IMPORTANT POINT
It is necessary to specifically aver in complaint u/s 141 N.I. Act that at the time the offence was committed, person accused was in charge of and responsible for conduct of business of company.

Headnote:Negotiable Instruments Act, 1881 —Section 138 and 141—Dishonour of cheque drawn by company—Vicarious liability of persons in charge of business of company—Appellants were not directors of company who issued cheques in question at the material time—Averment in complaint was to effect that accused being company, all the directors were responsible for the clearance of liability—Appellants’ petition u/s Cr.P.C. for quashing the process against them was dismissed by High Court—Appeal—Averments in complaint petition did not meet statutory requirements—Sworn statement of witness also did not contain any statement that appellants were in charge of business of company—Impugned judgment could not be sustained and process issued against appellants was liable to be quashed.
Held : A bare perusal of the complaint petitions demonstrates that the statutory requirements contained in Section 141 of the Negotiable Instruments Act had not been complied with. It may be true that it is not necessary for the complainant to specifically reproduce the wordings of the section but what is required is a clear statement of fact so as to enable the court to arrive at a prima facie opinion that the accused are vicariously liable. Section 141 raises a legal fiction. By reason of the said provision, a person although is not personally liable for commission of such an offence would be vicariously liable therefor. Such vicarious liability can be inferred so far as a company registered or incorporated under the Companies Act, 1956 is concerned only if the requisite statements, which are required to be averred in the complaint petition, are made so as to make the accused therein vicariously liable for the offence committed by the company. Before a person can be made vicariously liable, strict compliance of the statutory requirements would be insisted. Not only the averments made in paragraph 7 of the complaint petitions does not meet the said statutory requirements, the sworn statement of the witness made by the son of Respondent herein, does not contain any statement that Appellants were in charge of the business of the company. In a case where the court is required to issue summons which would put the accused to some sort of harassment, the court should insist strict compliance of the statutory requirements. In terms of Section 200 of the Code of Criminal procedure, the complainant is bound to make statements on oath as to how the offence has been committed and how the accused persons are responsible therefor. In the event, ultimately, the prosecution is found to be frivolous or otherwise mala fide, the court may direct registration of case against the complainant for mala fide prosecution of the accused. The accused would also be entitled to file a suit for damages. The relevant provisions of the Code of Criminal Procedure are required to be construed from the aforementioned point of view.(Para 8)
As the law laid down in the aforementioned decisions are clearly attracted in the instant case, we are of the opinion that the impugned judgments cannot be sustained which are set aside accordingly and the processes issued by the court of the Addl. Chief Metropolitan Magistrate, Bangalore against Appellants herein are quashed.(Para 12)

JUDGMENT

S.B. Sinha, J.—Leave granted in SLPs.

2. Two cheques dated 23.6.2001 and 30.6.2001 for a sum of Rs. 1,24,406/- each were issued in favour of the Respondent allegedly on behalf of a company known as Karnataka News Net (Bangalore) Ltd. The Appellants herein were not directors of the said company at the material time. Two complaint petitions were filed by the Respondent herein before the Addl. Chief Metropolitan Magistrate, Bangalore wherein Appellants were described as Accused Nos. 6 and 8. In the said complaint petitions, it was categorically stated that the company which had been dealing with imparting of computer education in rural areas represented by its Managing Director, Chairman,Vice-Chairman and other Directors borrowed a sum of Rs. 2,25,000/- from the Respondent on an interest of 24% per annum. Towards payment of the said loan, the accused had issued two cheques on 23.6.2001 and 30.6.2001 for a sum of Rs. 1,24,406/- each which upon being presented were dishonoured as the company did not have sufficient fund. In the complaint petition, it was averred:

"7) The complainant submits that the accused persons have failed to clear the liability. The accused being Company and all the directors are responsible for the clearance of liability under Section 141 of the N.I. Act and the acts and deeds of the accused persons is punishable under Section 138 of N.I. Act."

3. In support of the said complaint petition, one Ravidraradya, son of the complainant filed a sworn affidavit stating:

"...The accused No. 2 is the M.D. and others are Chairman and partners. The accused-company towards repayment of the loan, issued a cheque in favour of the complainant. The M.D. signed and issued the cheque dated 23.6.2001 for Rs. 1,24,406/- on the account maintained by the company. On presentation of the said cheque to the Bank for collection, the same was returned on 30.6.2001 as insufficient funds. Notice dated 12.7.2001 was issued through Advocate to the accused was served on 13.7.2001. The case was filed on 27.8.2001...."

4. Processes were directed to be issued on the said statement for alleged commission of an offence under Section 138 of the Negotiable Instruments Act.

5. Appellants herein filed an application under Section 482 of the Code of Criminal Procedure praying for quashing of the processes issued against them in the said proceedings.

6. The High Court by reason of the impugned judgment dismissed the said application stating:

"3) The material on record prima facie disclose that these petitioners were Directors on the date of the offence i.e. on 30.7.2003. The question as to whether these petitioners were involved in day to day affairs of the business of the company is to be decided based on the material on record collected during the course of trial."

7. Section 138 of the Negotiable Instruments Act provides that where a cheque drawn by a person is returned by the bank unpaid on the grounds specified therein, the person who had drawn the said cheque shall be deemed to have committed an offence thereunder. Section 139 provides for a presumption in favour of a holder of a negotiable instrument. Section 141 of the Act provides for offences by a company. Sub-section (1) of Section 141 reads 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 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 holdi

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2006 Supreme(SC) 848

IMPORTANT POINTIt is necessary to specifically aver in complaint u/s 141 N.I. Act that at the time the offence was committed, person accused was in charge of and responsible for conduct of business of company.

Cases Referred (3)

IMPORTANT POINT
It is necessary to specifically aver in complaint u/s 141 N.I. Act that at the time the offence was committed, person accused was in charge of and responsible for conduct of business of company.