2000 JTR(SC) 1502
2000 4 AICLR 741 ; 2000 41 AllCriC 949 ; 2001 AllMR(Cri)(SC) 1206 ; 2001 BankJ 483 ; 2001 1 BC 243 ; 2001 5 BomCR(SC) 555 ; 2001 41 CLA 171 ; 2001 104 CompCas 290 ; 2000 CriLR 778 ; 2000 4 CTC 432 ; 2001 DCR 587 ; 2001 1 EastCrC(SC) 43 ; 2001 2 JCC 795 ; 2000 Supp1 JT 519 ; 2000 6 Scale 578 ; 2001 10 SCC 218 ; 2002 SCC(Cri) 1038 ; 1986 SCC(L&S) 539 ; 2002 37 SCL 797 ; 2000 7 SLT 189 ; 2001 KHC 1230 ; 2000 3 KLT(Online) 1056 ; 2001 2 Supreme 311
2001(2) Supreme 311
SUPREME COURT OF INDIA
Syed Shah Mohammed Quadri & S.N. Phukan, JJ.
K.P.G. Nair -Appellant
versus
M/s Jindal Menthol India Ltd. -Respondent
SLP (Crl.) No. 206 of 2000
Decided on 12-9-2000
IMPORTANT POINT
A person other than the company can be proceeded against under section 138 of Negotiable Instruments Act only if that person was incharge of, and was responsible to company for conduct of its business.
Act
Referred
:CRIMINAL PROCEDURE CODE : S.482
NEGOTIABLE INSTRUMENTS ACT : S.141, S.138
(A) Under Section 141 of the Negotiable Instruments Act, read with Section 138, a person who was in charge of, and responsible to, a company at the time a cheque was dishonored for non-payment of a debt is deemed guilty and liable for prosecution, even if the complaint against the company does not explicitly incorporate the statutory wording, provided the substance of the allegation establishes such responsibility. This case further involves an application under Section 482 of the Code of Criminal Procedure to quash criminal proceedings initiated on a complaint filed under Section 138 read with Section 141 of the Negotiable Instruments Act.
(B) The key legal principle is that liability under Section 141 of the Negotiable Instruments Act is personal and attaches only to an individual who, at the relevant time, was in charge of and responsible for the conduct of the companys business. Mere directorship is insufficient; the substance of the allegations must demonstrate control and responsibility for the transaction in question.
Facts of the case:
The accused Company issued three cheques which were dishonored on May 14, 1998. A notice was served on the appellant and others. The appellant replied stating he was not in charge of the companys affairs on the date of the offence. The complaint alleged conspiracy to cheat and offences under Sections 138 and 141 of the Negotiable Instruments Act but did not establish that the appellant was in charge of the companys business at the relevant time.
Findings of Court:
The High Court erred in holding that the requirements of Section 141 were prima facie satisfied. The allegations in the complaint, read with the witness statement, did not make out a case that the appellant was in charge of and responsible for the companys business at the time the offence was committed.
Issues:
Whether the appellant can be proceeded against under Section 141 of the Negotiable Instruments Act solely on the basis of his directorship, without allegations showing he was in charge of and responsible for the conduct of the business at the time of the offence.
Ratio Decidendi:
Responsibility under Section 141 is personal and requires a finding that the individual was in charge of and responsible for the companys business at the time of the offence. The complaint failed to meet this threshold, rendering the prosecution against the appellant unsustainable.
Result:
The appeal is allowed. The impugned order is set aside and the proceedings against the appellant alone are quashed.
(A) Under Section 141 of the Negotiable Instruments Act, read with Section 138, a person who was in charge of, and responsible to, a company at the time a cheque was dishonored for non-payment of a debt is deemed guilty and liable for prosecution, even if the complaint against the company does not explicitly incorporate the statutory wording, provided the substance of the allegation establishes such responsibility. This case further involves an application under Section 482 of the Code of Criminal Procedure to quash criminal proceedings initiated on a complaint filed under Section 138 read with Section 141 of the Negotiable Instruments Act.
(B) The key legal principle is that liability under Section 141 of the Negotiable Instruments Act is personal and attaches only to an individual who, at the relevant time, was in charge of and responsible for the conduct of the companys business. Mere directorship is insufficient; the substance of the allegations must demonstrate control and responsibility for the transaction in question.
Facts of the case:
The accused Company issued three cheques which were dishonored on May 14, 1998. A notice was served on the appellant and others. The appellant replied stating he was not in charge of the companys affairs on the date of the offence. The complaint alleged conspiracy to cheat and offences under Sections 138 and 141 of the Negotiable Instruments Act but did not establish that the appellant was in charge of the companys business at the relevant time.
Findings of Court:
The High Court erred in holding that the requirements of Section 141 were prima facie satisfied. The allegations in the complaint, read with the witness statement, did not make out a case that the appellant was in charge of and responsible for the companys business at the time the offence was committed.
Issues:
Whether the appellant can be proceeded against under Section 141 of the Negotiable Instruments Act solely on the basis of his directorship, without allegations showing he was in charge of and responsible for the conduct of the business at the time of the offence.
Ratio Decidendi:
Responsibility under Section 141 is personal and requires a finding that the individual was in charge of and responsible for the companys business at the time of the offence. The complaint failed to meet this threshold, rendering the prosecution against the appellant unsustainable.
Result:
The appeal is allowed. The impugned order is set aside and the proceedings against the appellant alone are quashed.
ORDER
Leave is granted.
2. The appellant challenges the validity of the order passed by the High Court of Delhi in Criminal Miscellaneous Petition No. 3179 of 1999, dated December 16, 1999. By the said order, the High Court dismissed the petition filed by the appellant under Section 482 to quash the criminal proceedings emanating from the complaint filed by the respondent-Company against him and others under Section 138 of the Negotiable Instruments Act. The High Court took the view that the averments made in the complaint read along with the statement of the witness, prima facie, go to show that at the relevant time, the appellant being the Director of the accused Company, was also in charge of and responsible for the business of the accused Company.
3. Mr. V.R. Reddy, the learned senior Counsel appearing for the appellant submits that a plain reading of the relevant allegations made in the complaint do not even,prima facie make out a case against the appellant. He argues that it is not a case where the appellant has signed the cheques himself; he is sought to be prosecuted in view of the provisions of Section 141 of N.I. Act as he happened to be the Director of the accused Company at one point of time. Mr. Arora, the learned Counsel appearing for the complainant Company-respondent contends that from the allegations in the complaint, it has to be inferred that the appellant was in charge of and was responsible to the Company for the conduct of the business of the accused Company at the time the offence was committed.
4. To appreciate the contentions of the learned Counsel, it would be necessary to briefly narrate the facts giving rise to this appeal.
5. The accused Company issued two cheques on March 15, 1998 and one cheque on March 24, 1998. Those cheques were presented on May, 1998 but were returned dishonored on May 14, 1998. The respondent-Company issued notice to 7 persons including the appellant on May 29, 1998, requiring them to pay the amounts of cheques which were dishonored on May 14, 1998. It is stated that the appellant sent a reply on June 6, 1998 intimating that he was not in charge of the affairs of the Company on the date of the alleged offence.
6. Be that as it may, the respondent-Company filed a complaint on 14th July, 1998. The relevant allegations against the appellant are contained in para 11, which reads as follows:
"That the accused no.1 is the Company. the accused No. 2 is the whole time Chairman, the accused no. 3 is one of the Directors, who signed the share certificates on the date of issuance of the same and the three cheques which were issued to the complainant for the payment of the value of the preferential shares on the date of maturity. Accused Nos.4 and 5 are the signatories of all the three cheques. All the accused persons hatched a conspiracy with a mala fide intention to deceive the complainant to the tune of Rs. 57 lacs, thereby committing an offence of cheating and are liable to be punished under Section 420/120-B IPC. All the accused persons are also responsible for the dishonourment of the cheques under the Negotiable Instruments Act and all are liable to be punished for the offences committed under Section 138 NIA. All the accused persons have failed to make the payment of the dishonoured cheques despite the legal notice which was sent by registered post."
7. From a perusal of the experts of the complaint it is seen that nowhere it is stated that on the date when the offence is alleged to have been committed, the appellant was in charge of or was responsible to the accused Company for the conduct of its business. Here it will be appropriate to note Sub-section (1) of Section 141 which is in the following terms:
"Section 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."
8. From a perusal of Section 141, it is evident that in a case where a Company committed offence under Section 138, then not only the Company but also every person who at the time when the offence was committed, was in charge of and was responsible to the Company for the conduct of the business of the Company shall be deemed to be guilty of the offence and liable to be proceeded against and punished accordingly. It follows that a person other than the Company can be proceeded against under those provisions, only if that person was in charge of and was responsible to Company for the conduct of its business.
9. It is true, as submitted by Mr. Arora that the words of Section 141(1) need not be incorporated in a complaint as magic words but it cannot also be disputed that substance of the allegations read as a whole, should answer and fulfil the requirements of the ingredients of the said provision (for being proceeded against for an offence which he is allege to have committed). On the above premise, it is clear that the allegations made in the complaint do not, either in express words or with reference to the allegations contained therein, make out a case that at the time of commission of the offence, the appellant was in charge of and was responsible to the Company for the conduct of its business.
10. In that view of the matter, the High Court has misdirected itself and committed an error in coming to the conclusion that the requirements of Section 141 are Prima facie satisfied insofar as the appellant is concerned. Therefore, we allow the appeal, set aside the impugned order of the High Court and quash the proceedings in question as against the appellant alone.
Appeal allowed.
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Parallel Citations of other Journals :
K.P.G. Nair v. Jindal Menthol India Ltd., 2001(2) Supreme 311 : 2000 (Supp. 1) JT 519 : 2000 Crl. LR. (SC) 778 : 2000 (4) All. Crl. L.R. 741 : 2001 (1) B.C. 243 : 2001 (2) Crimes 132 : 2001(2) Crimes 132 : 2001 (2) Comp. L.J. 258 : 2001 Bankmann 432
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