S.C. Chhabra vs Gontermann Peipers (India) Ltd.

V.M. Jain, J.—This order shall dispose of 17 petitions, bearing Criminal Misc. Nos. 20573-M of 2001, 20575-M of 2001, 20577-M of 2001, 20579-M of 2001, 20581 -M of 2001, 20583-M of 2001, 48751-M of 2001, 48753-Mof 2001, 48755-M of 2001, 48757-M of 2001, 48759-M of 2001, 48761-M of 2001, 48763-M of 2001, 48765-M of 2001, 48767-M of 2001, 48769-M of 2001, and 48771 -M of 2001, filed by the complainants against M/s. Bhiwani Denim and Apparels Limited and its various office-bearers, including Managing Director and Directors. Six of the petitions have been filed by accused-petitioner S.C. Chhabra, the other six petitions have been filed by accused-petitioners S.K. Chhibar and R.L. Sahni, while remaining five petitions have been filed by accused-petitioners S.K. Sahni and V.K. Garg, Directors of M/s Bhiwani Denim and Apparels Ltd. Since common questions of law and facts arc involved in the 17 petitions, all the 17 petitions are being disposed of by a single order. For the sake of convenience, the facts of Criminal Misc. No. 20573-M of 2001, titled as S.C. Chhabra v. Gontermann Peipers (India) Ltd. are being noticed.

The complainant M/s Gontermann Peipers (India) Ltd. had filed the criminal complaint u/s 138 read with Section 141 of the Negotiable Instruments Act (hereinafter referred to as the Act) against M/s Bhiwani Denim and Apparels Ltd. as accused Nos. 1 and 10 other office-bearers of the said company, including the Managing Director, the Chairman and the Directors of the old company. In the said complaint, it was alleged that the complainant-company had been supplying cotton yarn to the accused-company and the supplies started in October, 1997 and that total material worth Rs. 1,34,68,299/- was supplied, out of which total payment of Rs. 47,84,000.41 had been paid from time-to-time and that there was a total balance of Rs. 86,85,298.59, which was still payable by the accused-company to the complainant. It was alleged that in order to clear the above said outstanding amount, the accused-company issued six cheques, out of which two cheques were dated 2.1.1998, two cheques were dated 2.2.1998 and two cheques were dated 3.2.1998, as detailed in para 5 of the complaint. The said complaint was filed in respect of one of the two cheques dated 2.1.1998 for Rs. 5,34,551.53, while the remaining five complaints had been filed in respect of the other cheques. It was alleged in the complaint that all these cheques were presented but the same were dishonoured, vide dishonouring memo dated 28.2.1998 and the complainant-Company had been informed by its Bankers on variousdates. It was alleged that as per the dishonouring memo dated 28.2.1998, the cheques were dishonoured with the remarks "Funds Insufficient". It was alleged that in spite of being informed by the complainant-company in this regard, the accused had failed to make any payment uptill now. It was further alleged that accused No. 1 is the company, accused No. 2 is the signatory to the cheque (also the authorised signatory-cum-Managing Director/Director of the said company), accused No. 3 was the General Manager, accused No. 4 was the Chairman, while accused Nos. 5 to 11 were the Directors, "who were actively involved in the entire business of the company and were responsible to the company for the conduct of the-business as well as the company and were responsible for the encashment of the cheques and were having the knowledge of the issuance of the cheques, as well as dishonouring of the cheques. Therefore, all these persons are guilty of an offence committed u/s 138 read with Section 141 of the Act....."

After the criminal complaints were filed, the learned Judicial Magistrate, recorded the preliminary evidence of the complainant and, thereafter, vide order dated 30.7.1998, the learned Judicial Magistrate 1 st Class, Chandigarh, ordered the summoning of the petitioners (in all the cases) as accused for the offence under Sections 138 and 141 of the Negotiable Instruments Act. Aggrieved against the filing of the criminal complaints and the summoning orders passed by the Judicial Magistrate in all the six criminal, complaints, various Directors of the accused-company filed the above mentioned 17 petitions m this Court, seeking the quashment of the criminal complaint and the summoning orders passed by the Judicial Magistrate, being illegal and abuse of the process of Court.

In the petitions, it was alleged by the accused-petitioners that the accused-petitioners were dealing in the affairs of the company. It was further alleged that the complainant in the complaint had not alleged that as to what functions or duties were being discharged by the accused-petitioners in the alleged handling of the affairs of the company. It was alleged that the complainant had failed to comply with the mandatory provisions of Sub-section (2) of Section 141 of the Act. It was alleged that the complaint filed by the complainant was mala fide, inasmuch as accused at Sr. No. 6 had already resigned w.e.f. 21.6.1996. Accused at Sr, No. 7 had already expired on 30.5.1996 while accused at Sr. No. 10 had left the company ori 30.10.1998 and still the complainant had inipleaded them as accused and the trial Magistrate had ordered their summoning. It was alleged that some of the Directors were the nominee Directors and had nothing to do with the business of the company. It was alleged that no case for proceeding against the accused-petitioners was made out in the criminal complaints filed by the complainant and as such the complaints and summoning orders were liable to be quashed.

The said petition was contested by the complainant by filing the written reply. It was alleged that these complaints were filed for dishonouring of six cheques, total amounting to Rs. 86,35,141.44 and that these cheques were dishonoured on 28.2.1998. It was further alleged that there were specific allegations against the accused-petitioners not only in the notices but also in the criminal complaints. It was alleged that from the allegations made in the notices and the criminal complaints, the accused-petitioners were proved to have committed the offence u/s 138 of the Act. It was alleged that the complaints and the summoning orders could not be quashed when there were specific allegations in the complaint against the accused-petitioners.

I have heard the learned Counsels for the parties in all the 17 petitions and have gone through the record carefully

The learned Counsel for the accused-petitioners has submitted before me that the mere allegation of the complainant in the criminal complaint u/s 138 read with Section 141 of the Act that the accused-petitioners (who are Directors of the accused-company) were actively involved for the business of the company and were responsible to the company for the conduct of the business of the company and were responsible for the encashment of the cheques and were having the knowledge of the issuance of the cheques as well as the dishonouring of the cheques, would not be enough to prosecute the accused-petitioners (who were Directors of the company) and/or to proceed against them. It was submitted that the complainant had failed to allege in the complaints as to what functions or duties were being discharged by the accused-petitioners in the alleged handing of the affairs of the company. It was alleged that in the absence of any such allegation, the bald allegation made by the complainant that the accused-petitioners were involved in the business of the company and were responsible to the company for the conduct or the business of the company and were responsible for the encashment of the cheques, would not be enough to make the accused-petitioners liable for the offence u/s 138 read with Section 141 of the Act. Reliance has been placed on the law laid down by the Hon''ble Supreme Court in the case reported as K.P.G.Nair v. Jindal Menthol India Ltd., VII (2000) SLT 189=I (2001) BC 243 (SC)=JT 2000 (Suppl.) SC 519.

After hearing the learned Counsel for the parties and after perusing the record, I find no force in this submission of the learned Counsel for the accused-petitioners.

In these cases, as referred to above, the complainant had specifically alleged in the criminal complaints that the accused-petitioners (who are the Directors of the accused-company) were actively involved in the entire business of the company and were responsible to the company for the conduct of the business of the company and were having knowledge of the issuance of the cheques as well as dishonouring of the cheques and as such all the accused-petitioners were guilty for the offence u/s 138 read with Section 141 of the Act. The complainant having made, all these allegations in the criminal complaints, in my opinion, had discharged the obligation as required u/s 141 of the Act for prosecuting the petitioners as accused for the offence u/s 138 of the Act. Nothing else was required to be alleged by the complainant in the criminal complaints in order to show that the accused-petitioners were liable of the offence u/s 138 read with Section 141 of the Act. In my opinion, the complainant was not required to allege in the criminal complaints as to what functions or duties were being discharged by the accused-company, as submitted before me by the learned Counsel for the accused-petitioners.

Section 141 of the Negotiable Instruments Act, reads as under :

"Offences by companies--(1) If the person committing an offence u/s 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.

(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."

From the above, it would be clear that Section 141 is in two parts. Sub-section (1) of Section 141 of the Act provides that if the person committing an offence u/s 138 of the Act 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. Sub-section (2) of Section 141 of the Act provides that notwithstanding anything contained in Sub-section (1), where any offence under the said Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance if, or is attributable to, any neglect on 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. This would show that Sub-section (2) of Section 141 of the Act is in addition to Sub-section (1) of Section 141 of the Act. This would mean that a person, who is covered by Sub-section (1) of Section 141 of the Act, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Besides that, those persons who are covered under Sub-section (2) of Section 141 of the Act, shall also be deemed to be guilty of the offence and shall also liable to be proceeded against and punished accordingly, in addition to the persons who are covered in Sub-section (1) of Section 141 of the Act. With regard to the persons who are covered by Subsection (1) of Section 141 of the Act, it has been provided that nothing contained in the said 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. Thus, in respect of the persons covered by Sub-section (1) of Section 141 of the Act, the Legislature has already provided a safeguard inasmuch as those persons having been given a right to show that the offence was committed without their knowledge or that they had exercised all due diligence to prevent the commission of such offence.

In the present case, at this stage, the case of the accused-petitioners is squarely covered by the provision of Sub-section (1) of Section 141 of the Act, inasmuch as in the criminal complaints, it has been specifically alleged that the accused-petitioners were actively involved in the entire business of the company and were responsible to the company for the conduct of the business of the company and were responsible for the encashment of the cheques and ''were having the knowledge of the issuance of the cheques as well as the dishonouring of the cheques. In fact, the complainant while making the above said allegations in the criminal complaints had also tried to cover the case of the accused-petitioners in Subsection (2) of Section 141 of the Act, by alleging that the accused-petitioners were having the knowledge about the issuance of the cheques as well as the dishonouring of the cheques, meaning thereby that the offence had been committed with the consent of the accused-petitioners, who were the Directors of the company. Be that as it may, the fact remains that the allegations made by the complainant in the criminal complaints clearly being the case of the accused-petitioners within the purview of Sub-section (1) of Section 141 of the Act. However, at the appropriate stage, the accused-petitioners would be entitled to prove that the offence was committed without their knowledge or that they had exercised all due diligence to prevent the commission of the offence. However, at this stage, in my opinion, the criminal complaints and the summoning orders passed by the learned Magistrate, cannot be quashed merely on the ground that the complainant had not alleged in the criminal complaints, that also what functions or duties were being discharged by the accused-petitioners in handling the affairs of the company.

The authority JT 2000 (Suppl.) SC 519 (supra) relied upon by the learned Counsel for the accused-petitioners, in my opinion, would have no application to the facts of the present case. In the reported case, the petition u/s 482, Cr.P.C. filed by the accused-petitioner, seeking the quashment of the criminal proceedings emanating from the complaint filed by the respondent against him and others, u/s 138 of the Act, was dismissed by the Delhi High Court, taking the view that the averments made in the complaint read along with the statements of the witnesses, prima facie, go to show that at the relevant time, the appellant (petitioner) being the Director of the accused-company, was also in charge of and responsible for the business of the accused-company. In the appeal before the Hon''ble Supreme Court, it was submitted by the Counsel for the accused-appellant that from a plain reading of the relevant allegations made in the complaint do not even, prima facie, make out a case against the appellant and that he is sought to be prosecuted in view of the provisions of Section 141 of the Act, as he happened to be the Director of the accused-company at one point of time. On the other hand, the learned Counsel for the accused-appellant submitted that from the allegations made in the complaint it has to be inferred that the accused-appellant was in charge of and was responsible to the company for the conduct of the business of the accused-company at the time when the offence was committed. In the reported case, in the criminal complaint, it was not specifically alleged by the complainant that the accused-appellant (who was one of the Directors of the accused-company), was in charge of and responsible to the company for the conduct of the business of the company.

After referring to Section 141 of the Act, it was held by the Hon''ble Supreme Court that a person other than the company can be proceeded against u/s 141 of the Act only if that person was in charge of and was responsible to the company for the conduct of its business. It was further held by the Hon''ble Supreme Court that the words of Section 141(1) of the Act, need not be incorporated in a complaint as magic words but it also could not be disputed that the substance of the allegation read as a whole should Answer and fulfil the requirements of the ingredients of the said provision. After going through the allegations made in the complaint, it was held by the Hon''ble Supreme Court that the allegations made in the complaint do not either in express words or with reference to the allegations contained therein, make out a case that at the time of commission of the offence, the appellant was in charge of and was responsible to the company for the conduct of its business. It was under those circumstances that the Hon''ble Supreme Court had quashed the proceedings in question against the accused-appellant alone.

In my opinion, the law laid down by the Hon''ble Supreme Court, in the above mentioned authority, would be of no help to the accused-petitioners in the present case. In the present case, as the complainant had specifically, in express words, alleged in the complaints that the accused-petitioners being the Directors of the company were in charge of and were responsible to the company for the conduct of the business of the company and as such they were liable to be proceeded against. The Hon''ble Supreme Court, in the above mentioned authority, had held that even if the language of Section 141(1) of the Act has riot been incorporated in the complaint, still the person can be made accused if the substance of the allegations, if read as a whole, should answer and fulfil the requirements of the ingredients of the said provision. In the present case, the allegations made in the complaint itself fulfil the requirement of Section 141(1) of the Act. In this view of the matter, in my opinion, the accused-petitioners cannot take any benefit of the law laid down by the Hon''ble Supreme Court, in K.P.G. Nair''s case (supra).

The other authority relied upon by the learned Counsel for the accused-petitioners, reported as Harbhajan Singh Kalra v. State of Haryana and Anr., I (1992) BC 673= 1992 The Criminal Law Times 178, in my opinion, would also have no application to the facts of the present case. In the reported case, this Court had considered the provisions of Section 141(2)of the Act for considering as to whether the allegations in the complaint were sufficient to proceed against the petitioner as accused. However, the case of the complainant in the present case is in respect of the allegations covered by Section 141(1) of the Act. Similarly, the other authority reported as Raj Kumar Mangla v. Indo Lowenbrau Breweries Ltd. 1997 (2) CLR 326 , relied upon by the learned Counsel for the accused-petitioners, would have no application to the facts of the present case. In the reported case, there was no allegation against the petitioner, who was one of the partners of the firm, that he was in charge of or responsible to the firm for the conduct of its business or that the offence was committed with his connivance or due to his neglect. It was under these circumstances that it was held by this Court that the complaint and the summoning order qua the said petitioner were liable to the quashed. However, as referred to above, in the present case, the specific allegations have been made by the complainant against the petitioners, in the various complaints filed by the complainant against them.

No other point has been urged before me in these petitions.

For the reasons recorded above, finding no merit in these petitions, all the petitions are hereby dismissed.