All Fabrics vs N. Muthusamy

C.T. Selvam, J.—The petitioners, who are accused in C.C.No.815 of 2008 on the file of learned Judicial Magistrate No. I, Karur, seek quash of the proceedings against them.

Heard learned counsel for the petitioners and learned counsel for the respondent.

On a perusal of the papers, it is seen that the only contention, which requires consideration is that petitioners stand arrayed as accused on misplaced principle of vicarious liability.

Sections 141 and 142 of the Negotiable Instruments Act reads as under:

"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, as well as 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 office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or 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.

Cognizance of offences. - Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), -

(a) no Court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;

(b) such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138;

Provided that the cognizance of a complaint may be taken by the Court after the prescribed period, if the complaint within such period;

(c) no Court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under Section 138."

In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (2005 SCC (CRI) 1975), it has been held that towards making persons liable for prosecution for offences under Section 138 Negotiable Instruments Act by aid of Section 141, the averment in the complaint of the person being incharge and responsible to the Company in the conduct of its affairs is a necessary one. Explanation to Section 141 of Negotiable Instruments Act informs that ''company'' means any body corporate and includes a firm or other association of individuals; and ''director'', in relation to a firm, means a partner in the firm.

In the instant case, the first accused is a partnership firm. From a perusal of the complaint, we find, the averment, which has been informed by the Supreme Court to be a necessary and mandatory one is not to be found on terms.

The first petitioner is the firm, while the second petitioner is the signatory of the cheque. Therefore, the prosecution as against them would survive. As regards, the third and fourth petitioner it would not.

Accordingly, the Criminal Original Petition is partly allowed and the proceedings in C.C. No. 815 of 2008 on the file of Judicial Magistrate No. 1, Karur stand quashed in respect of third and fourth petitioner. Considering the fact that the complaint is of the year 2008, this Court directs the Judicial Magistrate No. 1, Karur to dispose of the case within a period of three months from the date of receipt of a copy of this order. Consequently, connected Miscellaneous Petitions are closed.