IMPORTANT POINT
To prosecute a director of company for offence under Section 138 of Negotiable Instruments Act a bald allegation by merely repeating those words mentioned in Section 141 of the Act would not be enough and there must be something more dearly stated in complaint.
q

Headnote:(i) Negotiable Instruments Act, 1881 - Sections 138 and 141 Dishonour of cheque - Offence by company - Vicarious liability of Director or any other person who, at the time offence committed was incharge of and was -responsible to company for conduct of its business, shall be deemed to be guilty Accusation against each of the Director/person accused must be specific and unambiguous Complaint if read as a whole must clearly disclose role played by each of the Director of company - A bald allegation by merely repeating the words mentioned in Section 141 of the Act would not be enough.
       Held: A plan reading of Sec. 14 f of the Act would make it clear that in case of an offence under Section 138 of the Act has been committed by the company not only the company but every person who at the time the offence was committed, was incharge of, and was responsible to the company for the conduct of its business shall also be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Sub-section (2) of Section 141 of the Act would further make it clear that in case of an offence committed by a company, not only the company but all its Directors, Managers, Secretary or other officers of the company shall also be deemed to be guilty of the offence and shall also be liable to be proceeded against and punished accordingly, provided the offence has been committed by the company with the consent or connivance of or is attributable to, any neglect on their part. In such case, such directors, managers, secretary or other officers of the company shall also be deemed to be guilty of the offence and are liable to be proceeded against and punished accordingly. (Para 10)
       Further held: The complainant can proceed against only such persons who at the time the offence was committed by the company were incharge of and were responsible to the company for the conduct of its business. Such persons could be directors, managers, secretary or the other officers of the company. Such persons 'incharge' must mean that they were in over all control of the day-to-day business of the company or firm, as the case may be. A complaint based on wild, imaginations is not a complaint at all in the eye of law. The accusation against each of the director/person/ accused must be specific and unambiguous. The role played by each of the accused must be clearly stated in the complaint. The complaint if read as a whole must clearly disclose the role played by each of the Directors of the company in case of an offence committed by the company under Section 138 of the Act. Any inartistic expression used in drafting the complaint cannot by itself be a ground for quashing the proceedings; but, at the same time, no complainant can be permitted to launch prosecution against all the Directors of the Company without there being a proper foundation in the complaint, itself, about the actual role played by them at the material point of time, when the offence is committed by the Company. No prosecution would lie against a person or persons, as the case may be, on the simple accusation in the complaint that such person or persons were the Directors, Executive Director or an officer of the company at the material time when the offence was committed by the company. But at the same time it is equally well settled that this court in exercise of its power under Section 482 Cr.P.C. would not normally undertake any roving enquiry to find out as to the truth or otherwise of the allegations and accusations made in the complaint. The court cannot undertake any further enquiry if clear specific and unambiguous allegations are made against each of these persons arrayed as accused in the, complaint about the role played at the material time when the offence is committed by the company. Mere repetition of the words incorporated in Section 141 of the Act would not meet the requirement in law to cope any and every director, or other officer, manager, secretary of the company as the case may be. There must be something more clearly stated in the complaint. A bald allegation by merely repeating those magic words mentioned in Sec. 141 of the Act would not be enough. But in case where the complaint discloses the factual foundation against the persons arrayed as accused the High Court in exercise of its inherent jurisdiction cannot interdict the further enquiry and trial. (Para 32)
       (ii) Negotiable Instruments Act, 1881 - Sections 138 and 141 Dishonour of cheque - Offence by company - Quashing petition by accused A4 impleaded as one of the Directors in complaint - Only allegations in complaint was "A2 to A4 are actively involved in management of Al company" would be absolutely vague and indefinite and would not satisfy requirements of law - Other material referred' to by complainant was certified true copy of resolution passed by Board of Directors where by other Director in company was authorised to deal and transact with complainant company - Said resolution was certified as true copy by petitioner - Resolution was dated 15-2-1995 and cheque in question had been issued on 9-9-1996 - Document relied upon by complainant would not help him-'Proceedings against petitioner A4 were liable to be quashed. (Paras 33 to 39)
       Result: Petition allowed.

ORDER

B. Sudershan Reddy, J.- This is an application filed under Section 482 Cr.P.C. to quash the proceedings in C.C. No. 121 of 1998 on the file of the learned X Metropolitan Magistrate, Secunderabad in which the petitioner is arrayed as A-4.

2. Before adverting to the question as to whether the petitioner is entitled to any relief in this application, it may be necessary to briefly notice the relevant facts leading to the filing of this application.

3. The petitioner herein is a Director of the Company known as M/s. Direct Finance and - Investment Ltd. New Delhi. It is the case of the petitioner that she submitted her resignation from the directorship on 15-4-1994 sending/ a copy of the letter to the Company arid also to the Registrar of Companies. New Delhi. She was never associated with the company thereafter at any point of time. It is not necessary to further dwell on this aspect of the matter, since the court does not propose to express any opinion on this question as there is any amount of controversy regarding resignation of the petitioner as the Director of the company.

4. The first respondent herein filed a complaint against the petitioner and three others for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 as amended by Act 6o of 1988 (for short 'the Act'). In the said complaint it is inter alia stated that A-1 is a duly incorporated company having its registered office at 353, Bhora Enclave, outer Ring Road, Paschim Vihar. Delhi-110041. According to the first respondent I complainant the A-1 company is represented by A-2 a Director of the company. A-3 and A-4 are also Directors at the A-1 company. A-2 to 4 are actively involved in the management of the affairs of A-1 company. It is further alleged that the A-1 company represented by A-2 had called for inter corporate deposits from the first respondent/company for a short period of fifteen days to the extent of Rs. 2.00 crores. The rate of interest agreed by A-1 was 25% per annum payable on Rs. 2.00 crores. A-1 company represented by A-2 executed a demand promissory note for the said amount of Rs. 2.00 crores deposited by the complainant with A-1 company. The date of maturity of the deposit was 15-3-1995.

5. It is further alleged that after expiry of the period of deposit A-1 company represented by A-2 issued cheque bearing No. 705093 for Rs. 2.00 crores; cheque bearing No. 705094 for Rs. 1.58.219.00 and another cheque No: 519302 for Rs. 8,33,334.00 all drawn on Canara Bank, Janapath. New Delhi. All cheques were dated 15-8-1996. The cheques for Rs. 8,33,334.00 and Rs. 1,58,219,99 represented the interest part on the deposit of Rs. 2. crores for fifteen days. It is further alleged that the accused agreed to pay the balance within a short period.

6. It is further alleged that on presentation for encashment the cheques issued by the A-1 company were dishonoured on the ground of 'insufficient funds' and were returned by the complainant's bankers. Global Trust Bank Ltd. SD Road. Secunderabad with a Memo on 9-9-1996. The complainant immediately and within time got issued a notice dated 21-9-1996 directing the A-1-company to make payment of Rs. 2,09,91,553.00 payable under the said cheques together with interest thereon @ 25% per annum from 16-3-1995 and Rs. 5.000.00 towards the charges for the notice within fifteen days from the date of receipt of the said notice, It is stated that A-1, A-4 managed to return the notice unserved; but however A-2 and A3 received the same on 25-9-1996. A-1 and A-4 have full knowledge of the notice issued by the complainant. In spite of the notice the accused neither paid the amount nor gave any reply. This is the sum and substance of the complaint filed by the first respondent.

7. In this application. Sri Vedula Srinivas, learned counsel appearing for the petitioner / A-4 submits that the accusations and allegations made in the complaint filed by the first respondent against the petitioner are vague and there are n

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IMPORTANT POINTTo prosecute a director of company for offence under Section 138 of Negotiable Instruments Act a bald allegation by merely repeating those words mentioned in Section 141 of the Act would not be enough and there must be something more dearly stated in complaint.q

Cases Referred (6)

IMPORTANT POINT
To prosecute a director of company for offence under Section 138 of Negotiable Instruments Act a bald allegation by merely repeating those words mentioned in Section 141 of the Act would not be enough and there must be something more dearly stated in complaint.
q