Umesh Kumar Modi vs Talera Traders and Another

S.C. Vyas, J.—This is a petition filed u/s 482 of Criminal Procedure Code by b petitioner wherein the impugned order dated 29.6.2002 of taking cognizance of the offence u/s 138 of Negotiable Instruments Act (hereinafter shall be referred as ''Act'' for brevity) passed by Judicial Magistrate, First Class, Ujjain against the present petitioner in criminal (private complaint) case No. 102 of 05 is under challenge and seeking quashment of the same.

Short facts of the case are that complainant respondent No. 1 filed a complaint against as many as 17 persons u/s 138 of the Act. The learned Trial Magistrate vide order 29.6.2002 took cognizance of the offence u/s 138 of the Act against all the persons arrayed as accused in the complaint. It has been stated in the complaint that all the accused persons including the present petitioner are the company and its Managing Directors and authorized signatory and Manager, Purchase of Modi Industries Ltd. as well as Modi Vanaspati Manufacturing Co. Ltd. It has also been stated, that some amount was taken as loan by Modi Industries Ltd. and Modi Vanaspati Ltd. from the complainant and two cheques bearing No. 17170 of Rs. 2,83,000/- and No. 171091 of Rs. 9,740/- were issued in favour of the complainant and given to him which were dishonoured by the Bank with a memo that sufficient funds is not available in the account of company, Thereafter notices were sent by the complainant through his Counsel to all the accused persons and the complaint was filed.

Learned Counsel appearing for petitioner submitted that petitioner is one of the Managing Director of M/s. Modi Industries Ltd. and this company is comprised nine manufacturing units, such as Vanaspati. Gas, Electrodes, Lantern, Paints, Soaps, Steel, Sugar and Distillery. The management and control of first six units including Vanaspati Unit vested with Mr. M. K. Modi, another Managing Director and management and control of remaining three units namely Steel, Sugar and Distillery is vested with the petitioner.

It has also been submitted by learned Counsel appearing for the petitioner that g the present petitioner is not connected in any manner whatsoever with the management and control of day-to-day affairs of Vanaspati unit of M/s. Modi Industries Ltd. The Vanaspati unit which was being looked after by Mr. M.K. Modi who had issued cheques in question to the complainant and such cheques have been signed by authorized signatory of Vanaspati unit of NA2 which were dishonoured by the Bank on account of insufficiency of funds. It has been submitted that in the complaint it has nowhere been averred that present petitioner is in-charge of and is in control of day-to-day affairs and management of NA2. It has also been contended that as per settled law the complaint must contain a mention of the aforesaid factum for an offence to be made out u/s 138 read with Section 148 of the Act and since there is no such averments in the complaint, so, no offence is made out against the petitioner. Therefore, it has been prayed that the impugned order of taking cognizance against the petitioner is liable to be quashed.

Learned Counsel for petitioner in support of his arguments placed reliance on ajudgment of the Supreme Court reported in the matter of S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla and Another, , in which it has been held that-

there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability u/s 141 of the Act is sought to be fastened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable.

Under Section 141 what is required is that the persons who are sought to be made criminally liable 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 the conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. The liability arises on account of conduct, act or omission on the part of a person and not merely on account of holding an office or a position in a company.

Learned Counsel appearing for petitioner submitted that in the whole complaint there is no averment that present petitioner arrayed as accused No. 10 in any way connected with the day-to-day affairs and business of Vanaspati Unit of Modi Industries Ltd. It has also not been averted that present petitioner ever personally dealt with the complainant or signed the cheques which were issued to the complainant. He submitted that the complaint is liable to be quashed.

To counter these arguments, learned Counsel appearing for respondent No. 1 has submitted that in para 2 of the complaint it has been averred that accused persons are Managing Directors, Directors, authorized signatory and Manager purchase of Modi Industries Ltd. and this company had obtained loan for its Modi Vanaspati unit from the complainant and cheques in question were drawn by accused persons for repayment of loan amount. He submitted that notices were also issued to all accused persons including present petitioner stating all the aforesaid facts. He submitted that complaint contains full averments regarding the present petitioner that he being the Director of the company is also responsible for criminal action on non-payment of the cheques issued by the company.

I have anxiously gone through the complaint in which general averments have been made in para 2 regarding all accused persons without specifying their particular overt act. In para 2 it has been averred that it was Modi Vanaspati Manufacturing Company Ltd. who in fact obtained loan from the complainant and cheques were issued by that unit and not by all accused persons. It has been stated by complainant in his own statement recorded u/s 200 of the Cr.P.C, that amount was obtained by Modi Vanaspati Manufacturing Co. Ltd. Neither in the complaint nor in the statement of complainant it has been stated that present petitioner is incharge and looking after day-to-day affairs and conduct the business of the of the said unit of NA2. Annexure P.I is an agreement executed between Directors of Modi Industries Ltd and present petitioner. This agreement spells out that present petitioner will look after day-to-day affairs and conduct of business of Sugar, Steel and Distillery Units of Modi Industries Ltd. only. In the alleged agreement the Vanaspati Unit of Modi Industries has not been assigned to the present petitioner.

In the complaint it has been stated that the transaction was entered between complainant and Modi Vanaspati Manufacturing Co. Ltd. and not with Modi Industries Ltd. It was the duty of the complainant to make necessary averments specifically that petitioner is the in-charge of day-to-day affairs and conduct of business of Modi Vanaspati Manufacturing Co. but nothing has been stated in the complaint so far as the act of present petitioner is concerned.

Therefore in view of the judgment of SMS Pharmaceuticals Ltd. (supra) the prosecution of present petitioner is liable to be quashed for want of necessary averments in the complaint itself.

In the result, the petition succeeds and allowed. The prosecution of present petitioner in Criminal Case No. 102 of 2005 pending in the Court of JMFC, Ujjain and the order dated 29.6.2002 of taking cognizance of offence punishable u/s 138 of the Act are hereby quashed.