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2009 Supreme(Mad) 3657
High Court of Judicature at Madras
THE HONOURABLE MRS.JUSTICE ARUNA JAGADEESAN
V. Kannan
Versus
S. Subramanian .
Crl.OP.No.17781 to 17785 of 2006 & MP.Nos.1 to 1 of 2006
Decided On : 11-09-2009
For the Petitioner:Gupta, Advocate. For the Respondent:Dhanyakumar, Advocate.
Individuals in charge of and responsible to a company for the conduct of its business can be held liable for offenses under the Negotiable Instruments Act, and the burden of proof lies with the accused to demonstrate ignorance or due diligence.
Headnote:
Negotiable Instruments Act - Criminal Proceedings - Sections 138, 142 - Interpretation of Sections 141(1) and 141(2) - Liability of individuals in charge of and responsible to the Company for the conduct of its business - Legal provisions and interpretations influencing the court's decision.
Fact of the Case:
The petitioner, a former Chairman of a company, sought to quash criminal proceedings against him for dishonoring cheques issued by the company. He claimed to have resigned from the company and argued that he was not in charge of the company's affairs at the time of the offense.
Finding of the Court:
The court held that the petitioner's resignation from the company did not absolve him from liability under Section 141(1) of the Negotiable Instruments Act. It emphasized that the burden of proving ignorance or due diligence to prevent the offense rested on the accused.
Issues: The key issue was whether the petitioner, despite resigning from the company, could be held liable for the dishonor of the cheques under the provisions of the Negotiable Instruments Act.
Ratio Decidendi: The court interpreted Sections 141(1) and 141(2) of the Act, emphasizing that individuals in charge of and responsible to the company for the conduct of its business could be held liable for offenses, and the burden of proof lay with the accused to demonstrate ignorance or due diligence.
Final Decision: The court dismissed the petitions and upheld the criminal proceedings against the petitioner, stating that no case had been made to quash the complaints or set aside the issuance of process.
These Criminal Original Petition are filed to quash the complaints and all further criminal proceedings as against the petitioner in CC.Nos.450, 449, 451, 452 and 453/2005 on the file of the learned Judicial Magistrate I, Pondicherry.
2. The brief facts of the prosecution as culled out from the complaints are as follows:-
The petitioner who is arrayed as A1 is the Chairman of the M/s.PNL Nidhi Limited ((herein after referred to as the Company). A2 is the Vice Chairman of the Company, A3 to A6 are the Directors and A7 and A8 are the Secretary and Manager of the Company and A9 is the Company. The respondent/complainant had made investments by way of deposits in the Company/A9 and he had approached the Company for withdrawal of the said deposits. The Company had issued five cheques bearing Nos.968150 for a sum of Rs.2,25,500/- dated 9. 2004, 968151 for a sum of Rs.2,25,500/- dated 9. 2004, 968124 for a sum of Rs.1,80,000/- dated 28. 2004, 968125 for a sum of Rs.1,87,731/-dated 28. 2004 and 968152 for a sum of Rs.2,250,500/- dated 9. 2004 drawn on City Union Bank Limited, Pondicherry signed by S.Ramalingam, Director and V.V.Margbandu, Secretary of the Company, who were in charge of the affairs of the Company at that time. When the said cheques were presented for encashment, the same were returned dishonoured on 2. 2005 with an endorsement “insufficient funds. Thereafter, the complainant issued a statutory notice dated 15. 2005 to all the accused by Registered Post and the notice sent A1 to A4 were returned as “refused” and the notice sent to A5 to A9 were returned as “door locked”, “door intimation given”, “the addressee gone to long tour”, “left without instructions” and “office not functioning” respectively.
3. According to the respondent, the accused were evading to receive the notice and they were having knowledge of the contents of the notice issued under Section 138(b) of the Negotiable Instruments Act (herein after referred to as the Act) and even after the same, they failed to pay the cheque amount, which necessitated him to file the impugned complaints under Sections 138 and 142 of the Act.
4. According to the petitioner, he had resigned from the Board of the Company as early as on 6. 2004 and he has nothing to do with the affairs of the Company.
5. Mr.Gupta, the learned counsel for the petitioner would contend that the cognizance taken by the learned Magistrate of the offences against the petitioner is illegal, as he had resigned from the Board of the Company as early as on 6. 2004 and he was not the signatory to the cheques in question or possessing any executive powers during that time. He would contend that it is the obligation of the complainant to prove that at the time when the offence was committed the accused was in charge of and responsible to the Company for the conduct of its business and in the absence of any such averment to that effect in the complaint, initiation of prosecution and the cognizance taken by the learned Magistrate are illegal.
6. The learned counsel for the petitioner would rely upon the judgements of the Honourable Supreme Court rendered in the cases of SMS Pharmaceuticals Ltd Vs. Neeta Bhalla [2005-8-SCC-89], KPG Nair Vs. Jindal Menthol India Ltd [2001-10-SCC-218] and Katta Sujatha Vs. Fertilizers and Chemicals Travancore Ltd and another [2002-7-SCC-655] in support of his contention that the allegation in the complaint that the accused was in charge of and responsible to the Company for the conduct of its business was essential and in the absence thereof, he was entitled to be discharged.
7. On the other hand, Mr.Dhanyakumar the learned counsel for the respondent would submit that on the complaint given by one Boothanathan, a case in Cr.No.31/2004 was registered against the petitioner and the 2nd accused by name V.Baskaran, who are said to be the major share holders of the Company and accused Directors thereof as well as the Directors of M/s.New Hasan Sugar Mills Limited for the
