Shailendra S/O Gopalji Goyal vs Pradeep Bansal S/O Suresh Bansal And Others

[1] THE petitioner has filed this petition under Section 482 of the Code of Criminal Procedure seeking to quash the proceedings of Criminal Case

No.580/2011 pending before the Court of Judicial Magistrate, First Class, Neemuch for discharging the petitioner from all the charges.

[2] Admittedly, Respondent No.1 â€" Pradeep Bansal has filed a complaint before the Judicial Magistrate, First Class, Neemuch under Section 138 of

the Negotiable Instruments Act [in brief “the NI Actâ€] alleging that he is Proprietor of a firm called Shri Jwala Enterprises who had supplied steel

pipes and channels to the firm M/s Icon Fertilizer and Chemicals, Neemuch. In the complaint, it is alleged that a cheque for an amount of Rs.7,42,051-

00 was handed over to Respondent No.1 and this cheque was dishonoured when presented for payment through the banak of the complainant. The

petitioner Shailendra Goyal submits that he has been arrayed as an accused in the complaint alleging that he is one of the partners of the firm M/s Icon

Fertilizers and Chemicals. The petitioner submits that he had not drawn the cheque and could not be implicated in the case with the aid of Section 141

of the NI Act in view of the law laid down by Hon'ble Apex Court in the case of M/s Standard Chartered Bank v/s State of Maharashtra [(2016) 6

SCC 62. The cheque neither has been issued by the petitioner not it bears the signatures of the petitioner. The petitioner filed revision application

against the order of dismissal of application for discharge. He submits that the Courts below have failed to appreciate that the complaint against the

petitioner was not maintainable also on the ground that it has not been presented by proper person and there is defect of non joinder of essential

parties. On these grounds the relief for quashment of proceedings against him has been sought.

[3] No written reply to this petition has been filed by the Respondent No.1 and oral submissions were made.

[4] The question is whether there is substance in the submissions of the petitioner and whether the relief as sought can be afforded to him ?

[5] Admittedly, the impugned cheque has not been signed by the petitioner and, therefore, petitioner submits that no liability could be fastened on him

as since he has not only signed the cheque, he is not involved in issuance of cheque as well. The citation of M/s Standard Chartered Bank (supra) has

been cited in support. In this citation it has been held that only direct involvement of an officer of a company would make such officer liable under

Section 141 (2) of the NI Act. It has been held further that liability arises on account of conduct, act or omission by an officer and not merely on

account of his holding office or position in a company. The accused, being in-charge of and responsible for the conduct of the business of the company

must be specifically averred in the complaint. Pointing out this citation, learned counsel submits that because petitioner Shailendra Goyal is a partner of

the firm, he does not become liable only on this ground and he can be held liable only when the complainant/Respondent No.1 attributes a conduct, act

or omission on his part. The learned counsel has further referred to another citation of Apex Court which is N.K.Wahi v/s Shekhar Singh and others

[(2007) 9 SCC 481], in which it has been laid down that for launching a prosecution against the alleged Directors, there must be specific allegation in

the complaint as to the part played by them in the transaction and allegation should be clear and unambiguous as to how the Directors were in-charge

and responsible for the conduct of the business of the company.

[6] Yet another citation furnished in support is that of Makson Food (Private) Ltd. v/s Sterling Agro Industries Ltd., Gwalior and another [2009 (1)

MPWN 57] in which it has been held that liability under Section 138 arises only against the signatory of a cheque and applicant not issuing any cheque,

no liability arises against him.

[7] Per-contra, learned counsel for the Respondent No.1 has stated that all that was required for the complainant was to state that the Director in

question was in-charge of and was responsible for the company, for the conduct of the business of the company so as to bring the case under Section

141 (1) of the NI Act. Learned counsel has submitted that this was the only requirement as per citation of M/s Standard Chartered Bank (supra) and

also S.M.S. Pharmaceuticals Ltd. v/s Neeta Bhalla and another [(2007) 4 SCC 70] as also K.K.Ahuja v/s V.K.Vora and another [(2009) 10 SCC 48].

These requirements had been complied with as it has been specifically averred in the complaint filed by the Respondent No.1 that all the 3 partners,

including the petitioner, were in-charge and were responsible separately and jointly on behalf of firm in respect of each and every act of the firm and

such compliance, as per the learned counsel is sufficient and it could not be required to make further averments in the complaint as to the particular

roll played by the petitioner.

[8] Considered rival submissions.

[9] Section 141 (1) of the NI Act is reproduced as under :-

“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 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 shalal 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 :â€​

[10] The explanation (b) to Section 141 stipulates that “directorâ€​, in relation to a firm, means a partner in the firm.

[11] It would be appropriate to peruse the citation of M/s Standard Chartered Bank (supra), which has been cited by both the learned counsel. In this

case, the Apex Court has drawn from three-Judge Bench of Apex Court in S.M.S. Pharmaceuticals Ltd. v/s Neeta Bhalla and another [(2005) 8 SCC

89] (popularly known as “SMS Pharma I†case) and also S.M.S. Pharmaceuticals Ltd. v/s Neeta Bhalla and another [(2007) 4 SCC 70]

(popularly known as “SMS Pharma II†case - two-Judge Bench). In the former case of SMS Pharma, the Apex Court had in para 19 observed

that what is necessary to be stated in the complaint is that the accused was incharge of and responsible for the conduct of the business when the

offence was committed. Para 19 (a) of the judgment is reproduced as under :-

“19. (a) It is necessary to specifically aver in a complaint under Section 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.â€​

[12] The Apex Court when dealing with SMS Pharma II case, was confronted a citation of another Apex Court judgment which isS aroj Kumar

Poddar v/s State (NCT of Delhi) [(2007) 3 SCC 693 ]in which it was laid down that it is also required to be shown as to how and in what manner the

appellant was responsible for the conduct of the offence of the company.

[13] Thus, it was contended that merely stating that the accused was incharge and responsible for the conduct of business of the company would not

suffice but further it has to be stated as to in what manner the appellant was responsible for the conduct of the business of the company.

[14] The Apex Court in SMS Pharma II case considered these citations and in para 26 observed as under :-

“26. A faint suggestion was made that this Court in Saroj Kumar Poddar (supra) has laid down the law that the complaint petition not only must

contain averments satisfying the requirements of Section 141 of the Act but must also show as to how and in what manner the appellant was

responsible for the conduct of the business of the company or otherwise responsible to it in regard to its functioning. A plain reading of the said

judgment would show that no such general law was laid down therein. The observations were made in the context of the said case as it was dealing

with a contention that although no direct averment was made as against the appellant of the said case fulfilling the requirements of Section 141 of the

Act but there were other averments which would show that the appellant therein was liable therefor.â€​

[15] Thus, the position was clarified that requirement to aver in the complaint as to how and in what manner the appellant was responsible was made

in the context of the facts of the particular case in Saroj Kumar Poddar's case (supra) and no such general law was laid down therein.

[16] The Apex Court in M/s Standard Chartered Bank (supra) clarified the position ultimately. Para 23 of the judgment is of extreme importance. In

this paragraph, the Apex Court referred to yet another case of Apex Court which is K.K.Ahuja v/s V.K.Vora and another [(2009) 10 SCC 48] in

which in para 27 (iii) following observation has been made :-

“(iii) In the case of a Director, secretary or manager [as defined in Section 2(24) of the Companies Act] or a person referred to in clauses (e) and

(f) of Section 5 of the Companies Act, an averment in the complaint that he was in charge of, and was responsible to the company, for the conduct of

the business of the company is necessary to bring the case under Section 141(1) of the Act. No further averment would be necessary in the

complaint, though some particulars will be desirable.â€​

[17] Thus, it is clear that a three-Judge Bench in SMS Pharma I case has laid down that only requirement to be made in the complaint case is that it

should contain averments that the accused at the time of commission of offence was incharge and responsible for the company (firm). No further

requirements are needed to be made. The citation of N.K.Wahi(supra) referred to by learned counsel for the petitioner, in para 19 specifically lays

down that merely being a Director of a company is not sufficient to make a person liable and it cannot be deemed that the Director is incharge of

company and responsible for the conduct of his business. Such fact should be averred in so many words in the complaint.

[18] Coming to the case in hand, in para 4 of the complaint specific averment to that effect satisfying the requirements of a dictum of Apex Court in

SMS Pharma I case (supra) have been made. Consequently there is no flaw in the complaint and submissions raised on behalf of the petitioner is not

acceptable.

[19] Learned counsel for the petitioner has raised another objection which is that the impugned cheque has been shown to have been given only as a

measure of security in para 3 of the complaint and, therefore, learned counsel submits that the cheque was not given in discharge of the debt but was

given as security for the debt and, therefore, provisions of Section 138 of the NI Act could not apply.

[20] Para 3 of the complaint was perused. In this para it has been stated that the accused persons had assured that as soon as the bank limit of the

partnership firm would accrue, the amount shall be paid in cash or else the questioned cheque can be presented in the bank for encashment.

[21] The question is whether such a pleading shows that the cheque was merely a security for debt or was given for discharge of debt ? This question

was again answered by the Apex Court in the case of Don Ayengia v/s State of Assam [AIR 2016 SC 740]. The Apex Court noted that although the

words “security†was used while giving the cheques, it was also stipulated that if the amount is not paid within the stipulated period, cheques were

liable to be presented. The Apex Court held that where the existence of liability/debt is not in dispute and it is stipulated that on the failure to repay the

debt, the cheque could be presented then it would not be appropriate to call such cheque as “security†even though the word “security†has

been used.

[22] The case in hand contains facts similar to the above Apex Court's judgment in of Don Ayengia (supra). Thus, this submission on behalf of the

learned counsel for the petitioner also stands rejected that there is no liability under Section 138 of the NI Act as the cheque was barely a security and

not given in discharge of debt.

[23] Consequently both the submissions advanced by learned counsel for the petitioner are not liable to be accepted.

[24] Accordingly this petition filed under Section 482 of the Code of Criminal Procedure is dismissed.