Paresh P.Rajda Vs. State of Maharashtra & ANR. [2008] INSC 975 (16 May 2008)
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL No............../2008 (arising
out of SLP(Crl.) No. 3074/2006 Paresh P.Rajda .......Appellants State of
Maharashtra & Anr. .......Respondents WITH
Crl. A. No................../2008 @ SLP(Crl.) No.3075/2006 HARJIT SINGH BEDI,J.
1. Leave granted.
2. This judgment will dispose off
Criminal Appeals arising out of SLP (Crl.) Nos.3074 and 3075 of 2006. The facts
have been taken from the record of SLP (Crl.) No. 3074 of 2006. They are as
under:
3. Tata Finance Limited, which had
commercial dealings with the accused, filed a complaint under Section 138 of 2
the Negotiable Instruments Act, 1881 (hereinafter called the "Act")
alleging that the accused had issued two cheques dated 25th November 2001 and
18th December 2001, each for Rupees One Lakh, which had been dishonoured on
20th December 2001 with the remarks "Exceeds Arrangements". Notice
was issued to accused No.1 i.e. the Company, including accused No.2 Paresh
P.Rajda, the Chairman and accused No.4 Vijay Shroff, a director of the Company
and they appeared reluctantly before the court after bailable warrants had been
issued.
Accused Paresh Rajda thereupon moved
an application that as per the averments made in the complaint itself, no case
for summoning him had been made out as no overt act with regard to the issuance
of the dishonoured cheques had been attributed to him. The High Court, however,
vide its order dated 9th June 2004 directed that the application under Section
395 of the Code of Criminal Procedure, 1974 which had already been made before
the Metropolitan Magistrate be decided at the first instance. The Magistrate,
however, rejected the 3 application on 18th October 2004 holding that he had no
jurisdiction in the matter, as process under Section 395 of the Code had
already been issued. It is in this circumstance that the accused once again
moved the High Court. The High Court in its order dated 20th December 2005 held
that the argument that the accused had been arrayed as such merely because he
was a Director of the Company was wrong inasmuch as an over-all reading of the
complaint showed that specific allegations had been levelled against him as being
a responsible officer of the accused Company and therefore equally liable, and
that if it was ultimately found that the accused had, in fact, no role to play,
he would be entitled to an acquittal. The petition was accordingly dismissed.
It is in this background that the
present appeal is before us.
4. The learned counsel for the
appellant has argued that a perusal of the complaint would show that no
allegation whatsoever had been made against the accused and he had been arrayed
in a mechanical manner, merely 4 because he happened to be a Director of the
company.
He has, in particular, referred us
to the provisions of Section 141 of the Act that if an offence was committed by
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, would be deemed to be guilty of the offence and would be liable to be
proceeded against and as no such allegations had been made in the complaint,
the issuance of process against the accused was not justified. In support of
this argument, he has placed reliance on S.M.S.Pharmaceuticals Ltd. vs. Neeta
Bhalla & Anr. (2005) 8 SCC 89 and N.K.Wahi vs.
Shekhar Singh & Ors. (2007) 9
SCC 481. The learned counsel for the respondents has, however, submitted that
it was not possible at this stage and without evidence to reach a conclusion as
to the liability of the appellant and it was, therefore, appropriate that the
matter be left to trial, as had been observed by the High Court. The learned
counsel has also drawn our attention 5 to paragraphs 2 and 8 of the complaint
to contend that the allegations that the accused were, in fact, responsible
officers of the Company and were also conducting its day-to-day activities, had
been specifically made. It has also been pointed out that a great deal of
material had been put on record to show that the accused company and its
officers had issued several cheques to other organizations as well, which too
had bounced, and that huge sums were due from the Company on that account and,
they being habitual offenders, were not entitled to any relief. The learned
counsel has relied upon S.M.S.Pharmaceuticals Ltd. vs. Neeta Bhalla & Anr.
(2007) 4 SCC 70, Everest
Advertising (P) Ltd. vs. State, Govt of NCT of Delhi &
Ors. (2007) 5 SCC 54 and N.Rangachar vs. Bharat Sanchar Nigam Ltd.
(2007) 5 SCC 108 in support of his
submissions.
5. We have gone through the
judgments cited by the learned counsel. In S.M.S Pharmaceuticals [(2005)8 SCC
89], a three Judge Bench of this Court examined the scope and ambit of Section
141 of the Act and the 6 liability created with respect to the Directors and
other persons responsible for the affairs of the company.
Three questions were posed:
-
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 fulfill the requirements of the said section and it is not necessary
to specifically state in the complaint that the person accused was in charge
of, or responsible for, the conduct of the business of the company.
-
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.
-
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 directors 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 above questions were answered
in the following terms:
-
7 It is necessary to
specifically aver in a complaint under Section 141 that at the time offence was
committed, the person accused was in charge of, and responsible for the conduct
of business of the company. This averments 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.
-
The answer to the question
posed in sub-para (b) has to be in the 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 the 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.
-
The answer
to Question ( C ) has to be in the 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 the 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, 8 they get covered under Section
141.
So far as the signatory of a
cheque which is dishonoured is concerned, he is clearly responsible for the
incriminating act and will be covered under sub-section (2) of Section
141."
6. As this matter had come before
the three-Judge Bench on a reference, the Bench reverted the matter for a
discussion on facts to a Bench of two-Judges. It was this matter which was
again examined by the Bench and reported as S.M.S.Pharmaceuticals Ltd. (2007) 4
SCC 70 and it was found that the necessary averments had been made in the
complaint so as to attract the provisions of Section 141 of the Act. The appeal
filed by the company was accordingly dismissed. This matter once again came up
for consideration in Rangachari's case (supra) and in paragraph 21 it was
observed:
"A person normally having
business or commercial dealings with a company, would satisfy himself about its
creditworthiness and reliability by looking at its promoters and Board of
Directors and the nature and extent of its business and its memorandum or
articles of 9 association. Other than that, he may not be aware of the
arrangements within the company in regard to its management, daily routine,
etc. Therefore,, when a cheque issued to him by the company is dishonoured, he
is expected only to be aware generally of who are in charge of the affairs of
the company. It is not reasonable to expect him to know whether the person who
signed the cheque was instructed to do so or whether he has been deprived of
his authority to do so when he actually signed the cheque. Those are matters
peculiarly within the knowledge of the company and those in charge of it. So,
all tht a payee of a cheque that is dishonoured can be expected to allege is
that the persons named in the complaint are in charge of its affairs. The
Directors are prima facie in that position."
7. A reading of this passage would
reveal a slight departure vis-`-vis the other judgments in favour of the
complainant. It will be noticed that this decision too was rendered on a
consideration of both the judgments in S.M.S.
Pharmaceuticals. The matter came
up yet again for consideration in N.K. Wahi case (supra) which reiterated the
earlier view and held that where there were no clear averment in the complaint
or the evidence with regard to the role played 10 by the Directors and as to
whether and they were in charge and responsible for the conduct of the affairs
of the company, it would not be possible to maintain the prosecution against
them and they were entitled to acquittal. It may however be noticed that this
was a case where an acquittal was recorded after trial.
8. It will be clear from the afore
quoted judgments that the entire matter would boil down to an examination of
the nature of averments made in the complaint though we observe a slight
digression in the judgment in N.
Rangachari case (supra). It is in
this background, that the complaint needs to be examined. Paragraphs 2 and 8
are reproduced below:
"(2) I know the all the
accused. The accused No.1 is company registered under the Companies Act, 1956.
Accused No.2 is the Chairman of
the accused No.1. Accused No.3 is the Joint Managing Director of the Accused
No.1 and accused No.4,5 and 6 are the Directors of the accused No.1.
(8) The accused No.2 is the
Chairman of accused No.1 and is responsible for the day to day affairs of
accused 11 No.1 and therefore he is liable to repay amount of dishonoured
cheques. Accused No.3 being Joint Managing Director and accused No.4,5 and 6
being the Director of the accused No.1 are responsible officer of accused No.1
and therefore they are liable to repay the amounts of the dishonoured cheques.
As the accused have failed to make the payment within the stipulated period of
15 days after receipt of statutory notice they have committed and offence
punishable under Section 138 r/w 141 of the Negotiable Instruments Act 1881 (As
amended). Hence this complaint is filed before this Hon'ble Court."
9. A perusal of the aforesaid
paragraphs would show that accused No.2 is Paresh Rajda, the Chairman of the
Company, and as per the impugned judgment of the High Court, the question of
his responsibility for the business of the Company has not been seriously
challenged. We, nonetheless, find clear allegations against both the
accused/appellants to the effect that they were officers and responsible for
the affairs of the company. We are of the opinion that at a stage where the
trial has not yet started, it 12 would be inappropriate to quash the
proceedings against them in the light of the observations of this Court quoted
above. We, accordingly, find no merit in the appeals. They are dismissed.
.................................J.
(TARUN CHATTERJEE )
..............................
...J.
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