Hiten Bhupendra Shah and Others vs State of Gujarat and Others

Honourable Mr. Justice MD Shah

This petition u/s 482 of the Code of Criminal Procedure has been filed by the Petitioners to quash and set aside the complaint being Criminal Complaint No. 4868 of 2002 pending in the Court of the learned Chief Judicial Magistrate, Surat, and process issued therein.

The facts of the case in brief are that a complaint was filed by the Respondent No. 2 Bank against Home Trade Limited, its Directors and authorized signatories for the offence punishable u/s 138 of the Negotiable Instruments Act, 1881 for the alleged dishonour of a cheque dated 25-4-2002 for Rs. 6,36,250/- issued by the accused No. 3-Subodh Bhandari under his signature. The Petitioner No. 1, who is a Chartered Accountant and Petitioner No. 2, who is the wife of the Petitioner No. 1, have been involved in the alleged offence on the premise that they are the Directors of the said Company. Hence, a notice dated 5-5-2002 u/s 138 read with Section 141 of Negotiable Instruments Act was issued by registered post A/D and under Postal Certificate. However, notice sent by registered post A/D was returned unserved but notice issued under Postal Certificate was received by the accused on or about 8-5-2002. Since the accused have neither replied nor complied with the notice, present complaint has been filed by the Respondent No. 2-complainant in the Court of learned Chief Judicial Magistrate, Surat being Criminal Complaint No. 4868 of 2002 and a process was issued by the learned Magistrate on 19-6-2002 against the Petitioners. Hence, the present petition.

Heard learned advocate, Mr. Nandish Chudgar with Mr. Vikramsinh Gohil for M/s Nanavati Associates for the Petitioners, Mr. L.R. Pujari, learned APP for the Respondent No. 1-State and learned advocate, Mr. V.C. Vaghela for the Respondent No. 2.

It is submitted by learned advocate for the Petitioners that the Petitioners are neither Directors, Managers, Secretary nor Officer of accused No. 1 Company and they were never in charge of and were responsible to the accused No. 1 for the conduct of its business. There is no specific allegation to that effect against the Petitioners in the complaint either. Inspite of the same, the learned Magistrate without verifying the nature of allegations and oral and documentary evidence, mechanically issued process. Apart from that, the search report of Home Trade Limited which is at Annexure-II is concerned, this report shows that the Petitioners were not Directors in the Company. Statutory notice as contemplated u/s 138 of Negotiable Instruments Act is not issued by the complainant on the Petitioners. It is, therefore, requested that the impugned complaint deserves to be quashed and set aside qua the Petitioners. He has relied on a decision of the Apex Court in the case of S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla and Another, wherein it has been held that it is necessary to aver in the complaint filed that at the time when the offence was committed, the accused was in-charge of and responsible for the conduct of business of the Company. Without such averment being made in the complaint, the requirements of Section 141 of the Negotiable Instruments Act, 1881 cannot be said to be satisfied. Learned Counsel has relied upon the observations made in Paras 19 (a) & (b) of the said decision are relevant, which reads as under;

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 u/s 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 u/s 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.

He has also relied on a decision of Hon''ble Apex Court in the case of Sabitha Ramamurthy and Anr. v. R.B.S. Channabasavaradhya reported in AIR 2006 S.C.W. 4582 wherein laying down similar principle.

Learned Counsel for the Respondents have contended that since the petitioners were the Directors of the company in question, they were responsible for the conduct of business of the company and, therefore, no interference is required by this Court in this application.

On going through the averments made in the complaint, no where it appears that the Petitioners were in-charge of or were responsible for the conduct of the business of the Company. There is nothing in the complaint to show that the act committed or the conduct of the Petitioners was such that an inference could be drawn that they could be held vicariously liable. No overt act or act of commission or omission has been alleged against the Petitioners in the complaint.

What is stipulated u/s 141 of the Negotiable Instruments Act, 1881 is that the persons, who are sought to be made criminally liable, should be in charge of and responsible to the company for the conduct of the business of the company at the time when the offence was committed. A director in a Company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. It is only those persons who are in charge of and responsible for the conduct of business of the company at the time of the commission of the offence, shall be liable for criminal action. Learned advocates for the Respondents are not in a position to show from the complaint that the Petitioners were in charge of and responsible for the day-to-day affairs of the management of the Company. Since the complaint does not disclose that the Petitioners were in charge of and responsible to the company for the conduct of the business of the company, they could not be held criminally liable. Hence, in the opinion of this Court, in view of the principle laid down in S.M.S. Pharmaceuticals Ltd. and Sabitha Ramamurthy''s cases (supra), power u/s 482 of the Code of Criminal Procedure is required to be exercised in favour of the Petitioners.

Thus, this petition is allowed. Complaint being Criminal Complaint No. 4868 of 2002 pending in the Court of the learned Chief Judicial Magistrate, Surat, and process issued therein are quashed and set aside only qua the Petitioners. It is made clear that proceedings qua other accused persons shall proceed in accordance with law. Rule is made absolute.