Mohan Kumar Mukherjee vs Ledo Tea Company Limited

Asish Baran Mukherjee, J.—This is an application u/s 482 Cr. P.C. praying for quashing a proceeding being Case No. C 2135 of 1996 pending before the Metropolitan Magistrate 1.4th Court, Calcutta u/s 138/141 of the Negotiable Instruments Act, 1881 hereinafter referred to. as the N.I. Act and also for setting aside the order dated 17.5.97 by which the learned Metropolitan Magistrate rejected the prayer of the petitioner to drop the proceeding against him.

The case of the petitioner is that he is 83 years old and is also suffering from various ailments. He is in Ex-Honorary Presidency Magistrate of Calcutta and was also the sheriff of Calcutta at one point of time. The petitioner was a Director of M/s Tirrihannath Co. Ltd., hereinafter referred to as the company. But there he was a sleeping director of the company and was not involved in the day to day running of the company and is not also responsible to the company. In fact the petitioner does not participate in the active management of the company.

A proceeding u/s 138/141, N.I. Act was started against the said company and all its Directors including the petitioner on the allegation that the opposite party to the revisional application gave a loan of Rs. 10 lacs on 3.7.96 to the petitioner company with the stipulation to repay the same with interest within 120 days. The company issued a cheque dated 9.10.96 to repay the said sum but the cheque which was presented for encashment with the Bankers by the opposite party on 15.2.96 was returned on 17.2.96 with the Bankers endorsement "Funds Expected". A notice was issued on the company by the opposite party to make payment within 15 days together with interest and as payment was not made the criminal proceeding under N.I. Act was started.

The petitioner''s case is that since he is not responsible for day to day affairs of the company, the principle of vicarious liability is not applicable in his case. There is also no averment in the complaint connecting the petitioner with the affairs of the company. Accordingly, he prayed for dropping the case so far as it relates to him but the said prayer was rejected by the Metropolitan Magistrate on 17.5.97 with the observation that there is averment in the complaint that the petitioner is incharge of and also looking after the day to day business of the company. Hence the application u/s 482 Cr. P.C.

I have heard the learned Advocates representing the petitioner and the opposite party. It is contended by the learned Advocate for the petitioner that the petition of complaint apart from stating that the petitioner is one of the Directors, there is no mention that he was in charge of or was responsible to the company. He has drawn my attention to Para 2 of the petition of the complaint which runs thus "that the accused persons are the Directors of M/s Tirribannah Co. Ltd. having its registered office at Mcloid House, 3 Netaji Subhas Road, Calcutta-1". It is argued on the strength of the decision reported in Municipal Corporation of Delhi Vs. Ram Kishan Rohtagi and Others, that there being no averment in the petition of complaint involving the present petitioner, the continuance of proceeding shall be an abuse of process of the Court and as such the criminal case so far as it relates to the petitioner is concerned should be quashed. The cited decision is also an authority on the point of maintainability of an application u/s 482 Cr. P.C. by this Court in spite of the provisions of section 397(2) of the Criminal Procedure Code. It is also argued that by the impugned order the learned Metropolitan Magistrate while rejecting the petitioner''s prayer averred in the order that there is averment in the petition of complainant to the effect that the petitioner is incharge of and is responsible to the company. He submits that this observation is bereft of truth since the petition of complaint does not contain any such averment.

The learned Advocate appearing for the opposite party however supports the order of the learned Metropolitan Magistrate and submits that since the petitioner is one of the Directors, the proceeding u/s 138 read with Section 141 N.I. Act is maintainable against him. He has drawn my attention to section 14-1(1) proviso to the N.I. Act and submits that in terms of the proviso, the petitioner can prove that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. He also relied on an unreported decision of this Court, namely, A.K. Kanoria & Ors. v. State of West Bengal & Ors., which was disposed . by S.K. Tiwari. J. on 30.4.97. This revisional application is in connection with a prosecution under Employees State Insurance Act and after analysing different provisions of the said Act and also the Factories Act, the learned Judge came to the conclusion that Directors of the concerned company are prima facie responsible for any contravention of any provision of E.S. I. Act. It is also his argument that there need not be any averment in the petition of complaint to the effect that the concerned accused was in charge of and was responsible to the company for the conduct of the business of the company.

I have given my careful consideration to the submission of the learned Advocates of both the sides. I have also pursued the petition of complaint as also the impugned order passed by the learned Metropolitan Magistrate. I have also gone through the decision cited at the Bar. It appears to me that the argument advanced on behalf of the opposite party is not tenable. The primary onus lies with the complainant in an offence u/s 138 read with Section 141 N.I. Act to show that the persons sought to be proceeded against were in charge of and was also responsible to the company for the conduct of the business of the company. In order to constitute an offence u/s 138 N.I. Act when a company is at the dock, such an as anent u/s 141 N.I. Act is absolutely necessary in order to establish prima facie case in the absence of which process should not be issued against such person even though they were connected with the affairs of the company by implication. In other words, in the absence of any averment in the petition of complainant to the above effect, such persons cannot be proceeded with. The proviso to Section 141(1) of the N.I. Act comes into play only at a much later stage, namely, after discharge of initial onus by the complainant and at the stage when the defence is eligible to adduce evidence in their favour. But this proviso can have no application in the present case, then simply summons have been issued on him. I also find that contrary to the observation of the learned Metropolitan Magistrate in the impugned order, there is no averment in the petition of complaint. Besides a scrutiny of even the cause title of the complaint will reveal that one of the persons who have been made accused have been designated as the Managing Director while the present petitioner has been simply designated as a Director. It is quite natural that the Managing Director in the fitness of things should be deemed to be in charge of and was responsible to the company for the. conduct of business. It will also appear from the Annexures that after the Dishonour of the cheque, the opposite party issued the notice as required under the law before starting of the proceeding u/s 138 N.I. Act, to the company and to others including the person who has been mentioned as the Managing Director in the petition of complaint. Therefore, it must be deemed to be within the knowledge of the opposite party even, that the Managing Director of the company is in charge of and is also responsible to the affairs of the company. So at the present stage thee being no material against the petitioner for commission of an offence u/s 138 read with Section 141 N.l. Act, continuance of proceeding against him is an abuse of process of the Court.

If, however, at the subsequent stage of trial it appears from evidence that the present petitioner was in charge of and was also responsible to the company for its business at the relevant point of time, then the provision of section 319, Criminal Procedure Code can come into play though such step is required to be taken sparingly and with much caution and should only be resorted to when there are adequate evidence to entangle such persons with the commission of the said offence.. In the result. I conclude that the criminal proceeding against the present petitioner should not be allowed to proceed at the stage and the impugned order of the learned Metropolitan Magistrate should not stand.

Accordingly, the application stands allowed on contest. The proceeding being C-2135 of 1996 pending before the learned Metropolitan Magistrate, 14th Court stands quashed, so far as it relates to the present petitioner alone. By implication the order dated 17.5.97 also stands set aside. The interim order of stay so far as it relates to the petitioner is made absolute. The learned Metropolitan Magistrate is however at liberty to proceed with the proceeding before him so far as it relates to the other accused person".