2006(1) Bankmann 446
DELHI HIGH COURT
Ms.. Manju Goel, J.
Everest Advertising Pvt. Ltd. — Petitioner
versus
State — Respondents
Crl. M.C. No. 3690 of 2001 and Crl. M.C. No. 3691 of 2001
Decided on 13-7-2005

IMPORTANT POINT
A Director of other officer of company can be prosecuted for offence u/s. 138 Negotiable Instruments Act when he is covered by sub-section (2) of Section 141 of the Act.

Headnote:NEGOTIABLE INSTRUMENTS ACT, 1881—SECTIONS 138 AND 141—DISHONOUR OF CHEQUE ISSUED BY COMPANY—PROSECUTION OF DIRECTORS AND OTHER OFFICERS OF COMPANY—BY IMPUGNED ORDER MAGISTRATE RECALLED SUMMONS TO RESPONDENTS 2 AND 3, CHAIRMAN AND VICE-CHAIRMAN OF THE COMPANY, ON GROUND THAT NO SPECIFIC ROLE HAD BEEN ASSIGNED TO THEM IN RESPECT OF COMMISSION OF OFFENCE—REVISION BY COMPLAINT—QUESTION WHETHER A PERSON BY VIRTUE OF HIS SIMPLY BEING THE DIRECTOR, CHAIRMAN OR VICE-CHAIRMAN OF COMPANY WILL BECOME RESPONSIBLE FOR OFFENCE OF DISHONOUR OF CHEQUE ISSUED BY COMPANY? NO.

       HELD: THE SUPREME COURT IN THE CASE OF KATTA SUJATHA CASE (SUPRA) HAS LAID DOWN THAT NOT ALL THE DIRECTORS OF A COMPANY WILL BE RESPONSIBLE FOR THE CONDUCT OF THE BUSINESS OF THE COMPANY FOR THE PURPOSE OF THE PROVISIONS OF SECTIONS 138 TO 141 OF THE ACT. THIS HAS BEEN SO HELD DESPITE THE GENERAL LAW THAT A COMPANY IS GOVERNED BY THE BOARD OF DIRECTORS. APART FROM BEING THE DIRECTOR OF A COMPANY THE ACCUSED DIRECTOR ALSO NEED TO HAVE BEEN INVOLVED EITHER IN THE MANAGEMENT OF THE SPECIFIC PART OF THE BUSINESS OF THE COMPANY RELATING TO THE OFFENCE OR HE SHOULD BE IN ACTUAL OVERALL CONTROL OF THE BUSINESS AND NOT MERELY A MEMBER OF THE BOARD OF DIRECTORS AND RESPONSIBLE FOR THE CONDUCT OF THE BUSINESS OF THE COMPANY BY VIRTUE OF HIS BEING DIRECTOR OF THE COMPANY ONLY. THEREFORE, THE COMPLAINANT IS REQUIRED TO ALLEGE AS TO HOW A PARTICULAR DIRECTOR OF COMPANY IS RESPONSIBLE FOR THE OFFENCE OF THE COMPANY. IN OTHER WORDS, THE COMPLAINANT MUST SPECIFY AS TO HOW THE DIRECTOR SOUGHT TO BE PROSECUTED WAS IN CHARGE OF ACTUAL OVERALL BUSINESS OF THE COMPANY OR IN CHARGE OF THE SPECIFIC PART OF THE BUSINESS RELATING TO THE OFFENCE. (PARA 7)

       INDEED A COMPLETE READING OF SECTION 141 OF THE ACT ALSO SUGGESTS THAT EVERY DIRECTOR, MANAGER, SECRETARY OR OTHER OFFICER OF THE COMPANY CANNOT BE SAID TO BE COVERED BY SECTION 141 (1) OF THE ACT. IT HAS TO BE SEEN THAT IN SUB-SECTION (2) OF SECTION 141 OF THE ACT THE DIRECTOR, MANAGER, SECRETARY OR OTHER OFFICER HAS AGAIN BEEN INCLUDED. SECTION 141(2) MAKES A DIRECTOR, MANAGER, SECRETARY OR OTHER OFFICER RESPONSIBLE FOR THE OFFENCE ONLY WHEN SUCH DIRECTOR, MANAGER, SECRETARY OR OTHER OFFICER HAVE CONSENTED TO OR CONNIVED IN THE COMMISSION OF THE OFFENCE OR IF THE OFFENCE IS ATTRIBUTABLE TO ANY NEGLECT ON THEIR PART. IF A DIRECTOR OR OTHER OFFICER IS NECESSARILY COVERED BY SUB-SECTION (1) OF SECTION 141 HE NEED NOT HAVE BEEN MENTIONED AGAINST IN SUB-SECTION (2) OF THAT SECTION. IT IS CLEAR THAT A DIRECTOR OR OTHER OFFICER CAN BE PROSECUTED WHEN HE IS COVERED BY SUB-SECTION (2) OF SECTION 141. IN THE ALTERNATIVE, HE CAN BE PROSECUTED IF HE IS A PERSON IN CHARGE OF AND RESPONSIBLE TO THE COMPANY BUT NOT SO SIMPLY ON ACCOUNT OF BEING A DIRECTOR, CHAIRMAN OR VICE CHAIRMAN. IN OTHER WORDS, HE HAS TO BE SOMETHING MORE THAN SIMPLY THE DIRECTOR, CHAIRMAN OR VICE CHAIRMAN. THIS LEADS TO THE CONCLUSION THAT IF A DIRECTOR OR OTHER OFFICER OF A COMPANY IS TO BE PROSECUTED FOR THE OFFENCE UNDER SECTION 138 OF THE ACT, THE COMPLAINANT MUST SHOW HOW THE DIRECTOR OR OTHER OFFICER IS RESPONSIBLE FOR THE CONDUCT OF THE DAY-TO-DAY BUSINESS OF THE COMPANY. THE COMPLAINANT MAY, ON THE OTHER HAND, SHOW THAT THE DIRECTOR OR OTHER OFFICER IS RESPONSIBLE FOR THE OFFENCE BECAUSE THE OFFENCE WAS COMMITTED WITH HIS CONSENT OR CONNIVANCE OR BECAUSE THE OFFENCE IS ATTRIBUTABLE TO HIS COMMISSION OR OMISSION. (PARA 8)

       COMING BACK TO THE FACTS OF THE TWO CASES BEFORE ME, I FIND THAT THE ALLEGATION IN THE COMPLAINT ARE FAR FROM SUFFICIENT TO SUMMON RESPONDENTS 2 & 3 FOR THE OFFENCE OF THE COMPANY ACCUSED NO. 6. APART FROM MAKING AN OMNIBUS ALLEGATION THAT ALL THE ACCUSED WERE RESPONSIBLE FOR THE CONDUCT OF THE BUSINESS OF THE COMPANY AND THAT ALL OF THEM CONNIVED IN THE OFFENCE, THERE IS NO SPECIFIC AVERMENT AS TO HOW ANY OF THE ACCUSED 1 & 2 (RESPONDENTS. 2 & 3 HEREIN) WERE ACTUALLY INVOLVED IN THE CONDUCT OF THE BUSINESS OF THE COMPANY RELATING TO THE TRANSACTION IN QUESTION OR HOW AND ON WHAT BASIS IT CAN BE SAID THAT IT WAS WITH THE ACTIVE CONNIVANCE OF THESE TWO ACCUSED THAT THE OFFENCE WAS COMMITTED BY THE COMPANY. IN MY OPINION, THE PETITIONERS COULD NOT HAVE BEEN SUMMONED ON THE BASIS OF THE ALLEGATIONS MADE BY THE COMPLAINANT. THE METROPOLITAN MAGISTRATE HAS NOT COMMITTED ANY MISTAKE IN DECLINING TO SUMMON THE TWO ACCUSED. (PARA 13)

       RESULT: PETITION DISMISSED.