JUDGMENT
J.B. Goel, J.
1. This is a petition under Section 482 of the Code of Criminal Procedure (for short the ‘Code’) seeking quashing of the summoning of the petitioners and the proceedings arising in complaint case No. 536/96 for an offence under Sections 138/141 of the Negotiable Instruments Act (for short the ‘Act’) by the 32nd Metropolitan Magistrate (M.M.), New Delhi.
2. M/s. DCM Financial Services Ltd., New Delhi (hereinafter called the ‘complainant’), has filed a complaint against M/s. Garpco Industries Ltd. and its Chairman, Managing Director and four Directors (arraigned as accused Nos. 1 to 7), the petitioners being accused Nos. 4 and 5 (A-4 and A-5) shown as its two Directors, for proceeding under Section 138 of the Act read with Sections 141 and 142.
3. The facts alleged in the complaint are that the complainant is engaged in the business of financing, leasing, hire purchase etc., and it had given certain plant and machinery to accused No. 1 on lease and hire purchase basis for which written lease agreement and hire purchase agreement (copy of which have not been produced) were executed and towards the repayment of the monthly charges and hire rentals for the month of May, 1996 two cheques being No. 778105 and 781013 both dated 1.5.1996 of Rs. 2,77,914.25 and Rs. 2,81,006.37 respectively drawn on ANZ Grindlays Bank, Janpath, New Delhi were given to the complainant on behalf of the accused. The two cheques were presented by the complainant through its bankers Punjab & Sind Bank, Janpath, New Delhi but were returned dishonoured by the drawee bank on 4.5.1996 with the remarks “not arranged for”. The complainant had sent two separate statutory notices both dated 10.5.96 by regd. A.D. post and UPC to accused No. 1 demanding the payment against the aforesaid two cheques. These were duly served and were dishonoured by the accused in its reply dated 5.6.1996. Inspite of this notice, the payment having not been made the complaint was filed for proceeding against all the accused Nos. 1 to 7.
4. The petitioners have alleged that they have been summoned and non-bailable warrants have also been issued against them (but copies thereof have not been filed). It is alleged that petitioner No. 1 was the Chairman and remained sick and hospitalised in August, 1993 and had submitted his resignation to the accused company on 31.7.1996 and petitioner No. 2 had also submitted his resignation on 1.8.96 and both ceased to be its Directors under Section 303(2) of the Companies Act, 1956. They are thus not liable for the liabilities of the company and are also not liable for the dishonour of the two cheques as they were not in charge of and responsible for day to day running of the company and they have been wrongly proceeded against and summoned by the learned M.M. under Section 138 read with Sections 141/142 of the Act.
5. Learned counsel for the petitioners has contended that the complaint does not disclose the ingredients of Section 138 read with Sections 141/142 of the Act; also the petitioners had resigned and ceased to be Chairman and Director of the company and as such they are not liable and their summoning is not legal and valid. He has relied on Municipal Corporation of Delhi v. Ram Kishan Rohtagi, and Ors. ; Sham Sunder and Ors. v. State of Haryana and Nucor Wires Ltd. v. HMT International 1998 ISJ (Banking) (Kar.) 202.
6. The two cheques were issued On 1.5.1996, were duly presented; were dishonoured on 4.5.1996 by the drawee bank of the accused company; notices of demand as contemplated under Section 138 of the Act were sent by Regd. A.D. and UPC and were duly served on the accused No. 1. These facts are not disputed. Prima facie an offence under Section 138 of the Act is made out against the company.
Section 141 of the Act reads as under :-
141 (1) If the person committing an offence under Section 138 is a company, every person who, at the time the offence was committed, was in charge 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 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 connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against the punished accordingly.
Explanation :- For the purpose of this Section :-
(a) “Company means any body corporate arid includes a firm or other association of individuals; and
(b) “director” in relation to a firm, means a partner in the firm”.
7. Under this section besides the company a Director or any other person who at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of its business or where the offence is committed with the consent or connivance of or is attributable to any neglect on the part of, any director etc. is also liable for the offence u/s 138 of the Act. If this requirement is fulfillled then the two petitioners will also be liable under Section 138 of the Act irrespective of the fact whether they were or had ceased to be directors later on after the cause of action had arisen.
8. It is not disputed and is admitted in the petition that the petitioner No. 1 was Chairman and petitioner No. 2 was the Director of the company at the time the cheques were issued, dishonoured and when statutory notices of demand were served. In DMC v. Ram Kishan Rohtagi and Ors. (supra) regarding the legal position about the scope of the power to quash the complaint under Section 138 of the Act has been laid down in para 10 as under :-
“10. It is, therefore, manifestly clear that proceedings against an accused in the initial stages can be quashed only if on the face of the complaint or the papers accompanying the same, no offence is constituted. In other words, the test is that taking the allegations and the complaint as they are, without adding or subtracting anything, if no offence, is made out then the High Court will be justified in quashing the proceedings in exercise of its powers under Section 482 of the present Code.”
9. In this case reliance has inter alia been placed on an earlier decision of the Supreme Court reported as Smt. Nagawwa v. Veeranna Shivalingappa Konjalgi, wherein the legal position has been noticed (in para 2 at page 1950 of AIR) as under:-
“It is well settled by a long catena of decisions of this Court that at the stage
of issuing process the Magistrate is mainly concerned with the allegations
made in the complaint or the evidence led in support of the same and he is
only to be prima facie satisfied whether there are sufficient grounds for
proceedings against the accused. It is not the province of the Magistrate to
enter into a detailed discussion of the merits or de-merits of the case nor
can the High Court go into this matter in its revisional jurisdiction which is a
very limited one.” .
10. After referring to Chandra Deo Singh v. Prokash Chandar Bose and Vadilal Panehel v. Dattatrya Dulaji it has further been laid down as under :-
“It would thus be clear from the two decisions of this Court that the scope of the inquiry under Section 202 of the Code of the Criminal Procedure is extremely limited – limited only to the ascertainment of the truth or falsehood of the allegations made in the complaint – (i) on the materials placed by the complainant before the Court; (ii) for the limited purpose of finding out whether a prima facie case for issue of process has been made out; and (iii) for deciding the question purely from the point of view of the complainant without at all adverting to any defense that the accused may have. In fact it is well settled that in proceedings under Section 202 the accused has got absolutely no locus standi and is not entitled to be heard on the question whether the process should be issued against him or not.”
11. It is thus clear that at this stage it is not necessary for the Magistrate to delve into the question of the truthfulness, veracity and correctness of the allegations made in the complaint.
12. In para 9 of the complaint, the averment imputing liability to the accused Nos. 2 to 7 have been made as under :-
“That the Accused No. 1 is a Company and the Accused Nos. 2 to 7 were in charge of and were responsible to the Accused No. 1 for the conduct of the business of the Accused No. 1, at the time when the offence was committed. Hence, the Accused Nos. 2 to 7, in addition to the Accused No. 1, are liable to be proceeded against and punished by this Hon’ble Court, as provided by Section 141 of the Negotiable Instruments Act, 1881. Further, the offence has been committed by the Accused No. 1 with the consent and connivance of the Accused Nos. 2 to 7.”
13. Petitioners have not placed on record either the pre-summoning evidence recorded by, or the order summoning the petitioners passed by, the learned M.M. apparently on the material placed on record before him must have been satisfied that there was material before him to proceed against the petitioners.
14. The first plea taken by the petitioners that they had resigned as Chairman and as Director on 31.7.96 and 1.8.1996 respectively is of no help since admittedly they were holding these positions when the cause of action arose. Their having resigned later on is of no relevance. Their second plea is that they were not responsible to the Company for the conduct of its business at the time when the offence was committed. This is their defense and would be gone into by the learned M.M. where the petitioners would be at liberty to challenge the plea taken by the complainant.
15. As already noticed this Court in exercise of its inherent power would not be justified in going into the question of truthfulness, veracity and correctness of the allegations made in the complaint. The petitioners instead of rushing to this Court should have approached the learned M.M. with the pleas taken here and the learned M.M. is competent to drop the proceedings even at this stage. In this connection reference may be made to the legal position as noticed in K.M. Mathew v. State of Kerala and Anr. where it has been observed as under :
“8. It is open to the accused to plead before the Magistrate that the process against him ought not to have been issued. The Magistrate may drop the proceedings if he is satisfied on reconsideration of the complaint that there is no offence for which the accused could be tried. It is his judicial discretion. No specific provision is required for the Magistrate to drop the proceedings or rescind the process. The order issuing the process is an interim order and not a judgment. It can be varied or recalled. The fact that the process has already been issued is no bar to drop the proceedings if the complaint on the very face of it does not disclose any offence against the accused.”
16. In the case of Nucor Wires Ltd. (supra) besides the Company (A-1), A-2 who had executed the agreement and the Managing Director who had signed the cheques on behalf of the company, petitioners No. 4 to 8, who were its partners were arraigned as accused. In para 14 of the judgment it has been noticed that there was no allegation made against them and they were arraigned as accused persons only because they were the partners of the first petitioner. In the facts of that case it was held that petitioners 4 to 8 were not properly arraigned as accused persons.
17. In MCD v. Ram Kishan Rohtagi (supra) the relevant averments against the accused 4 to 7 were as under :-
“5. That the accused No. 3 is the Manager of accused No. 2 and accused Nos. 4 to 7 are the Directors of accused No. 2 and as such they were in charge of and responsible for the conduct of business of accused No. 2 at the time of sampling”.
18. The High Court held that there was no clear averment of the fact that the accused Nos. 4 to 7 were really in charge of the manufacturing and responsible for the conduct of the business and the words “as such” indicated that the complainant had merely presumed that the directors of the company must be guilty because they were holding that particular office and quashed the proceedings. Agreeing with the same the Supreme Court also noticed that there was neither pleading nor evidence from which a reasonable inference could be drawn that they could be vicariously liable.
19. In the case of Sham Sunder (supra) also it has been noticed that there was no evidence against appellants 1, 2 and 4 who were partners of the firm, that besides appellant No. 3, they were also conducting the business of the firm when the offence was committed.
20. These cases obviously are based on their own facts. Whether in a complaint ingredients of the offence have been made out or not will depend upon the facts of each case.
21. In the present case it cannot be said that the material available before the M.M. did not disclose the essential ingredients of the offence under Section 138 of the Act. The pleas raised by the petitioner are their defense, the correctness of which would be gone into by the learned M.M. Petitioner No. 1 has admitted that he was the Chairman at the relevant time. He would prima facie be overall in charge of the affairs of the business. In these circumstances, it cannot be said that the complaint does not disclose a cause of action against the petitioners.
22. This petition thus has no merit and the same is accordingly dismissed in limine.