IMPORTANT POINT
For dishonour of cheque issued by a company to launch a prosecution against the alleged Directors there must be a specific allegation in complaint as to the part played by them in the transaction.

Headnote:Negotiable Instruments Act, 1881—Sections 138 and 141—Offence of dishonour of cheque issued by company—Liability of Directors or any other person—Only such person would be liable if at the time when offence is committed he was incharge of and was responsible to the company for conduct of business of company—There should be clear and unambiguous allegations as to how the Directors were incharge and responsible for conduct of business of company—Allegations in complaint against respondent accused Nos. 2 to 12 were Directors/persons responsible for carrying out business of company and the liability of accused persons was joint and several—High Court held that there was no clear averment or evidence to show that respondents were incharge or responsible to company for conduct of business and accordingly quashed proceedings against respondents—No reason to interfere.
       Held : To launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction. There should be clear and unambiguous allegation as to how the Directors are incharge and responsible for the conduct of the business of the company. The description should be clear. It is true that precise words from the provisions of the Act need not be reproduced and the court can always come to a conclusion in facts of each case. But still in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable.(Para 8)
       Section 141 of the Act in terms postulates constructive liability of the Directors of the company or other persons responsible for its conduct or the business of the company.(Para 11)
       The only averment made so far as the respondents are concerned, reads as under:
       “Preliminary evidence had been recorded and at that time also no specific evidence on assertion was forthcoming. Shri Wahi who appeared at that time only stated that accused 2 to 12 are directors and responsible officers of the company. They are liable for the acts of the company. In other words, there was no averment or evidence that the present petitioners were incharge of or responsible to the company for the conduct of the business of the company as well as the company.
       The accused Nos. 2 to 12 are the Directors/persons responsible for carrying out the business of the company and the liability of the accused persons in the present complaint is joint and several.”(Para 12)
       In view of the legal position set out above, the inevitable result is that the appeals are without merit, deserve dismissal, which we direct.(Para 15)

JUDGMENT

Dr. Arijit Pasayat, J.—Challenge in this appeal is to the order passed by a learned Single Judge of the Delhi High Court, allowing the three applications filed by the respondents for quashing the order passed by the learned Metropolitan Magistrate, New Delhi, on 25th November, 2000.

2. Background facts in nutshell are as under :

Appellant presented a criminal complaint under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 (in short the ‘Act’) in the Court of Metropolitan Magistrate, New Delhi. It was pleaded that M/s Western India Industries Ltd. is a limited company and the respondents and some others were the Directors/persons responsible for carrying on the business of the company and the liability of these persons is joint and several. It was stated that certain cheques had been issued by the company which were dishonoured on being presented. After giving the necessary notice the complaint was filed. The respondents filed an application for dropping the proceedings stating that they were not Directors of the company and further there was no allegation against them in terms of Section 141 of the Act and as such they should not have been made parties. Learned Metropolitan Magistrate dismissed the application holding that whether the applicants in the aforesaid petitions were Directors at the relevant point of time or not is to be decided on evidence.

3. It was further held that the company is a juristic person and works through persons responsible for carrying out its activities and, therefore, they have been rightly impleaded as parties. Respondents filed applications invoking Section 482 of the Code of Criminal Procedure, 1973 (in short the ‘Code’). The High Court held that the preliminary evidence does not establish that the respondents were either incharge or were responsible to the companies for the conduct of business. In the absence of any such evidence or assertion, it was held that the learned Metropolitan Magistrate was not justified in issuing summons to the respondents.

4. In support of the appeals, learned counsel for the appellant submitted that there was clear material to show that respondents were either Directors or persons incharge of the business of the company. The High Court found that preliminary evidence had been recorded and subsequent evidence was forthcoming. The appellant who appeared at that time only stated that accused 2 to 12 are Directors and responsible for the company and as such liable by the acts of the company. The High Court held that there was no clear averment or evidence to show that the respondents were incharge or responsible to the company for the conduct of the business as well as the company. Accordingly the proceedings were quashed so far as the respondents are concerned.

5. The respondents on the other hand supported the order of the High Court.

6. Chapter XVII has been incorporated under the Act with effect from 1.4.1989. In certain contingencies referred to under Section 138 of the Act on the cheques being dishonoured a new offence as such had been created. But to take care of the offences purported to have been committed provisions of sub-section (1) to Section 141 of the Act come into play. It reads as under :-

“141 - Offence 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.”

7. This provision clearly shows that so far as the companies are concerned if any offence is committed b

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2007 Supreme(SC) 330

IMPORTANT POINT For dishonour of cheque issued by a company to launch a prosecution against the alleged Directors there must be a specific allegation in complaint as to the part played by them in the transaction.

Cases Referred (3)

IMPORTANT POINT
For dishonour of cheque issued by a company to launch a prosecution against the alleged Directors there must be a specific allegation in complaint as to the part played by them in the transaction.