S. Rajasaravanan vs E.J. Prosper

Aruna Jagadeesan, J.—This Criminal Original Petition is filed to quash the proceedings in CC. No. 958/2005 on the file of the Judicial

Magistrate II, Pondicherry in so far as the petitioner/A2 is concerned.

The brief facts, which are necessary for the disposal of this Criminal Original Petition, are as follows:

The Respondent herein has filed the private complaint against the Petitioner for the offence u/s 138 and 142 of the Negotiable Instruments Act. As

per the averments made in the complaint, the Petitioner''s brother/A1 had received a sum of Rs. 1,00,000/- from the complainant for his business

and in consideration of the same, he issued a cheque dated 10.4.2005 drawn on State Bank of Trivancore, Pondicherry. The complainant

presented the cheque for collection on 29.6.2005 and the same was returned on the ground that the account has been closed. The complainant

had issued a statutory notice to the 1st accused through his lawyer on 6.7.2005 and the same had been returned with an endorsement ""as refused"".

Hence, he has filed the present complaint against A1 and the Petitioner, who is arrayed as A2.

The learned Counsel for the Petitioner submitted that the Petitioner has not borrowed any amount from the complainant nor issued any cheque

and he has nothing to do with the alleged transaction. Admittedly the notice demanding money was sent only to A1 and not to the Petitioner/A2

and the Petitioner was not aware of any demand made by the complainant and therefore, no cause of action has arisen as against the Petitioner

herein.

The contention of the learned Counsel for the Petitioner that he is neither the drawer of the cheque nor responsible for the conduct of the

business of the Company by name M/s. Ess Ess AR Agencies and absolutely, there is no averment in the complaint that the Petitioner was in-

charge or responsible for the conduct of the business of the said company, has got every force. It is the contention of the learned Counsel for the

Petitioner that none of the ingredients to create a criminal liability in terms of Section 138 of the Negotiable Instruments Act has been shown either

in the complaint or in the sworn statement recorded thereon. He relied on the decision of the Honourable Supreme Court rendered in the case of

Saroj Kumar Poddar Vs. State (NCT of Delhi) and Another, in support of his contention that the Apex Court has formulated the ingredients to

fasten the criminal liability u/s 138 of the Negotiable Instruments Act, which are extracted as under:

For creating a criminal liability in terms of the said Section, the complainant must show:

(i) that a cheque was issued;

(ii) the same was presented;

(iii) but it was dishonoured

(iv) a notice in terms of the said provision was served on the person sought to be made liable; and

(v) despite service of notice, neither any payment was made nor other obligations, if any, were complied with within fifteen days from the date of

the notice.

The question as to whether a Director or Partner of a Company would become vicariously liable was discussed in the decision of the Three-

Judges Bench of this Court in the case of S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla and Another, , wherein upon consideration of a large

number of decision in that regard, Apex Court opined:

While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence u/s 138 is committed by a Company. The key

words which occur in the Section are ""every person"". These are general words and take every person connected with a Company within their

sweep. Therefore, these words have been rightly qualified by use of the words ""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, etc."" What is required is that the persons who are sought to be made criminally liable u/s 141 should be at the time the offence was

committed, in charge of and responsible to the Company for the conduct of the business of the Company. Every person connected with the

Company shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for conduct of business of

the Company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a Director of a Company

who was not in charge of and was not responsible for the conduct of the business of the Company at the relevant time, will not be liable under the

provision. The liability arises from being in charge of and responsible for conduct of business of the Company at the relevant time when the offence

was committed and not on the basis of merely holding a designation or office in a Company. Conversely, a person not holding any office or

designation in a Company may be liable if he satisfies the main requirement of being in charge of and responsible for conduct of business of a

Company at the relevant time. Liability depends on the role one plays in the affairs of a Company and not on designation or status. If being a

Director or Manager or Secretary was enough to cast criminal liability, the Section would have said so. Instead of ""every person"" the Section

would have said ""every Director, Manager or Secretary in a Company is liable"". etc. The legislature is aware that it is a case of criminal liability

which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be

connected with the commission of a crime at the relevant time have been subjected to action.

In this case, there is no averment in the complaint as to how and in what manner, the Petitioner was responsible for the conduct of the business

of the Company or otherwise responsible in regard to its functioning. The Petitioner has not issued the cheque. Except saying that he was looking

after the business after issuance of the cheque, no other averment satisfying the requirements of Section 141 of the Negotiable Instruments Act is

mentioned in the complaint. To add, no notice has been sent to the Petitioner. Therefore, the statutory requirement is also not complied with, so as

to attract an offence u/s 138 of the Negotiable Instruments Act.

The decision relied on by the learned Counsel for the Petitioner rendered in the case of B. Raman and Ors. v. Shasun Chemicals and Drugs

Limited by its C. Secretary 2006 4 CTC 529 and Lakshmi Srinivas Savings and Chit Funds Syndicate Pvt. Ltd. Vs. S. Bhojarajan, that defective

notice issued would not be construed to be a notice as contemplated u/s 138 of the Negotiable Instruments Act squarely applicable to the facts of

the case on hand. In this case, even the notice sent to A1 has been returned unnerved and as such, there was no notice at all as contemplated u/s

138 of the Negotiable Instruments Act. Hence, viewed at any angle, the complaint cannot be maintained as against the Petitioner herein, who is

neither responsible nor in charge of the conduct of the business of the Company nor he is the drawer of the cheque.

For the above said reasons, this Court is of the considered view that the impugned complaint deserves to be quashed and accordingly, it is

quashed and this Criminal Original Petition is allowed. Consequently, the connected MP is closed.