JUDGMENT
S.P. Talukdar, J.
1. The instant case relates to an application under Section 401 read with Section 482 of the Criminal Procedure Code.
2. By filing such application the petitioners sought for quashing of the proceeding arising out of the Order dated 30th September, 2005 passed by the learned Judicial Magistrate, Bidhannagar, 24-Parganas (N) in connection with Case No. C-85 of 2005 corresponding to Trial Case No. T-662 of 2005 under Section 138 of the Negotiable Instruments Act.
3. Grievances of the petitioners may briefly be stated as follows:
On the basis of a petition of complaint filed on behalf of the present opposite party, learned Additional Chief Judicial Magistrate, Bidhannagar, District 24-Parganas (N), by order dated 26.08.2005 took cognizance of the offence under Section 138 of the Negotiable Instruments Act and then made over the case to the learned Court of Judicial Magistrate for disposal.
It was alleged in the said petition of complaint that accused No. 1, being a partnership firm, ‘Tec Mark Combines’, was the authorised wholesale distributor under the complainant and in course of business transaction complainants supplied various type of products worth about Rs. 25 lakhs and on demand of the proceeds the accused company issued cheque of the said amount drawn on Central Bank of India, Howrah Branch. The said cheque while presented to the banker of the complainant being the City Bank, Chowringhee Branch for encashment, was dishonoured with Bank endorsement ‘payment stopped by drawer’ and despite the notice of demand for payment of the said amount nothing was paid.
The said petition of complaint was moved on 26.08.2005. Cognizance was taken of the offence alleged to have been committed being under Section 138 of the N.I. Act and, thereafter, it was transferred to the learned Court of Judicial Magistrate, Bidhannagar for disposal. The learned Transferee Court on receipt of the case record issued process upon accused No. 2, i.e., the present petitioner No. 1 and withheld issuance of summons upon the present petitioner No. 2/accused No. 1 and, thereafter, by order dated 30.09.2005 fixed the date for recording plea under Section 251 of the Criminal Procedure Code. Thus, none of the Courts examined the complainant or any witness on behalf of the complainant in compliance with Section 200 of the Code of Criminal Procedure.
The petition of complaint did not contain any averment connecting the petitioner No. 1/accused No. 2 with the alleged offence. There was no specific allegation that the accused petitioners were in any way responsible for day-to-day business of the accused company. In absence of any prima facie case against the petitioners, learned Additional Chief Judicial Magistrate was not justified in taking cognizance and learned Transferee Court misdirected itself the impugned proceedings against the petitioners/assused persons. The cause of action for initiating of the impugned proceedings arose outside the territorial jurisdiction of learned Judicial Magistrate, Bidhannagar inasmuch as the concerned cheque was drawn upon the Bank situated at Howrah and the Bank of the drawee is situated at Chowringhee at Kolkata as averred in the petition of complaint.
4. Being aggrieved by, and dissatisfied with, the same, the petitioners sought for quashing of the instant, proceeding.
5. Mr. Sudipta Moitra, learned Counsel for the petitioners referred to Section 141 of the N.I. Act while submitting that the learned Magistrate did not examine any witness nor there had been any concrete allegation disclosing day-to-day functioning of the accused company.
6. Section 141 of the N.I. Act may be reproduced as follows:
141. Offences by companies.(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:
Provided further that where a person is nominated as a Director of a company by virtue of his 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 contained anything 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 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 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.
7. It was submitted, by Mr. Moitra that in absence of any allegation that the present petitioners were actually in charge of, and were responsible to, the company for the conduct of the business, there could be no scope for proceeding against them. Mr. Moitra in support of the said contention sought to derive strength from various decisions like the decision in the case of Katta Sujata (Smt.) v. Fertilizers & Chemicals Travancore Ltd. and Anr. , as well as the decision in the case of K.P.G. Nair v. Jindal Menthol India Ltd. . It was submitted that allegations made in the present case do not make out a case that at the time of commission of offence the present petitioners were in charge of, and were responsible to, the company for the conduct of the business. In fact, reference was also made to the learned Single Benci decision of the Court in Veteran Co. Pvt. Ltd. and Anr. v. State and Ors. reported in 2003 C Cr. LR (Cal) 1035. In fact, applying the principles of law, as mentioned in the said judgments, to the facts and circumstances of the present case, it can very well be said that the grievances of the petitioner cannot just be brushed aside under the carpet. What is important to consider is something more than that and the decision in the case of Monaben Ketanbhai Shah and Anr. v. State of Gujarat and Ors. , throws light amidst the encircling gloom. What essentially emerges from the aforesaid decisions is that the allegations must make out a case that at the time of the commission of offence the petitioners were in charge of, and were responsible to, the company for the conduct of the business and in absence of such allegations, the complaint is liable to be quashed. The Supreme Court of India in the case of Monaben Ketanbhai Shah and Anr., as referred to earlier, while dealing with the offence by partnership firm and the vicarious liability of partners indicated that Section 141 of the N.I. Act does not make all partners liable. Liability is fastened only on those who at the time of the commission of the offence, were in charge of and were responsible to, the firm for the conduct of its business. The Apex Court took the view that primary responsibility is on complainant to make necessary averments in complaint and establish the fact that when the offence was committed the accused were in charge of, and responsible to, the firm for the conduct of its business. The Apex Court firmly observed that there cannot be any presumption that every partner knows about the transaction.
8. On the other hand, Mr. Milon Mukherjee, learned Counsel for the opposite party contended that the anxiety of the present petitioners is premature. He reminded the Court that the Explanation to Section 141 of the N.I. Act clearly shows that “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.
9. In fact, Mr. Mukherjee also invited attention of the Court to the meaning of the word “partner” as shown in Black’s Law Dictionary (7th Edn.) at Page-1142. It follows from the said meaning that partner is one who shares or takes part with another especially in a venture with shared benefit and shared risks. There are reference to various kinds of partnership like collapsible partnership, commercial partnership, family partnership, implied partnership, limited partnership, non-trading partnership, particular partnership and so on and so forth. It is not at all necessary to deal with that aspect of the matter any further within the scope of the present application. It is significant to mention that both Mr. Moitra, as learned Counsel for the petitioners and Mr. Mukherjee, as learned Counsel for the private opposite party have placed reliance on the judgment in the case of S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Anr. reported in 2005(4) All India Criminal Law Reporter 421.
10. It seems to be the settled position of law that the requirement of Section 141 of the N.I. Act 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.
The main ingredients so as to constitute the offence under Section 138 of the N.I. Act are as follows:
(i) Issuance of a cheque,
(ii) Presentation of the cheque,
(iii) Dishonour of the cheque,
(iv) Service of statutory notice of the person sought to be made liable, and
(v) Non-compliance or non-payment in pursuance of the notice within 15 days of the receipt of the notice.
12. It has been observed by the Apex Court that Section 141 contains conditions which have to be satisfied before the liability can be extended to the officers of a company:
Since the provision creates criminal liability, the conditions have to be strictly complied with. The conditions are intended to ensure that a person who is sought to be made vicariously liable for an offence of which the principal accused is the company, had a role to play in relation to the incriminating act and further that such a person should know what is attributed to him to make him liable. In other words, persons who had nothing to do with the matter need not be roped in. A company being a juristic person, all its deeds and functions are result of acts of others.
13. It was observed that:
the proviso to the sub-section contains an escape route for persons who are able to prove that the offence was committed without their knowledge or that they had exercised all due diligence to prevent commission of the offence.
14. The Apex Court while summing up held as follows:
(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 the person 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 deemd 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 dishonored is concerned, he is clearly responsible for the incriminating act and will be covered under Sub-section (2) of Section 141.
15. Thus, it can be said that 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. Merely being a Director of a company is not sufficient to make the person liable under Section 141 of the N.I. Act.
16. The persons holding the post of Managing Director or Joint Managing Director being in charge of, and responsible for, the conduct of business of the company get covered under Section 141 of the N.I. Act. The signatory of a cheque which is dishonoured is also responsible for the incriminating act and will be covered under Sub-section (2) to Section 141 of the N.I. Act.
17. Analysing the facts and circumstance of the present case in the context of the legal position as discussed earlier, it is found that the present petitioners have been tied as partners of the firm, ‘Tec Mark Combines’, which was made accused No. 1. It was stated in the petition that accused No. 1 is a partnership firm and the accused Nos. 2 & 3 are the partners of the said firm. In para 9 of the petition, it was stated that “on demands of the proceeds the accused in discharge of their liability issued a cheque….”In para 12 of the petition of complaint it was also stated “that the accused persons have sent a reply against the demand notice but has not paid any money as yet.” It was also stated in paragraph 13 “that the accused persons issued the cheque in furtherance to his fraudulent intention and purposely issued instruction to the Bank to stop payment.”
18. This being the factual backdrop of the present case, it is now necessary to examine as to whether there is any merit in the grievances as ventilated on behalf of the persent petitioners.
19. The N.I. Act, 1881 is an Act to define and amend the law relating to promissory notes, bills of exchange and cheques. While dealing with such ‘Act’ there is need to make effort for interpreting the provisions of the Act in such a manner so as to achieve and promote the object of the Act. The object is essentially the free circulation of the instrument from hand to hand without confusion and obscurity but with precision and certainty as held in the case of Sivaram v. Jayaram AIR 1966 Madras 297. In the present case, however unhappily drafted the petition of complaint might have been it cannot be denied that there is specific averment that the cheque issued by the accused persons was dishonoured and this was in pursuant to the fraudulent intention of the accused persons who gave instruction to the Bank to stop payment. It is neither possible nor desirable to explore the genuineness of the merits or lack of the same in the grievances as ventilated in the application. True, accused No. 1 is a partnership firm with accused Nos. 2 and 3 as its partners. It also cannot be denied that as partners, they practically swim together or sink together. Section 141(2) of the N.I. Act leaves no scope for ambiguity in this regard and the Explanation to the said sub-section indicates that Director in relation to a firm means a partner in the firm. Mere fact that there is no specific mention of the role of the partners in the functioning of the said firm does not necessarily take away the right of the complainant, nor does it prevent the complainant from proceeding with such partners against the fact that the signatory to a cheque cannot be allowed to wash their hands of is a significant aspect which is required to be considered in the context of liability of the partners.
20. Considering all these facts and circumstances, I am inclined to hold that the present case which has been sought to be quashed does not suffer from any such inherent legal infirmity which calls for or justifies an order of quashing of the proceeding.
21. So, the present application being C.R.R. No. 3138 of 2005 be dismissed. Interim order, if any, stands vacated. Learned Court of Judicial Magistrate is directed to proceed with the matter as expeditiously as possible.
22. Send a copy of this order along with L.C.R., if any, to the learned Trial Court immediately for information and necessary action.
23. Department is directed to supply xerox certified copy of this order, if applied for, to the learned Counsel of the parties as expeditiously as possible.