IMPORTANT POINT
For prosecution of Directors of Company for offence of dishonour of cheque issued by Company there has to be averment that accused were in-charge of and responsible to company for day to day affairs of company.

V.B. Gupta, J.—Initially the present petition has been filed under Section 482, Cr. P.C. by the petitioners seeking discharge from five complaint cases pending under Sections 138 and 144 (sic. 141) of Negotiable Instruments Act at Karkardooma Court.

2. However, on 17.9.2007, Counsel for the petitioner gave a statement that he wants to withdraw the petition with regard to four complaint cases and as such the petition with regard to four complaint cases was dismissed as withdrawn and this petition was ordered to be treated with regard to complaint case No.2544/07 only.

3. Brief facts of this case are that respondent herein had filed complaint case under Section 138 r/w Section 144 (sic 141) of the Act 1881 against the present petitioners and certain other persons. The allegations made in the complaint are that petitioner Nos. 1 to 4 are the Directors of the Company in the name and style of M/s. Bhageeratha Engineering Ltd. The present petitioners besides other persons, are the Directors (signatory of the cheques), and are in-charge of and responsible for the day to day affair of the Company and are jointly and severally liable for the acts and liabilities of the Company.

4. At the request of the petitioners, the respondent sanctioned a loan facility for purchase of certain assets worth Rs. 22.5 lacs to the petitioners vide Loan-cum-Hypothecation Agreement. As per the agreement, the petitioners have agreed to repay the amount along with interest in 36 equated instalments of Rs. 77,447/-. In the partial discharge of their liability, the Company issued two cheques in favour of respondent. However, these cheques were dishonoured by the Bankers of the petitioners for the reasons ‘Not Arranged For’, The dishonour of the cheques shows and establishes that the petitioners did not leave sufficient funds in the account to honour the cheques and thereafter a legal notice was served. In spite of that, the petitioners did not make the payment.

5. In the present petition, it has been stated that the petitioners are not directly involved in the day to day affairs of the company and Directors in other companies as well. The impugned cheques were issued purely as security and it was specifically instructed that in any circumstance the cheques were not to be presented for encashment. The petitioners are not signatory to the impugned cheques and there is no averment in the complaint as to how and in what manner the petitioners were responsible for the conduct of the business of the company and no offence specifically is made out against the petitioners. The post-dated cheques in this case were given purely as security and the method adopted by the parties according to the mutual understanding in the agreement was that M/s.Bhageeratha Engineering Ltd. company would give a demand draft as per the schedule mutually agreed and at that time the security cheques would be given back to this company.

6. Since there is no averment in the complaint or in the evidence adduced before the Magistrate that the petitioners were in charge or responsible for the conduct of the business of the company, the present complaint is not maintainable and is liable to be quashed. In support of his contentions learned Counsel for the petitioners had relied upon a decision of Apex Court reported in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Anr.1

7. In a decision of Apex Court reported in N.K. Wahi v. Shekhar Singh and Ors.2 it has been laid down that as per Section 141 of the Negotiable Instruments Act, only such person is held liable if at the time when the offence was committed, he was in-charge and responsible to the company for conduct of the business of the company. Held:

‘In certain contingencies referred to under Section 138 of the Act on the cheques being dishonoured a new offence as such had been created. But to take care of the offences purported to have been committed provisions of sub-section (1) to Section 141 of the Act come into play. It reads