To establish liability under Section 138 of the NI Act, the complaint must specifically allege that the accused were in charge of and responsible for the company's conduct at the time of the offence.

ORDER :

1. The petitioners are the accused Nos. 2 & 3 in C.C. No.1103/2016 on the files of the Judicial First Class Magistrate Court, Mattancherry, a case relating to the commission of offence under Section 138 the Negotiable Instruments Act, 1881 (in short ‘NI Act’). They are arraigned in the complaint in their capacities as the Managing Director and Authorised Signatory respectively, of the first accused Co-opearative Society by name ‘The Kaduthuruthy Co-operative Rubber Marketing and Processing Society Limited No.1397’.

2. The complaint was about the dishonour of a cheque for Rs.1,63,800/- issued to the first respondent by the petitioners for and on behalf of the first accused Society towards payment of the amount due to the proprietary firm represented by the first respondent. Originally the complaint was filed before the Judicial First Class Magistrate Court, Vaikom. Later on it was transferred to the Judicial First Class Magistrate Court, Mattancherry, on jurisdictional grounds.

3. In the present petition, the petitioners would contend that they are not liable to be prosecuted for the dishonour of the cheque issued by the first accused Society, since the dishonour happened due to the financial collapse of that Society which was beyond their control. The first petitioner would contend that he was deputed as Managing Director from the Co-operative Department as per a Government Order, while working as Deputy Registrar, and that his services with the first accused Society ended on 31.05.2014. The second petitioner, who was working as Factory Manager of the first accused Society, was said to be on leave without allowance from 01.07.2014 onwards. It is further stated that, at the intervention of this Court as per the directions in about five writ petitions, steps are being taken to sell the properties of the Society for settling the liabilities, and that the amount covered by the cheque involved in this case is also included as part of the liability to be cleared by the Society from its assets proposed to be sold in public auction. Thus, it is contended that the petitioners are no way liable to be prosecuted for the commission of offence under Section 138 of the NI Act in connection with the dishonour of the cheque issued during the course of business of the first accused Society.

4. The State of Kerala was impleaded as additional third respondent vide order dated 30.08.2018.

5. The petitioners had filed C.M.P. Nos. 843 & 844/2018 before the learned Magistrate seeking their discharge from the case. The above petitions were dismissed by the learned Magistrate holding that there is no provision to entertain a prayer for discharge in a summons trial. The learned Magistrate also observed that Section 141 of the NI Act cannot be applied at the initial stages of the complaint.

6. Heard the learned counsel for the petitioners, the learned Public Prosecutor representing Additional third respondent and the learned counsel for the first respondent.

7. Section 141 of the NI Act deals with the commission of offence under Section 138 of the said Act by a company. As per Sub-Section (1) of Section 141 of the NI Act, the requirement for fastening a person with criminal liability for the offence committed by a company under Section 138 of the NI Act is that at the time when the offence was committed , such person should be in charge of, and responsible to the company for the conduct of the business of the company. The first proviso to Section 141(1) of the NI Act exonerates the officer or employee of the company from the said offence 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. As per the second proviso, a person nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or the State Government or a Financial Corporation owned or controlled by the Central Government or the State Government