IMPORTANT POINT
For offence u/s 138/141 N.I. Act, averments must state that person who is vicariously liable for commission of offence by company both was incharge of and was responsible for conduct of business of company and requirement must be read conjointly and not disjunctively.

Headnote:Negotiable Instruments Act, 1881 —Sections 138 and 141—Dishonour of cheque issued by Company—Requirement of law for proceeding against the Directors of Company for their purported constructive liability—Director of a Company shall not automatically be vicariously liable for offence—Sufficient averments should be made to show that person sought to be proceeded against being vicariously liable must be incharge and shall also be responsible to Company for conduct of its business—Liability of a Director must be determined on date on which offence is committed—Accused-Company took inter-corporate loan of Rs. 2 crores from complainant Company—Cheque issued towards interest on loan amount bounced—Prosecution of Company, its Managing Director accused No. 2 and two directors accused No. 3 and 4, respondent being accused No. 4—In a petition to quash proceedings against accused No. 4, High Court allowed petition—Appeal—Complaint read in its entirely showed that only person actively associated in matter of obtaining loan, signing cheques and other affairs of Company was accused No. 2 —Resolution of Company dt. 15-2-1995 authorised only accused No. 2 to do certain acts on behalf of Company—Cheque in question had been issued on 15-8-1996—High Court found that resolution by itself did not constitute offence even assuming that same bore signature of respondent—No reason to interfere with impugned judgment.
       Held : Section 141 of the Act does not say that a Director of a Company shall automatically be vicariously liable for commission of an offence on behalf of the Company. What is necessary is that sufficient averments should be made to show that the person who is sought to be proceeded against on the premise of his being vicariously liable for commission of an offence by the Company must be incharge and shall also be responsible to the Company for the conduct of its business.(Para 16)
       The liability of a Director must be determined on the date on which the offence is committed. Only because Respondent No. 1 herein was a party to a purported resolution dated 15.02.1995 by itself does not lead to an inference that she was actively associated with the management of the affairs of the Company. This Court in this case has categorically held that there may be a large number of Directors but some of them may not associate themselves in the management of the day to day affairs of the Company and, thus, are not responsible for conduct of the business of the Company. The averments must state that the person who is vicariously liable for commission of the offence of the Company both was incharge of and was responsible for the conduct of the business of the Company. Requirements laid down therein must be read conjointly and not disjunctively. When a legal fiction is raised, the ingredients therefor must be satisfied.(Para 20)
       If the complaint petition is read in its entirety, the same would show that the only person who was actively associated in the matter of obtaining loan, signing cheques and other affairs of the company which would lead to commission of the alleged offence was the accused No. 2. By reason of the purported resolution dated 15.02.1995, whereupon strong reliance has been placed by Mr. Mishra, only the accused No. 2 was authorized to do certain acts on behalf of the Company. The cheques were issued on 15.08.1996, i.e., after a period of 17 months from the date of the said resolution. As is evident from the averments made in the complaint petition, the cheques represented the amount of interest payable for a total period of 15 days only calculated at the rate of 25% per annum on the amount of deposit, viz., rupees two crores.(Para 21)
       The High Court has gone into the matter at some length. The High Court found that the resolution by itself did not constitute an offence even assuming that the same bore the signature of Respondent No. 1 (although the genuineness thereof was disputed).(Para 22)
       We, therefore, are of the opinion that the judgment of the High Court cannot be faulted.(Para 27)
       (ii) Criminal Procedure Code, 1973 —Section 482—High Court is not denuded from exercising its inherent jurisdiction for second time—Principles of res judicata is not attracted.(Paras 28 and 30)

JUDGMENT

S.B. Sinha, J.—Appellant herein is a company registered and incorporated under the Companies Act. Respondent No. 1 was a Director of a company known as M/s. Direct Finance and Investment Ltd., New Delhi. She allegedly submitted her resignation on 15.04.1994.

2. Against the said company, the Managing Director thereof, Respondent No. 1 herein as also another director, a complaint petition was filed by the appellant alleging that the Company represented by its Managing Director had called for inter-corporate deposit for a short period of 15 days to the extent of rupees two crores and to such a proposal it agreed. The rate of interest for such deposit was stipulated at 25% per annum therefor payable within 15 days. A promissory note was executed by the accused No. 2 on behalf of the Company. The date of maturity of the said deposit was fixed on 15.03.1995. Upon expiry of the period of deposit, the accused Company represented by its Managing Director allegedly issued a cheque for a sum of rupees two crores as also a cheque for a sum of Rs. 1,58,219.00 and another cheque for a sum of Rs. 8,33,334.00 drawn on Canara Bank, Janpath, New Delhi. All the cheques were dated 15.08.1996. The cheques for Rs. 8,33,334.00 and Rs. 1,58,219.00 represented the interest part on the deposit of rupees two crores for 15 days. The said cheques upon presentation were dishonoured on the ground of insufficient funds. It stands accepted that a notice dated 21.09.1996 was issued by the appellant asking the accused No. 1 – Company to pay the said sum. The said notice was served upon the accused Nos. 2 and 3, viz., the Managing Director and another Director of the Company. Respondent No. 1 who was arrayed as the accused No. 4 in the complaint petition was however not served with any notice. The address of Respondent No. 1 herein – accused No. 4 was shown as the Director of the Company being resident of 353, Bhera Enclave, Outer Ring Road, Delhi – 110 041. We may, however, notice that in the complaint petition her address had been shown to be Outer Ring Road, Paschim Vihar, Delhi – 110 041.

3. In the complaint petition the allegations made inter alia are as under:

“The Accused No. 1 is a duly incorporated Company, having its registered office at the address mentioned above, represented by the Director, Accused no. 2. The accused No. 3 and 4 are also the Directors of the Accused No. 1 company and the accused 2 to 4 are actively involved in the management of the affairs of the Accused No. 1 Company.”

4. Appellant along with the said complaint petition annexed a purported resolution dated 15.02.1995 authorizing the Managing Director of the Company to execute the promissory note which reads as under:

“RESOVED THAT the Company to avail an Inter Corporate Deposit of Rs. 2 Crores (Rupees Two Crores Only) for 15 days @ 25% p.a. from Reddy Nagar, Hyderabad and that Mr. Rajiv Anand, Director be and is hereby authorized to sign and execute Demand Promissory Note, Post Dated Cheques and other documents as may be required by M/s. SMS Pharmaceuticals Ltd. on behalf of the Company and deliver the same to M/s. SMS Pharmaceuticals Ltd.

RESOVED FURTHER THAT Mr. Rajiv Anand, Director of the Company be and is hereby authorized to affix common seal of the Company on such documents and papers as may be required in this connection pursuant to the Articles of Association of the Company.”

5. In the said proceedings, a petition for discharge was filed by Respondent No. 1 which was rejected by the learned Trial Judge. A revision petition filed thereagainst was also dismissed by the learned Sessions Judge. An application under Section 482 of the Code of Criminal Procedure was filed questioning the said orders which, however, was permitted to be withdrawn by the High Court stating:

“The learned counsel for the petitioner seeks leave of the Court to withdraw this application. The same shall accordingly stand dismissed as withdrawn.

Leave granted to the petitioner to avail the

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2007 Supreme(SC) 208

IMPORTANT POINTFor offence u/s 138/141 N.I. Act, averments must state that person who is vicariously liable for commission of offence by company both was incharge of and was responsible for conduct of business of company and requirement must be read conjointly and not disjunctively.

Cases Referred (6)

IMPORTANT POINT
For offence u/s 138/141 N.I. Act, averments must state that person who is vicariously liable for commission of offence by company both was incharge of and was responsible for conduct of business of company and requirement must be read conjointly and not disjunctively.