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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.S. SHINDE, J.
Kulwant Chauhan - Appellant
Versus
State of Maharashtra - Respondent
Criminal Application No. 1433 of 2018, 1023, 1024, 1025, 1026, 1027, 1029, 1030, 1031, 1032 of 2019
Decided On : 23-09-2019
Negotiable Instruments Act,1881 - Section 138 r/w 141 - Companies Act,1956 - Post of Director of company – Dishonor of cheque - Learned counsel appearing for applicants submit that if the allegations in the complaint are taken on its face value and read in its entirety an alleged offences are not disclosed - It is submitted that learned Metropolitan Magistrate has not appreciated legal position concerning the vicarious liability of a director in a company which is being prosecuted for offence under Section 138 r/w. 141 of the Said Act - Learned Magistrate has not properly appreciate that what is required is that the persons who are seeking to be made vicariously liable for a criminal offence under Section 141 of Said Act should be at the time the offence was committed was in charge of and was responsible for conduct of the business of company - Every person connected with company shall not fall within ambit of the said provision - Only those persons who are in charge of and responsible for conduct of business of company at time of commission of an offence will be liable for criminal action - If a Director of a Company who was not in charge of and was not responsible for conduct of business of company at relevant time will not be liable for a criminal offence under provisions - Liability arises from being in charge of and responsible for conduct of business of company at relevant time when offence was committed and not on basis of merely holding a designation or office in a company - Section 141 of said Act is a penal provision creating vicarious liability and which as per settled law must be strictly construed - It is therefore not sufficient to make a bald cursory statement in a complaint that a Director is in charge of and responsible to company for conduct of business of company - This is in consonance with a strict interpretation of penal statutes especially where such statutes create vicarious liability – Held, Only point that arises for our consideration in this case is whether High Court was right in setting aside the order by which process was issued - It is settled law that Magistrate at stage of taking cognizance and summoning, is required to apply his judicial mind only with a view to taking cognizance of offence or in other words to find out whether a prima facie case has been made out for summoning the accused persons - Learned Magistrate is not required to evaluate merits of the material or evidence in support of complaint because Magistrate must not undertake exercise to find out whether the materials would lead to a conviction or not - Quashing the criminal proceedings is called for only in a case where complaint does not disclose any offence or is frivolous vexatious, or oppressive - If allegations set out in the complaint do not constitute the offence of which cognizance has been taken by Magistrate it is open to High Court to quash the same - It is not necessary that a meticulous analysis of case should be done before Trial to find out whether the case would end in conviction or acquittal - If it appears on a reading of complaint and consideration of the allegations therein in light of statement made on oath that ingredients of offence are disclosed there would be no justification for the High Court to interfere - Defenses that may be available or facts/aspects which when established during trial may lead to acquittal are not grounds for quashing complaint at threshold - At that stage only question relevant is whether averments in complaint spell out ingredients of a criminal offence or not - Court are of the considered view that High Court ought not to have set aside order passed by Trial Court issuing summons to Respondents - A perusal of complaint discloses that prima facie offences that are alleged against Respondents - Correctness or otherwise of the said allegations has to be decided only in the Trial - At the initial stage of issuance of process it is not open to Courts to stifle proceedings by entering into merits of contentions made on behalf of accused - Criminal complaints cannot be quashed only on ground that allegations made therein appear to be of a civil nature - If ingredients of offence alleged against accused are prima facie made out in complaint criminal proceeding shall not be interdicted - Criminal Applications stands rejected
JUDGMENT :
S.S. SHINDE, J.
1. Rule. Rule made returnable forthwith. Since all these Criminal Applications involves common question of law and fact, by consent of counsel for the parties, the same are heard together and being disposed of finally at an admission stage.
2. It is submitted that, the facts involved in all the above matters are similar, except the cheque numbers and criminal complaint numbers therefore, Criminal Application No. 1433 of 2018 would be treated as a lead matter.
3. These Criminal Applications take an exception to the order passed by the learned Metropolitan Magistrate 44th Court at Andheri, Mumbai (for short "said Court") dated 03rd February 2018 thereby issuing process against the applicants for an offence punishable under Section 138 r/w 141 of the Negotiable Instruments Act,1881 (for short "the said Act").
4. The learned counsel appearing for the applicants submit that, if the allegations in the complaint are taken on its face value and read in its entirety an alleged offences are not disclosed. It is submitted that, learned Metropolitan Magistrate has not appreciated the legal position concerning the vicarious liability of a director in a company which is being prosecuted for the offence under Section 138 r/w. 141 of the Said Act. The learned Magistrate has not properly appreciate that, what is required is that the persons who are seeking to be made vicariously liable for a criminal offence under Section 141 of the Said Act should be, at the time the offence was committed, was in charge of and was responsible for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the said provision. Only those persons who are in charge of and responsible for the conduct of the business of the company at the time of commission of an offence will be liable for criminal action. If a Director of a Company who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable for a criminal offence under the provisions. The liability arises from being in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Section 141 of the said Act is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is, therefore, not sufficient to make a bald cursory statement in a complaint that a Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company. This is in consonance with a strict interpretation of penal statutes, especially, where such statutes create vicarious liability.
5. The learned Metropolitan Magistrate made grave error in not taking into consideration the uncontroverted documents relating to applicants resignation from the post of Director of the company, had these documents been considered by the learned Magistrate. It would have been apparent that the applicant has resigned much before the cheques were issued by the company. In fact, the document, a company master data and signatory details annexed by the Original Complainant himself clearly indicates the date as January 21st, 2017 of resignation of the present applicants as Directors / Signatory.
6. It is submitted that, before issuance of process the learned Magistrate has not applied his mind to the allegations made in the complaint and mechanically issued the process. The learned counsel invites attention of this Court to the photo copies of the form No. DIR-11 and submits that, the applicants resigned on 21st January 2017 as it is apparent from Clause - 4(a) of the said Form no. DIR - 11. It is submitted that, in Clause - 5 reasons for resignation is also mentioned. The said resignation has been accepted by the Registrar of the Company and therefore, the applicant cannot be pr
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