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2024 Supreme(SC) 618
SUPREME COURT OF INDIA
ABHAY S. OKA, AUGUSTINE GEORGE MASIH, JJ.
National Housing Bank – Appellant
Versus
Bherudan Dugar Housing Finance Ltd. & Ors. Etc. – Respondents
Criminal Appeal Nos. 3176-3177 of 2024 (Arising out of Special Leave Petition (Crl.) Nos. 452-53 of 2018)
Decided On : 01-08-2024
IMPORTANT POINT
Offence by Company – Vicarious liability of Directors of accused company must be averred in complaint.
Headnote:
National Housing Bank Act, 1987 – Sections 49(2A) and 50 (Pari Materia to Section 141 of Negotiable Instruments Act, 1881) – Offence by Company – Vicarious liability of Directors of accused company – In absence of averments in complaint, Trial Court could not have taken cognizance of offence against third to seventh accused, who are allegedly Directors of first accused company – However, second accused being Managing Director, would be in charge of company and responsible to company for its business – There was no justification for quashing complaint against second accused – First respondent is a company – No reasons have been assigned to quash complaint against first accused – Complaint shall stand quashed as against third to seventh accused shown therein – However, complaint shall proceed according to law against first and second accused. (Paras 8 and 9)
Facts of the case:
Appellant filed a complaint under Section 200 of Code of Criminal Procedure, 1973, alleging commission of an offence of violating provisions in Section 29A of National Housing Bank Act, 1987. Magistrate took cognizance of complaint for the offence under Section 29A (i) read with Section 50 and punishable under Section 49 (2A) of 1987 Act.
Findings of Court:
Unless assertions, as required by sub-Section (1) of Section 50, are made, vicarious liability of Directors of first accused company is not attracted.
Result : Appeals partly allowed.
JUDGMENT :
Abhay S. Oka, J.
FACTS
1. The appellant filed a complaint under Section 200 of the Code of Criminal Procedure, 1973, alleging the commission of an offence of violating the provisions in Section 29A of the National Housing Bank Act, 1987 (for short, the ‘1987 Act’). The learned Magistrate took cognizance of the complaint for the offence under Section 29A (i) read with Section 50 and punishable under Section 49 (2A) of the 1987 Act. Section 49(2A) provides for a minimum sentence of one year, which may extend to five years. For convenience, we will refer to the parties as per their status before the Trial Court. The first accused is a company. The second accused was described in the complaint as the Managing Director of the first accused company, and the other five accused were described as the Directors. By the impugned judgment, the High Court has proceeded to quash the complaint in its entirety. The High Court held that the requirements of sub-Section (1) of Section 50 of the 1987 Act are similar to the requirements incorporated in Section 141 of the Negotiable Instruments Act, 1881 (for short, ‘the NI Act’), which were not complied with by the complainant.
SUBMISSIONS
2. The learned counsel appearing for the appellant has taken us through the averments made in the complaint and the provisions of the said Act of 1987. He submitted that on a plain reading of the complaint, a violation of the provisions in Section 29A (i) of the 1987 Act was made out. Therefore, there was no reason to quash the complaint. Inviting our attention to the complaint, he pointed out that the second accused was described as the Managing Director of the first respondent and, therefore, he was in charge of and was responsible to the first respondent company for the conduct of the company's business. He submitted that there were sufficient averments for implicating the other accused.
3. The learned counsel appearing for the accused supported the impugned judgment and submitted that averments as required by sub-Section (1) of Section 50 of the 1987 Act have not been incorporated in the complaint.
REASONS
4. Section 50 of the 1987 Act reads thus:
“50. Offences by Companies.— (1) Where an offence has been committed by 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 such person liable to any punishment provided in this Act, 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.
(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation.—For the purposes of this section—
(a) “company” means any body corporate and includes a firm or other association of individuals; and
(b) “director”, in relation to a firm, means a partner in the firm.”
(emphasis added)
There is no dispute that sub-Section (1) of Section 50 is pari materia with Section 141 of the NI Act.
5. Paragraph 9 of the complaint contains relevant averments on which reliance was placed by the learned counsel for the complainant. Paragraph 9 reads thus:
“The complainant submits that the Accused No. 1 herein is a Limited Company, having its registered Office at Nos. 73/1A, Jermiah Road, Vepery, Chennai-600007. It was incorporated on 17-12-199
