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2023 Supreme(Bom) 948
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
R.G. Avachat, J.
Pashupathy Puthuseri Veedu – Appellant
Versus
The State of Maharashtra & Anr. – Respondents
Criminal Application No. 651 of 2022 with Criminal Application No. 652 of 2022 with Criminal Application No. 653 of 2022 with Criminal Application No. 654 of 2022 with Criminal Application No. 655 of 2022 with Criminal Application No. 656 of 2022 with Criminal Application No. 657 of 2022 with Criminal Application No. 658 of 2022
Decided On : 08-02-2023
Mr. Sachin Ramrao Pawar, Advocate, for the Appellant; Ms. Anamika Malhotra, APP and Mr. Niranjan Kandade a/w Pradip Zende a/w Nikhil Wadikar i/b Nandu Pawar, Advocate, for the Respondent
The main legal point established in the judgment is that specific averments are required to establish vicarious liability under Section 141 of the NI Act, and a disqualified director is not liable for prosecution under the Act.
Headnote:
Section 482 - Quashing of process - Negotiable Instruments Act, 1881 - Section 138 - Vicarious liability - Disqualification of Director - [NI Act] - [Section 138, Section 141 of NI Act] - The court discussed the provisions of Section 141 of the Negotiable Instruments Act, 1881, and the principle of vicarious liability. It highlighted the legal requirements for establishing vicarious liability and the burden of proof on the accused to show lack of knowledge or due diligence to prevent the offense. The court also considered the disqualification of a director under the Companies Act, 2013, and its impact on vicarious liability. The judgment emphasized the need for specific averments in the complaint to establish vicarious liability and the duty of the complainant to make the accused vicariously liable. The court concluded that the accused, who was disqualified as a director, was not liable for prosecution under Section 141 of the NI Act.
Fact of the Case:
The complaints were filed under Section 138 of the Negotiable Instruments Act, 1881, against the accused, including the applicant, for dishonor of cheques. The applicant sought to quash the process on the grounds of lack of averments establishing vicarious liability and his disqualification as a director of the company.
Finding of the Court:
The court found that the complaints lacked necessary averments to establish vicarious liability of the applicant and that the applicant, being disqualified as a director, was not liable for prosecution under Section 141 of the NI Act.
Issues: The issues revolved around the establishment of vicarious liability under Section 141 of the NI Act and the impact of the applicant's disqualification as a director on his liability for prosecution.
Ratio Decidendi: The court held that specific averments in the complaint are required to establish vicarious liability, and the burden of proof lies on the accused to show lack of knowledge or due diligence to prevent the offense. It also emphasized that a disqualified director is not liable for prosecution under Section 141 of the NI Act.
Final Decision: The court allowed the applications and quashed the process against the applicant, concluding that he was not liable for prosecution under Section 141 of the NI Act due to lack of necessary averments and his disqualification as a director.
JUDGMENT
1. Heard.
2. This group of eight applications, under Section 482 of the Code of Criminal Procedure, 1973 (for short 'Cr.PC.'), is being decided by this common order, since common questions of facts and law arise therein. Moreover, the parties thereto are same.
3. The applicant in all these applications is one of the accused in the prosecution/complaints instituted under Section 138 of the Negotiable Instruments Act, 1881 (for short 'NI Act').
4. The gist of allegations in all the complaints, is as under :-
a. M/s. Savair Energy Limited (accused no. 1) is a limited company. The applicant and two others (co-accused), are the Directors of accused no. 1 company. All the accused were in need of finance. The original accused no. 2 had friendly relations with the complainant/respondent no. 2. On his request, the complainant advanced them a sum of Rs. 5,00,000/- in seven applications and Rs. 45,00,000/- in one application, as friendly loan. The original accused no. 2 had executed a separate Bill of Exchange. He even issued various cheques. The details thereof have been given in the respective complaint. The cheques were presented for encashment, but returned unpaid. Statutory Demand Notice/s was therefore issued to accused no. 1 company and its Directors including the applicant herein. Since there was no compliance of the Statutory Demand Notice, the complaints came to be instituted against the company and its Directors including the applicant herein. Learned Metropolitan Magistrate issued the process against the applicant and others. The applicant is therefore before this Court.
5. The orders of issuance of process against the applicant herein, are sought to be quashed mainly on the ground of there being no averments in the complaints making out a case against him of vicarious liability in terms of Section 141 of NI Act.
6. It is also the case of applicant that he was disqualified to be a Director of any of the companies, before the cheques in question were issued. As such, the applicant was not a Director of accused no. 1 company at the relevant time and his prosecution therefore is bad-in-law.
7. Learned Advocate for the applicant made submissions consistent with the averments in the application. The same are therefore not adverted to.
8. Learned Advocate for respondent/complainant company would, on the other hand, submit that there are averments in the complaint to make out a case for proceeding against the applicant under Section 138 read with Section 141 of NI Act.
a. Learned Advocate has relied on the judgment of Hon'ble Apex Court in the case of N. Rangachari vs. Bharat Sanchar Nigam Ltd. reported in Criminal Appeal No. 592 of 2007 (arising out of SLP (Cri.) No. 1844 of 2006).
b. Learned Advocate would further submit that so far as regards the applicant's case that he was disqualified to be a Director of any of the companies, is a question of fact and that could only be decided by the Trial Court on appreciation of evidence that may be adduced in support of the defence. Learned Advocate therefore urged for dismissal of the applications.
9. Considered the submissions advanced. Perused the complaint and the authorities relied on.
10. For better appreciation, Section 141 of NI Act is reproduced, which 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 incharge 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 vi
