JUDGMENT
P.S. Narayana, J.
1. Accused No. 4 in C.C. No. 182/99 on the file of V Additional Munsif Magistrate, Guntur and Accused No. 4 in C.C. No. 181/99 on the file of the self-same Court filed these Criminal Petitions praying for quashing of the said proceedings.
2. The 1st respondent Mr. Srinivasa Marketing Company filed private complaints under Section 138 of Negotiable Instruments Act, hereinafter in short referred to as “Act” for the purpose of convenience. Several averments were made in relation to the mediation at the settlement and it was stated that in pursuance thereof the cheque in question was issued by Accused No. 2 alone. It is no doubt staled that the other accused are in a way responsible to see that the payment is made.
3. Mr. Prakash Reddy, the learned Counsel representing the petitioncrs/A-4 would maintain that there is no averment that the firm in question is a registered firm and hence the complaint itself is not maintainable. The learned Counsel also would further maintain that even otherwise the petitioner ceased to be Director of the Accused No. 1 Company with effect from 1.10.1990 and hence the complaint against him cannot be maintained. The learned Counsel also would further maintain that even on a reading of the averments made in the complaint, it had not been averred that the petitioner/A-4 is in charge of the day-to-day affairs of this Company and on this ground also the proceedings arc liable to be quashed.
4. Per contra Mr. B. Naresh, the learned Counsel representing the 1st respondent/complainant would maintain that the question whether the 1st respondent firm is a registered firm or not may have to be gone into at the appropriate stage. The learned Counsel also would maintain that in the light of the averments specifically made in paras 2, 3, 4 and 5 of the complaint, the petitioner/A-4 also is liable and hence at this stage the proceedings cannot be quashed.
5. The learned Additional Public Prosecutor, Mr. Dhanamjaya also had taken this Court through the averments made in the complaint and would comment that this is a complaint filed under Section 138 of the Act simplicitor and hence in the light of the averments made in the complaint, whether the proceedings so far as they relate to the petitioner/A-4 to be quashed or to be further proceeded with may have to be decided.
6. Heard the Counsel on record.
7. The 1st respondent/complainant filed a private complaint taken on file as C.C. No. 182/99 on the file of V Additional Munsif Magistrate, Guntur against the petitioner/A-4 and three others under Section 138 of the Act alleging that accused Nos. 2 to 4 on behalf of the Accused No. 1 Company placed order for supply of 100 F.P. Bales of M.C.U. – 5 Cotton Lint on 24.4.1994 at the rate of Rs. 23,000/- per candy and the 1st respondent agreed to supply the same and accordingly dispatched 50+50 F.P. Bales of M.C.U. – 5 Cotton Lint on 24.4.1994 and the same was received by accused Nos. 2 to 4 on behalf of accused No. 1 and the value of the stock is Rs. 5,61,657.85 + Rs. 5,69,205.16. It was further averred in the complaint (hat against accused Nos. 2 to 4 placed another order for supply of 50 F.P. Bales of L.K. Cotton Lint at the rate of Rs. 19,500/- per candy and the 1 st respondent agreed for the same and accordingly dispatched the same on 20.8.2004 and the value of the slock is Rs. 4,46,645.97. And in all the total amount due under the above three sale transactions is Rs. 15,77,508/-. It was also further averred that the accused did not pay the amount due and in such circumstances the 1st respondent approached Arundalpet Police Station complaining about cheating, misappropriation and criminal breach of trust and as the police did not take any action the 1st respondent was constrained to file a private complaint before the V Additional Munsif Magistrate, Guntur under Sections 420 and 406, IPC on 11.10.1996 and the same was numbered as C.F.R. No. 7162 of 1996 and the same was sent to Arundalpet Police Station under Section 156(2), Cr.P.C. and on such receipt of the complainant, the Arundalpel Police registered a case under Sections 406 and 420, IPC. It was further averred that subsequently negotiations were held in Cotton Association Hall, Gunturon 1.11.1996 and at that time accused No. 2 on behalf of accused Nos. 1, 3 and 4 executed an agreement in favour of the 1st respondent undertaking that they were in arrears to a tune of Rs. 15,77,508/- and to show the bona fides, accused No. 2 on behalf of the other accused paid a sum of Rs. 1,00,000/- and further agreed to pay the balance amount of Rs. 14,77,508/- with interest within 41 months commencing from January, 1997and for which accused No. 2 alleged to have issued 14 post-dated cheques. It was further alleged that the complainant presented one such cheque bearing No. 250655 dated 27.5.1998 on 12.7.1998 and it was returned with an endorsement “exceeds arrangements”. Subsequently the complainant presented the cheque bearing No. 250655 dated 27.5.1998 for Rs. 91,000/- and another cheque bearing No. 250661 dated 25.7.1998 for Rs. 91,000/- on 29.8.1998 and 1.9.1998 respectively and the same were returned on 3.9.1998 with an endorsement, “exceeds arrangements” and the same were received by complainant on 8.9.1998. It was further averred in the complaint that the complainant got issued notice on 21.9.1998 demanding the accused to pay the amount due under the cheques bearing Nos. 250655 and 250661 and accused Nos. I to 3 received the same on 28.9.1998 and the accused No. 4 managed to return the same and therefore the complainant filed the present complaint and the learned V Additional Munsif Magistrate had taken cognizance and the case had been numbered as CC No. 182.
8. Another private complaint also had been filed by the 1st respondent/complainant against the petitioner/A-4 and three others in respect of the same transaction, the cheque dishonoured being a different one, in C.C. No. 181/99 corresponding to Crl.P. No. 63/2003, with similar averments as in C.C. No. 182/99 corresponding to Crl.P. No. 62/2003 on the file of the self-same Court.
9. It is needless to say that the question whether the firm is a registered firm or not need not be gone into at this stage. Hence the said question is left open. It is not in serious controversy that the petitioner/A-4 had not signed the cheque. The only averment made is that he had also participated in the deliberations and agreed to see that the payment is duly made. No doubt specific stand is taken by the petitioner/A-4 that he has nothing to do with the company in question/accused No. 1. This question also need not be seriously considered for the reason that on a careful scrutiny of the averments made in both these complaints, there is no specific averment so far as it relates to the petitioner/A-4 that he is the in-charge of the day-to-day affairs of the Company. The Apex Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla IV , considered the following questions referred by a two-Judge Bench for determination:
(a) whether for purposes of Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the allegation read as a whole fulfil the requirements of the said section and it is not necessary to specifically state in the complaint that the persons accused was in-charge of, or responsible for, the conduct of the business of the company?
(b) whether a Director of a company would be deemed to be in-charge of and responsible to, the company for conduct of the business of the company and, therefore, deemed to be guilty of the offence unless he proves to the contrary?
(c) even if it is held that specific averments are necessary, whether in the absence of such averments the signatory of the cheque and/or the Managing Director or Joint Managing Director who admittedly would be in-charge of the company and responsible to the company for conduct of its business could be proceeded against?
The Apex Court ultimately at para 20 answered the reference as hereunder:
(a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in-charge of and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.
(b) The answer to question posed in sub-para (b) has to be in negative. Merely being a Director of a Company is not sufficient to make him liable under Section 141 of the Act. A Director in a company cannot be deemed to be in-charge of and responsible to the company for conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in-charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases.
(c) The answer to question (c) has to be in affirmative, The question notes that the Managing Director or Joint Managing Director would be admittedly in-charge of the company and responsible to the company for conduct of its business, When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as Managing Director or Joint Managing Director, these persons are in-charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under Subsection (2) of Section 141.
10. In the light of the authoritative pronouncement of the Apex Court and also in the light of the submissions made in the complaint, this Court is satisfied that the proceedings under Section 138 of the Act, so far as they relate to petitioner/accused No. 4 are concerned are liable to be quashed.
11. Accordingly the Criminal Petitions are allowed to the extent indicated above so far as they relate to the petitioner/accused No. 4.