I.Mahanty, J.
HIGH COURT OFIORISSA: CUTTACK
CRLMC No. 2189 of 2009
In the matter of an application under Section 482 of the Code of Criminal
Procedure. ‘
Petitioner
Smt. Laxmidevi Ram
-Versus-
Opp.Party
. . » . no
Tifupati Electra Marketing Pvt. Ltd..,
: M/ s G.Madaris,S.K.Pradhan,
‘ For Petitioner
M.Dalai, B.K.Mishra 85 J.Pal.
For Opp. Party : Mr. D.Das.
PRESENT:
THE HON ‘BLE MR.JUSTICE INDRAJIT MAHANTY
Date of hearing: 25.3.2010 Date of Judgment: 25.3.2010
In this application under Section 482 Cr.P.C. the petitioner-
Smt. Laxmidevi Ram has prayed for quashing of the order of cognizance
dated 17.3.2008 passed in I.C.C. No. 847 of 2008 by the learned SDJM,
Bhubaneswar in respect of the present petitioner.
2. – Mr.Pal, learned counsel for the petitioner states that the
petitioner who was a Director of M/ s L.P.Electronics (Orissa) Private
Limited, has been implicated as an accused in a proceeding under
Section 138 of the N.I: Act, inter alia, only for the reason of her having
been named as Director of such company. He asserts that other
similarly placed Directors had also filed application under Section 482
Cr.P.C. for quashing of order of cognizance, namely, Sri Om Prakash
Ram and Sri Deepak Kumar Ram in CRLMC Nos. 1051 and 1900 of
2008 which were disposed of on 19.5.2009, whereby Hon’ble Mr.
Justice B.K.Patel came to a conclusion that there were no express
averments made in the complaint petition that any of the petitioners
therein was either in-charge or and / or was responsible to the accused
company .for the conduct of the business of the company. Therefore
relying on Section 141 of the N .I.Act, the learned Single Judge came to
hold that the learned counsel for the opposite party Was constrained to
admit that the complaint petition does not contain such averrnents as
required under Sectionl’4lof the N .1. Act for implicating the Directors
who are petitioners therein. Accordingly, the CRLMCS were allowed and ,
order of cognizance in so far as it concerned other Directors was
directed to be quashed.
3. Mr. Pal further contends that the present petitioner is
similarly circumstanced as the Director, Who had moved the CRLMC
mentioned herein above and against whom order of cognizance has
been quashed.
4. Mr. Das, learned counsel for the complainant–opposite party
relied upon the judgment of the Hon’ble Supreme Court in the case of
Malwa Cotton and Spinning Mills Ltd. Vrs. Virsa Singh Sindhu and
Ors., reported in 2008 CriLJ 4316 in which their Lordships came to a
conclusion that the claim of the petitioner therein that he has resigned
from the Directorship of the defaulting Company prior to the date on
which the cheque had been issued was a matter which should be
proved in course of trial and therefore, came to a conclusion that the
High Court yvas not justified in quashing the proceeding in the said
case. He further placed reliance on a reference made therein to an
earlier judgment in the case of N.Rangachari Vrs. Bharat Sanchar
Nigam Ltd., reported in 2007 CriLJ 2448 in which it is observed that in
the commercial World having a transaction with a company is entitled
to presume that the Directors of the company are in charge of the
affairs of the company. If any restrictions on their powers are placed by
the memorandum of articles of the company, it is for the Directors to
establish it at the trial.
5. Sn” Pal, learned counsel for the petitioner on the other hand
placed reliance upon the recent judgment of the Hon’ble Supreme Court
in the case of National Small Industries Corporation Limited Vs.
Harmeet Singh Paintal and Another, reported in
MANU/SC/0112/2010 which was disposed of on 15.2.2010. In the said
judgment, the Hon’ble Supreme Court has referred to its earlier
judgment in the case of N..Rangachari (supra), the relevant portion of
Which in paragraphs 9, 10 and 1 1 thereof are as folloWs:-
“Section 138 of the Act refers about penalty in
case of dishonour of cheque for insufficiency of funds in
the account. We are more concerned about Section 141
dealing with offences by Companies which reads as
under. _
141. Offences by companies–(1) If the person
committing an offence under Section 138 is a company,
every persons 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, of that he had exercised all due diligence to
prevent the commission of such offence.
Provided further that Where a person is
nominated as a Director of a company by Virtue of his
i
%»
holding any office or employment in the Central
Government or State Government or a financial
corporation owned or controlled by the Central
Government or the State Government, as the case may
be, he shall not be liable for prosecution under this
Chapter.
(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, and secretary or 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 be proceeded
against and punished accordingly.
EXplanation- For the purposes of this section,-
‘company’ means any body corporate and includes a
firm or other association of individuals; and
‘director’ in relation to a firm, means a partner in the
firm.
It is very clear from the above provision that what
is required is that the persons who are sought to be
made vicariously liable for a criminal offence under
Section 141 should be, 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.” Every person connected with the company
shall not fall within the ambit of the provision. Only
those persons who were in-charge of and responsible
for the conduct of the business of the company at the
time of commission of an offence will be liable for
criminal action. It follows from the fact that if a
Director of a Company who was not in–charge of and
was not responsible for the conduct of the business of
the company at the relevant time, will not be liable for a
criminal offence under the provisions. The liability
arises from being in-charge of an responsible for the
conduct of the business of the company at the relevant
time when the offence was committed and not on the
basis of merely holding a designation or office in a
company.
10. Sections 141 is a penal provision creating
vicarious liability, and which, as per settled law, must
be strictly construed. It is therefore, not sufficient to
make a bald cursory statement in a complaint that the
Director (arrayed as an accused) is in charge of and
responsible to the company for the conduct of the
business of the company Without anything more as to
the role of the Director. But the complaint should spell
out as to how and in What manner Respondent No.1
was in-charge of or was responsible to the accused
company for the conduct of its business. This is in
consonance with strict interpretation of penal statutes,
especially, Where such statutes create vicarious liability.
A company may have a number of Directors and to
make any or all the directors as accused’ in a complaint
merely on the basis of a statement that they are in-
charge of and responsible for the conduct of the
business of the company Without anything more is not
a sufficient or adequate fulfillment of the requirements
under Section 141.
11. In a catena of decisions, this Court has held
that for making Directors liable for the offences
committed by the company under Section 141 of the
Act, there must be specific averments against the
Directors, showing as to how and in What manner the
Directors were responsible for the conduct of the
business of the company.”
6. In consideration of the above, in paragraph–lO of the
judgment referred to by the I-Ion’b1e Supreme Court in the case of
Malwa Cotton (supra), the Hon’ble Supreme Court hasilaid down three
categories of persons covered by Section 141 which are as fol1ows:–
(1) The company Who committed the offence.
(2) Everyone who was in charge of and was
responsible for the business of the company.
(3) Any other person who is a director or a
manager or a secretary or officer of the
company With whose connivance or due to
whose neglect the company has committed the
offence.
7. In the present case the complaint petition it-self has been
annexed as AnneXure–l and in paragraph–7(i) the complainant has
made the following complaint, which reads as follows:–
“7(i} Since Mr. Rajendra Prasad Ram is
Managing Director of the company and
Mrs. Lakshmi Devi Ram, Mr. Ashok Kumar Ram, Mr.
Niranjan Prasad Ram and Mr. Deepak Kumar Ram are
the Directors of the company and are committed and
looking after the day to day business of the company in
their respective individual capacity and jointly as
Directors of the company, for which all of them are
responsible in one Way and other for the conduct of the
business of the company as well as company and the
accused company has issued the cheque in
consultation with all Directors in order to liquidate their
liability but subsequently Witha View to defraud the
claim of complainant knowing fully Well their liability
purposefully have defaulted to pay to the complainant.
The complainant company officials have time to time
contacted all the Directors of the accused company
before and after issue of cheque but to defraud the
claim of complainant has stopped payment of the
cheque when they did not have sufficient balance to
cover the cheque amount…”
8. On a reading of Section 141 of the N.I. Act vis–a-vis the
complaint made in this application it would be clear that necessary _
averments to implicate a Director such as the present petitioner for
having connived or neglected in committing the offence, has not been
clearly imade. Admittedly the Managing Director Sri Rajendra Prasad
Ram had been impleded as accused No.2 in the complaint petition and
it is the said Managing Director who had issued the cheque in question
and the dishonour of such cheque is the subject matter of the
complaint. Further I find that in CRLMC Nos. 1051 85 1900 of 2008
Hon’ble Mr. Justice B.K.Patel of this Court had also come to a
conclusion that Section 141 of the Act was required to be strictly
complied With and by making ambiguous statement regarding
involvement of other Directors other than the Managing Director, the
requirement of Section 141 of the N.I. Act was not complied with and
therefore, in the absence of any such statement as required under
Section 141 of NI. Act Vis–a–Vis the present petitioner, there is no scope
for her prosecution and therefore, the cognizance order passed against
the present petitioner is quashed’.
The learned counsel for the O.P. states that the case has
remained pending before the learned SDJM, Bhubaneswar since 2008
and thus, more than two years have lapsed in the meantime prays for a
direction for early disposal. Therefore, the learned SDJ M is directed to
take up the matter and dispose of the same expeditiously in accordance
with law preferably Within a period of four months from the date of V
communication of this order.
Interim orders, if any, stand vacated.
‘ ~ 94-3, l\/’£9/l/\CU’T\’l;7’)j.
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ORISSA HIGH comer, CUTTACK
25m March,20lQ /AKD
