction under Section 482 of
Cr.P.C.”
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Crl.O.P.(MD)No.14732 of 2020
6.The learned counsel appearing for the respondent would
submit that all the partners are family members. The first accused is
a firm and A.2 to A.6 are partners of the first accused firm which is
a registered partnership firm in the name and style of 'Sun Coir
Mat'. The second accused is the Managing partner with a mandate
and authority of other accused herein to deal with the every day
management and financial committee. A3 is the mother of A.2, A.4
is the wife of A.2, A.5 is the mother of A.4 as well as mother-in-law
of A.2 and A.6 is the brother of A.4 and brother-in-law of A.2. All
the accused persons are directly engaged in the day to day activities
of the firs accused firm such as manufacturing process, supervision
of the work in progress, maintenance of the accounts and stock,
purchase of raw materials etc. A.5 and A.6 are looking after
marketing of the products. Thus, all the accused are actively
involved in the contact of the business of the firm. While being so,
the complainant, who is a close relative of all A.2 and A.3, and all
the accused represented to the respondent that for the purpose of
improvement of business, they required additional amount to the
tune of Rs.50,00,000/- and assured that it will be repaid with
interest at the rate of 1% per month. On 20.01.2015 all the accused
came to the respondent's residence and received the sum of
Rs.10,00,000/- as loan and assured to repay the same. Therefore,
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Crl.O.P.(MD)No.14732 of 2020
the petitioners are actively involved in the day to day activities of
the first accused firm and they also requested the respondent to
lend money. Further, the grounds raised by the petitioners have to
be gone into by full fledged trial before the trial Court and
documents produced by them has to be tested before the trial
Court.
7.In support of his contention, he relied upon the Judgment of
the Honourable Supreme Court of India in the case of Tamil Nadu
News Print and Papers Limited Vs. D.Karunakar and others
reported in 2016 (6) SCC 78, in which, the Honourable Supreme
Court of India held that simply because someone is a Director in a
company, he cannot be held responsible in respect of a cheque
issued on behalf of the company, but if the concerned Director is in-
charge of and is responsible to the company for its conduct of
business, he can be held to be guilty of the offence under Section
138 of the Act.
8.He also relied upon the Judgment of the Honourable
Supreme Court of India in S.M.S.Phamaceuticals Limited Vs.
Netta Bhallen reported in (2005) 8 SCC 89, wherein the
Honourable Supreme Court of India has held as follows:-
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Crl.O.P.(MD)No.14732 of 2020
“18. To sum up, there is almost unanimous
judicial opinion that necessary averments ought to be
contained in a complaint before a person 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. Section 141 of the Act contains the
requirements for making a person liable under the
said provision. That the respondent falls within the
parameters of Section141 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.”
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Crl.O.P.(MD)No.14732 of 2020
9.Heard the learned counsel appearing for the petitioners and
the learned counsel appearing for the respondent and perused the
materials available on record.
10.The petitioners are arraigned as Accused Nos.5 and 6 in
the complaint lodged by the respondent for the offence punishable
under Section 138 of the Negotiable Instruments Act. According to
the respondent, the first accused partnership firm borrowed loan for
a sum of Rs.10,00,000/- on 20.01.2015. In order to repay the
same, they issued two cheques dated 15.07.2017 and 01.08.2017.
Both the cheques were presented for collection and both were
returned dishonoured for the reason that 'present in proper zone'.
11.The specific stand taken by the petitioners is that they
were not the partners of the firm even at the time of borrowal of
loan and at the time of issuance of cheques. Therefore, they are not
liable to be punished for the offence under Section 138 of the
Negotiable Instruments Act, since no evidence is made out against
them.
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Crl.O.P.(MD)No.14732 of 2020
12.On a perusal of the document produced by the petitioners
namely Form A issued by the Register of Firms with regard to first
accused partnership firm by name 'Sun Coir Mat' consisting of five
partners, in which the petitioners were the fourth and fifth partners.
While being so, they submitted Form No.V on 12.10.2015 after their
resignation from the partnership firm as on 01.04.2014 and the
same was recorded and their names were deleted on 12.10.2015
and it was duly in Register of Firm under Form A. In fact after
receipt of statutory notice issued under Section 138 of the
Negotiable Instruments Act, the first petitioner by reply dated
21.09.2017 issued reply notice and categorically stated that they
were resigned from their partnership firm as early as on 01.04.2014
and as such they are not liable to pay any debts for the first
accused firm. The reply was duly received by the respondent and
the respondent also issued re-joinder, dated 09.10.2017. Though
the respondent averred specific overt act as against the petitioners
while borrowal of loan and also their day to day activities of the first
accused firm, they were resigned from the first accused partnership
firm as early as on 01.04.2014 itself. The Judgments cited by both
the learned counsels are related to Section 141 of the Negotiable
Instruments Act to make a Director of company or partners of the
partnership firm is liable for offence under Section 138 of the
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Crl.O.P.(MD)No.14732 of 2020
Negotiable Instruments Act. Whereas in the case on hand
admittedly the petitioners were resigned from the first accused
partnership firm as early as on 01.04.2014 and as such they are not
liable to be punished for the offence under Section 138 of the
Negotiable Instruments Act. Therefore, the above Judgments cited
by the learned counsels are not applicable to his case.
13.In view of the above, the proceedings in S.T.C.No.46 of
2018 on the file Judicial Magistrate No.VI (Fast Track Court-
Magistrate Level), Madurai, is quashed insofar as the petitioners
alone are concerned and this Criminal Original Petition is allowed.
Consequently, connected Miscellaneous Petition is closed.
05.04.2022
Internet :Yes
Index :Yes / No
ps
https://www.mhc.tn.gov.in/judis
Crl.O.P.(MD)No.14732 of 2020
G.K.ILANTHIRAIYAN, J.
ps
Note :
In view of the present lock
down owing to COVID-19
pandemic, a web copy of
the order may be utilized
for official purposes, but,
ensuring that the copy of
the order that is presented
is the correct copy, shall
be the responsibility of the
advocate / litigant
concerned.
To
The Judicial Magistrate No.VI,
(Fast Track Court-Magistrate Level),
Madurai.
Order made in
Crl.O.P(MD)No.14732 of 2020
05.04.2022
https://www.mhc.tn.gov.in/judis
