The prosecution of directors under Section 141 of the Negotiable Instruments Act requires specific allegations in the complaint regarding their role in the transaction and their knowledge of the offense. The magistrate has a duty to scrutinize the complaint and discharge unnecessary accused persons to avoid harassment and inconvenience.

( 1 ) THE short question that arises for consideration in this petition is whether it was permissible to launch a prosecution under Section 138 of the Negotiable Instruments Act against all the Directors of the Company notwithstanding the nomination made by the Company. In order to appreciate the arguments advanced for and against the contention of the petitioners and respondent it is necessary to succinctly refer to the facts of the case.

( 2 ) THE respondent lodged a complaint under Section 200 of the Cr. P. C. , against these petitioners alleging that on 22-2-1996, A-2 executed an agreement on behalf of A-1. In connection with the transaction, the 1st petitioner A-l on behalf of all the accused issued in favour of the complainant a cheque dated 31-10-1996 bearing No. 865657 drawn on Canara Bank, industrial Finance Branch, Bangalore, for a sum of Rs. 35,00,000/- lakhs in part payment of the advance received in that transaction. Subsequently, on 11-11-1996 after informing the petitioners the respondent presented the cheque for encashment. However on 13-11-1996 the said cheque was returned dishonoured with an endorsement "not arranged for". Thereafter, the respondent got issued statutory notice to the petitioners and lodged the complaint against the Company, Joint managing Director, Managing Director and all the Directors. The Magistrate has taken cognizance and directed to issue notice to the petitioners which order is questioned in this petition.

( 3 )

( 4 ) THE learned Counsel for the petitioners in support of his arguments placed reliance on a catena of decisions which came to be rendered under Section 10 of Essential Commodities Act, section 17 (4) of the Prevention of Food Adultration Act and section 141 of the Negotiable Instruments Act.

( 5 ) IN the case of Sham Sunder and Others v State of haryana, their Lordships of the Supreme Court had an Occasion to deal with a case in which a complaint was lodged against the company, its Directors and Managers. In those circumstances their Lordships have held that no clear allegation against the manager and Directors that they were responsible for conduct of business of disputed sample was made. Under the circumstances, it was held that the proceedings could be quashed against the Directors but not against the Manager. In that case it was observed:"more often it is common that some of the partners of a firm may not even be knowing of what is going on day-to-day in the firm. There may be partners, better known as sleeping partners who are not required to take part in the business of the firm. There may be ladies and minors who were admitted for the benefit of partnership. They may not know anything about the business of the firm. It would be a travesty of justice to prosecute all partners and ask them to prove under the proviso to sub-section (1) of Section 10 that the offence was committed without their knowledge. The obligation for the accused to prove under the proviso that the offence took place without his knowledge or that he exercised all due diligence to prevent such offence arises only when the prosecution establishes that the requisite condition mentioned in sub-section (1) is established. The requisite condition is that the partner was responsible for carrying on the business and was during the relevant time in charge of the business. In the absence of any such proof, no partner could be convicted". That was a case in which their Lordships have dealt with the matter while considering the scope and purpose of Section 10 of the Essential Commodities Act.

( 6 ) IT is also held in Kishore Lal and Others v State of karnataka, while dealing with Section 10 of the Essential commodities Act that the partner cannot be proceeded against simply on the ground that he is the Director of that Company. The prosecution must first show that partner of the firm to be prosecuted, was in charge of and responsible for the conduct of the business of the Company.

( 7 ) IN Bakridan Bibi and Ot

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