Rose Mary Ratnam vs Mohammad Farooq

K.N. Phaneendra, J.—Heard the learned counsel for the petitioner. Perused the records. The respondent is served and not represented.

It is seen from the records that one Mohammad Farooq lodged a private complaint under Section 200 for the offence punishable under Section 138 of the Negotiable Instruments Act and under Section 420 of the Indian Penal Code. It is alleged in the complaint that the respondent company Mehna Plantations Pvt. Ltd., represented by its Managing Director has issued a cheque dated 05.12.2000 for a sum of Rs. 5,000/- and on presentation of the said cheque it came to be dishonored and therefore after compliance of Section 138 a complaint came to be lodged. During the pendency of the said criminal proceedings it appears an amendment application was filed seeking the impleadment of the other directors of the company, particularly, the petitioner who is arrayed as accused No. 8 is also one of the directors impleaded in the said complaint.

The learned counsel for the petitioner contends that the director of a company cannot be ipso facto made liable for any of the act of the company unless a specific allegation is made in the complaint and a specific role is adverted to the said director as contemplated under the provisions of the Negotiable Instruments Act. Therefore, in the absence of any averments in the complaint, merely making the petitioner as one of the accused by way of impleadment the criminal prosecution cannot be continued and it would amounts to abuse of process of the court. Therefore, she pleaded that the complaint registered against the petitioner in C.C. No. 63/2002 on the file of the Additional Civil Judge (Jr. Dn.) and JMFC, Kundapur, deserves to be quashed.

On careful perusal of the complaint averments as rightly contended by the learned counsel originally the Managing Director of the respondent company was made as a party and every allegation made against the company being taken care of by the Managing Director. There is absolutely no averment or allegation against the present petitioner who is arrayed as accused No. 8. It is specifically stated at paragraph 4 of the complaint, that the notice was issued to the Chairman and the Managing Director of the accused and the said notice was returned as the Chairman and Managing Director left the place and therefore on the ground of deemed service the complaint was filed. There is absolutely no averments so far as this petitioner is concerned, what role is given to him in the company. Even the learned counsel has submitted that she resigned to the post of the company on 25.3.1995 itself. The said document is produced before the court at page 15 in Form No. 32 which is the certified copy before the court which also shows that accused No. 8 resigned as a director on 25.3.1995 itself.

Even otherwise Section 141 of the Negotiable Instruments Act clearly indicates who are all the persons liable on behalf of the company. The said provision reads thus:

"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 in charge 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 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."

In order to encompass the directors of the company to a crime, it should be specifically shown to the court that the offence was committed by any person who was in charge 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. Therefore, this section clearly indicates that the person who is arrayed as an accused on behalf of the company shall be in charge of the company or was responsible to the company for the conduct of the business of the company unless it is shown to the court even considering that petitioner is the director, he is not liable under the above said provision of law.

This court had an occasion to deal with the similar matter in Criminal Petition No. 5929/10 pertaining to the petitioner herein. The court has quashed the proceedings in PCR No. 155/2001 on the file of the JMFC, Kundapur. In the said order this court has relied upon a decision of the Apex Court in the case of National Small Industries Corp. Ltd. Vs. Harmeet Singh Paintal and Another, wherein at para 25 the Apex Court held as under:

"25. From the above discussion, the following principles emerge:

(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.

(ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.

(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make accused therein vicariously liable for offence committed by company along with averments in the petition containing that accused were in-charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.

(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred.

(v) If accused is Managing Director or Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.

(vi) If accused is a Director or an Officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint.

(vii) 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."

In view of the above said decision and also the specific provision under Section 141 and in the absence of any specific allegations against this petitioner in the complaint about his role in the company, I am of the considered opinion that the complaint is not maintainable and it cannot be continued or proceeded against this petitioner. Therefore, the following order.

ORDER

The petition is allowed. Consequently, all proceedings in C.C. No. 63/2002 pending on the file of the II Addl. Civil Judge and JMFC, Kundapur is hereby quashed in so far it relates to the petitioner (accused No. 8).