ORDER
1. Heard. Accused 2 to 12 and 14 in C.C. No.3767 of 1999 on the file of the XIV Metropolitan Magistrate, Egmore, Chennai are the petitioners 1 to 12 in the present petition. They challenge the said proceedings pending before the learned Metropolitan Magistrate by seeking a direction to call for the records in C.C.No.3767 of 1999 and quash the same. The parties are referred to as contained in the complaint. The complainant M/s Birla Finance Limited, a limited liability company incorporated under the Companies Act is having its registered office at Chennai. As per the complaint, the accused petitioners in all 14 in number including accused No.1 M/s S & S Industries and Enterprises Limited represented by its Managing Director and one Mr. T. Elangovan, Director of the Company A13 entered into bill of discounting facility with the complainant on 18.10. 97 for a total sum of Rs.25,05,000.
Towards the repayment of the said amount the 1st, accused company issued two cheques signed by the 13th accused T. Elangovan one cheque bearing No.759578, dated 15.2.99 for a sum of Rs.18,05,000 and another cheque bearing No.759579, dated 15.2.99 for a sum of Rs.1,80,377. Both the cheques were drawn on Indian Bank, Mylapore Branch, Chennai in favour of the complainant. The complainant presented the cheques through its bankers State Bank of India, Nungambakkam Branch, Chennai on 15.3.99. Both the cheques were returned dishonoured with endorsement “funds insufficient” on 16.3.99. Therefore, the complainant issued a statutory notice to the accused on 18.3.99 demanding the payment of the amount covered in the two cheques within 15 days from the date of receipt of the notice. All the accused received the said notice on 22.3.99. Even after the receipt of the said notice, the 1st accused failed and neglected to pay the said amount to the complainant. Therefore, the 1st accused committed an offence under Section 138 of Negotiable Instruments Act. The 2nd accused being the Managing Director, Accused 3 to 14 being the Directors of the 1st accused responsible for the conduct of the business are also guilty of the offence. Therefore, the complaint was lodged against all the accused for guilty of the offence and liable to be punished under Section 138 and 141 of the Negotiable Instruments Act hereinafter called the Act.
2. Mr. R. Raghupathy, learned counsel appearing for the accused/petitioners submitted that the said complaint is not maintainable and is liable to be quashed against the accused 2 to 12 and 14 who are the petitioners in this petition. In support of the petition, the learned counsel would raise the following points:-
(a) Inasmuch as no specific allegations, made in the petition that the accused/petitioners were incharge of and was responsible to the company, for the conduct of the business of the company as well as the company, the accused/petitioners cannot be deemed to be guilty of the offence and shall not be liable to be proceeded against and punished accordingly;
(b) There is no averment in the complaint that the accused/petitioners have participated in the day-to-day affairs of the 1st accused company;
(c) In the absence of any allegation either made orally or in writing of the Magistrate in regard to the involvement of the accused/petitioners in the offence, the accused/petitioners cannot be proceeded under Sections 138 and 141 of the said Act as the accused 11 and 6 expired and their names were removed from the Directorship and on the date of the complaint they were no more and the complaint against dead persons is unsustainable in the eye of law and the lodging of such complaint would also go to show the non-application of mind of the complainant and
(d) In so far as the accused Nos.5,7,8 and 9 who have submitted their resignation even prior to the issuance of a lawyer’s notice also cannot be proceeded with under Sections 138 and 141 of the Act and the complaint against them is also unsustainable for non- application of mind on the part of the complainant in lodging the complaint.
3. The learned counsel in support of his first and second submissions relied upon a judgment of this Court reported in Mr. Col.R.S. Agarwal and 4 others v. M/s Ashok Leyland, Madras, 1998 (1) L.W.(Crl.) 24 and would
contend that director who are incharge of and responsible for the company or firm for the conduct of the business of the company or the firm are alone deemed to have committed the offence and for the said purpose there must be an allegation prima facie disclosing the commission or the offence as regards the person shown as accused. The learned counsel drew my attention to the averments made in the complaint with regard to all the accused including the accused/petitioners in the present petition. The relevant paragraph Implicating the accused/petitioners referred to by the learned counsel for the accused/petitioners can be usefully extracted which reads as follows:-
” A Statutory Notice was issued to the accused on 18.3.99, demanding the payment of above referred cheque amount within 15 days from the date of receipt of notice. All the accused received the notice on 22.3.1999. Even after receipt of the said notice the 1st accused has failed and neglected to pay the said amount to the complainant. Thus the 1st accused has committed an offence under Section. 138 of Negotiable Instruments Act. The 2nd of you being the Managing Director, 3 to 14 of you being the Directors of the 1st accused are responsible for the conduct of the business of the 1st accused is guilty of the offence and liable to be punished under Section 138 and 141 of the Act. Further, they have consented and connived. The offence is attributable to them. Hence this complaint.”
Therefore, the learned counsel would contend that even according to the complainant, even after the receipt of the notice, the 1st accused alone has failed neglected to pay the amount to the complainant. All that has been stated against the 2nd accused namely the 1st petitioner was that he being the Managing Director and against the accused 3 to 14 being the Directors of the 1st accused are responsible for the conduct of the business and they are liable to be punished under Sections 138 and 141 of the Act. These averments will not constitute the compliance of Section 141 of the Act inasmuch as there is no averment made against the accused/petitioners that they were incharge and were responsible to the company for the conduct of the business of the company as well as the company. Therefore, the complaint against the accused/petitioners are liable to be quashed.
4. On the other hand Mr. Gowri Shankar, learned counsel appearing for the complainant/respondent would contend that while the accused are described, it has been stated that accused 2 to 14 are responsible for the conduct of the 1st accused and in paragraph 4 of the complaint it is stated that the accused No.2 being the Managing Director, accused 3 to 14 being the Directors of the 1st accused are responsible for the business of the 1st accused and further they have consented and connived in the offence would constitute sufficient compliance of the ingredients of Section 141 of the Act. The learned counsel would further submit that the judgment relied upon by the learned counsel for the accused/petitioners is not applicable to the facts of the present case inasmuch as there are allegation as to the commission of the offence by the accused/petitioners in the complaint.
5. Before considering the above rival submissions, it would be relevant to extract the provision of Section 141 of the Act which reads as follows:-
“141. Offence by Companies:- (1) If the person committing an offence under S. 138 is a company every person who, at the time the offence was committed, was incharge of and was responsible to, the company, for the conduct of the business of the company, as well as the company, shall be deemed to be the guilty of the offence and shall be liable to be proceeded against and punished accordingly.
Provided that nothing contained in this sub-section shall render any person liable to punishment 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.
(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivances of, or is attributable to, any neglect on the part of any director, manager, secretary of other officer of the company, such
director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to proceeded against and punished accordingly.
Explanation:- For the purpose of this section-
(a) ‘Company’ means any body corporate and includes a firm or other association of individuals, and
(b) ‘Director’ in relation to a firm, means a partner in the firm”.
6. A careful reading of sub-section (i) of Section 141 of the Act would clearly indicate that when an offence is committed by a company under Section 138 of the Negotiable Instruments Act, every person who at the time of the offence was committed was incharge of and was responsible to the company for the conduct of business of the company as well as the company shall be deemed to be guilty of the offence and consequently is liable to be proceeded against and punished accordingly. On going through the averments made against the accused/petitioners in paragraph 4 of the complaint which was extracted earlier, all that has been stated against the accused 3 to 12 and 14 who are the petitioners herein is that they being the Directors of the 1st accused company are responsible for conduct of the business of the accused. The averments against the accused/petitioners as to whether they were incharge of the company for the conduct of the business of the company as well as the company is totally lacking in the complaint. As per sub-section (i) of Section 141 of the Act to constitute an offence against the Directors of the Company, it must be pleaded that those directors were incharge of and were responsible to the company for the conduct of business of the company as well as the company. A mere pleading that the directors were responsible to the company may not in my considered view constitute a sufficient compliance of sub-section (i) of Section 141 of the Negotiable Instruments Act making those directors also liable for guilty of the offence. This view is supported by a judgment of Padmini Jesudurai, J. made in C. Balasundaram v. Prakash M/s Rasi Financing Corporation., Crl.M.P.No.13898 of 1989 dated 21.11.90. While considering the sustainability of the complaint under Sections 138 and
141 of the Negotiable Instruments Act, the learned Judge has observed as
follows: –
” To be made liable, the complaint must first show that the petitioner was incharge of and responsible to the firm at the lime when the offence was committed …..Whatever be the liability of this petitioner to pay the amounts under the cheque, in the absence of any averment in the complaint, that this petitioner was incharge of and responsible to the partnership firm at the time when the offence committed the complaint cannot be legally sustained as against the present petitioner.”
When a similar question arose before this Court before Pratap Singh, J. in the decision reported in Senthil Kumar Tea Industries etc. and 3 others v. N. Rajkumar, 1994 (1) L.W. (Crl) 278 also has taken a similar view that to sustain a complaint it must be averred that the accused were incharge of the firm at the time of Commission of the offence.
7. Recently, K. Govindarajan, J, in the judgment reported in Mr. Col.R.S. Agarwal and 4 others v. M/s Ashok Leyland, Madras, 1998 (1) LW (Crl) 24 had an occasion to consider a similar question as to the sustainability of the complaint against the directors. Finally after elaborately considering various judgments of the Apex Court as well as this Court including a judgment of Allahabad High Court the learned judge has held as follows:-
” S. 141 of the Negotiable Instruments Act is deeming provision to bring the Directors or Partners within the purview of S. 138, if they were incharge of and responsible to the company for the conduct of the business at the time of the offence was committed. It does not make all the directors or partners liable for offence, whether they do business or not. But for the said provision, only the Company or firm or association of individuals alone is liable for the offence under S. 138 of the Act. So, to bring the persons within the purview of S. 138 of the Act, there must be some specific averment against those persons, to take congnizance of the offence by the learned Magistrate with respect to the persons.”
The judgments referred to above would therefore support the view that a person is not liable to be proceeded with and punished under Sections 138 and 141 of the Negotiable Instruments Act merely because he happens to be a director of the company. The complainant must specifically allege in the complaint that such person was in fact incharge and responsible for the affairs of the company. Only when such averments are made against the person who has been proceeded with under Sections 138 and 141 of the Negotiable Instruments Act since he happens to be the director of the company, a complaint can be sustained against such director. As already found, there is no such averment implicating the accused 3 to 12 and 14 petitioners 2 to 12 and therefore, the complaint against these accused/petitioners is not sustainable under Sections 138 and 141 of the Negotiable Instruments Act and is liable to be quashed.
8. This is further fortified by the provision of section 2(d) of Cr.P.C. which defines the complaint and could be usefully extracted as follows:-
” complaint means any allegation made orally or in writing to a Magistrate, with a view to his taking action under this Code, that some person, whether known or unknown, has committed an offence, but does no( include a police report.”
A reading of the above section would clearly indicate that a complaint must disclose allegations either made orally or in writing to the Magistrate with regard to the offence. When such allegation in compliance of the provisions of sub-section (i) of Section 141 is not made in the complaint, such complaint against the accused 3 to 12 and 14 petitioners 2 to 1 is unsustainable. I do not also agree with the contention of the learned counsel for respondent that in the complaint averments relating to all the accused of their consent and connivance had been alleged and that would constitute sufficient compliance of sub-section (ii) of Section 141. The said averment has been made without any application of mind and not supported by any prima facie materials since on the date of the issue of the cheques, accused 11 and 6 were no more and accused 5,7,8 and 9 have already resigned from the directorship. But the said allegation cannot be construed as an allegation based on any prima facie material, and the same has been made without any application of mind and cannot constitute compliance under sub-section (ii) of Section 141 of the Negotiable Instruments Act.
9. However, the complaint against the 2nd accused/1st petitioner stands on a different footing. The 2nd accused /1st petitioner has been made an accused in the capacity of he being the Managing Director thereby indicating that he was incharge of the management and the affairs of the company. Therefore, even in the absence of any specific averment made against the 2nd accused/1st petitioner that he was incharge and was responsible for the affairs of the company, a complaint could be sustained on the very fact that the accused No.2/1st petitioner in the capacity of Managing Director could be presumed to be incharge and responsible for the affairs of the company. In fact more or less a similar question came up for consideration before the Apex Court in the judgment reported in Delhi Municipality v. Ram Kishan, . That was a case where the Apex Court was considering the sustainability of a complaint against the manager of the company. The Apex Court held as follows:-
” So far as the Manager is concerned we are satisfied that from the very nature of his duties it can be safely inferred that he would undoubtedly be vicarioulsly liable for the offence, vicarious liability being an incident of an offences under the Acts”.
In that view of the matter, I do not find any force in the submission of the learned counsel for the petitioners that in the absence of any averment in so far as the 2nd accused/1st petitioner as to whether he was incharge and was responsible to the company or for the conduct of business of the company as well as the company, the complaint is unsustainable. Accordingly, the petition
of 2nd accused/1st petitioner seeking to quash the proceedings pending against him before the learned Magistrate is liable to be rejected. In view of my finding, the other contentions raised by the learned counsel for the petitioners need not be gone into.
10. Accordingly, this petition is allowed and the proceedings pending in C.C.No.3767 of 1999 on the file of the XIV Metropolitan Magistrate, Egmore, Chennai are quashed in so far as the accused Nos.3 to 12 and 14/petitioners 2 to 12 are concerned and the petition is dismissed in so far as the accused No.2/petitioner No.1 is concerned. Consequently, Crl.M.P.Nos. 5027 and 5028 of 1999 are closed.