CRLP/926/2008 of M/s. Agri Gold Organics Pvt. Ltd., Vs The Drugs Inspector, on 24 December 2008

JUDGMENT:

1. Aggrieved by the acquittal of the respondents 1 to 3/A1 to A3 for the offences under Section 138 r/w Section 142 of the Negotiable Instruments Act vide judgment in CC No.2101 of 2005 dated 08.04.2008, passed by the X Metropolitan Magistrate, Cyberabad at Malkajgiri, the present appeal is filed.

2. The case of the complainant is that he had supplied wooden cable drums to the Hindustan Cables Limited/A1. There was an outstanding amount of Rs.17,40,455/- towards the said supplies, for which reason, the accused issued three cheques for the said amount under Exs.P1, P2 and P3. The said cheques, when presented for clearance, were returned unpaid for the reason of ‘exceeds arrangement’.

3. The learned Magistrate acquitted the accused on the following grounds;

i) No where in the complaint it is stated that the Chief General Manager, Senior General Manager and Manager Finance were responsible and In-charge of the business of the company;

ii) The complainant has not chosen to include any directors of the company or any head of the A1 company as party;

iii) Since A1 to A3 are employees in the company, it is not sufficient to make a person liable under Section 141 of the Negotiable Instruments Act.

4. It is not in dispute that the material was not supplied by the complainant company. The stand taken by the accused is that the complainant did not seek permission nor intimate about the presentation of the cheques.

5. Learned Magistrate found that there is a legally enforceable debt on the date of issuance of the cheques. However, acquitted the respondents/A1 to A3 for the reason of there being no mention in the compliant that they were responsible for the day to day affairs of the company.

6. A1 is the company represented by Chief General Manager, one Mr. K.K.Gupta was the Chief General Manager at the relevant time.

7. The Hon’ble Court in S.M.S.Pharmaceuticals Ltd., v. Neeta Bhalla[1] held as follows:

“10. While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. The key words which occur in the section are “every person”. These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words:

“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, etc.” What is required is that the persons who are sought to be made criminally liable under Section 141 should be, at the time the offence was committed, in charge of and 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. It is only those persons who were in charge of and responsible for the conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this 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 under the provision. The liability arises from being in charge of and responsible for the conduct of 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. Conversely, a person not holding any office or designation in a company may be liable if he satisfies the main requirement of being in charge of and responsible for the conduct of business of a company at the relevant time. Liability depends on the role one plays in the affairs of a company and not on designation or status. If being a director or manager or secretary was enough to cast criminal liability, the section would have said so. Instead of “every person” the section would have said “every director, manager or secretary in a company is liable”…, etc. The legislature is aware that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action.”

8. In K.K.Ahuja v. V.K.Vora[2], wherein the Hon’ble Supreme Court discussed the principles of the vicarious liability of the officers of a company in respect of dishonour of a cheque and held: - “27. The position under Section 141 of the Act can be summarised thus:

(i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix “Managing” to the word “Director” makes it clear that they were in charge of and are responsible to the company, for the conduct of the business of the company.

Conclusion

(ii) In the case of a Director or an officer of the company who signed the cheque on behalf of the company, there is no need to make a specific averment that he was in charge of and was responsible to the company, for the conduct of the business of the company or make any specific allegation about consent, connivance or negligence. The very fact that the dishonoured cheque was signed by him on behalf of the company, would give rise to responsibility under sub-section (2) of Section 141.

(iii) In the case of a Director, secretary or manager [as defined in Section 2(24) of the Companies Act] or a person referred to in clauses (e) and (f) of Section 5 of the Companies Act, an averment in the complaint that he was in charge of, and was responsible to the company, for the conduct of the business of the company is necessary to bring the case under Section 141(1) of the Act. No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under Section 141(2) by making necessary averments relating to consent and connivance or negligence, in the complaint, to bring the matter under that sub-section.

(iv) Other officers of a company cannot be made liable under sub-section (1) of Section 141. Other officers of a company can be made liable only under sub-section (2) of Section 141, by averring in the complaint their position and duties in the company and their role in regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligence.”

9. It cannot be said that the Chief General Manager, who is representative of the company at Hyderabad for Hindustan Cables Limited is not responsible for the affairs of the company. It is not necessary that the complainant specifically makes an averment that the Chief General Manger is responsible for the day to day affairs of the company. In the absence of the said averment also, by virtue of his position in as the Chief General Manager who is In-charge at Hyderabad in Hindustan Cables Limited, he is responsible on behalf of the company and the company is also liable. Admittedly there is an outstanding. The finding of the learned Magistrate that the company represented by Chief General Manager, is not responsible is not proper and an incorrect finding.

10. In the said circumstances, the first respondent/A1 being represented by the then Chief General Manager Mr.K.K.Gupta is convicted for the offence under Section 138 of the Negotiable Instruments Act. The 1[st] respondent/A1 is directed to pay fine of Rs.25.00 lakhs, recoverable and to be paid to the appellant.

However, the case against respondents 2 and 3/A2 and A3 is dismissed.

11. Accordingly, the Criminal Appeal is partly allowed.

Date:16.09.2022kvs

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K.SURENDER, J

kvs

THE HON’BLE SRI JUSTICE K.SURENDER

Crl.A.No.926 of 2008

Dated:16.09.2022