S.Rajasaravanan v. E.J.Prosper

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 8.07.2009CORAM:THE HONOURABLE MR.JUSTICE ARUNA JAGADEESANCrl.OP.No.6266/2006Crl.MP.No.1604/2006S.RajasaravananPetitioner VsE.J.ProsperRespondentPrayer:- This Criminal Original Petition is filed to call for therecords in CC.No.958/2005 on the file of the Judicial MagistrateII, Pondicherry and to quash the same in so far as thePetitioner/A2 is concerned.For Petitioner:Mr.S.SundaresanFor Respondents:Mr.Parthiban-Legal Aid CounselORDER This Criminal Original Petition is filed to quashthe proceedings in CC.No.958/2005 on the file of the JudicialMagistrate II, Pondicherry in so far as the petitioner/A2 isconcerned.2. The brief facts, which are necessary for thedisposal of this Criminal Original Petition, are as follows:-The Respondent herein has filed the private complaintagainst the Petitioner for the offence under Section 138 and 142 ofthe Negotiable Instruments Act. As per the averments made in thecomplaint, the Petitioner's brother/A1 had received a sum ofRs.1,00,000/- from the complainant for his business and inconsideration of the same, he issued a cheque dated 10.4.2005 drawnon State Bank of Trivancore, Pondicherry. The complainantpresented the cheque for collection on 29.6.2005 and the same wasreturned on the ground that the account has been closed. Thecomplainant had issued a statutory notice to the 1st accused throughhis lawyer on 6.7.2005 and the same had been returned with anendorsement "as refused". Hence, he has filed the presentcomplaint against A1 and the Petitioner, who is arrayed as A2.3. The learned counsel for the Petitioner submitted https://hcservices.ecourts.gov.in/hcservices/ that the Petitioner has not borrowed any amount from thecomplainant nor issued any cheque and he has nothing to do with thealleged transaction. Admittedly the notice demanding money wassent only to A1 and not to the Petitioner/A2 and the Petitioner wasnot aware of any demand made by the complainant and therefore, nocause of action has arisen as against the Petitioner herein.4. The contention of the learned counsel for thePetitioner that he is neither the drawer of the cheque norresponsible for the conduct of the business of the Company by nameM/s.Ess Ess AR Agencies and absolutely, there is no averment in thecomplaint that the Petitioner was in-charge or responsible for theconduct of the business of the said company, has got every force.It is the contention of the learned counsel for the Petitioner thatnone of the ingredients to create a criminal liability in terms ofSection 138 of the Negotiable Instruments Act has been shown eitherin the complaint or in the sworn statement recorded thereon. Herelied on the decision of the Honourable Supreme Court rendered inthe case of Saroj Kumar Poddar Vs. State (NCT of Delhi) andanother (2007-1-CTC-529) in support of his contention that the ApexCourt has formulated the ingredients to fasten the criminalliability under Section 138 of the Negotiable Instruments Act,which are extracted as under:-"10. For creating a criminal liability in terms of the saidSection, the complainant must show:-(i) that a cheque was issued;(ii) the same was presented;(iii) but it was dishonoured(iv) a notice in terms of the said provision was served onthe person sought to be made liable; and(v) despite service of notice, neither any payment was madenor other obligations, if any, were complied with withinfifteen days from the date of the notice."5. The question as to whether a Director or Partnerof a Company would become vicariously liable was discussed in thedecision of the Three-Judges Bench of this Court in the case ofS.M.S.Pharmaceuticals Limited Vs. Neeta Bhalla and another (2005-5-CTC-65), wherein upon consideration of a large number of decisionin that regard, Apex Court opined:-"While analysing Section 141 of the Act, it will be seenthat it operates in cases where an offence under Section138 is committed by a Company. The key words whichoccur in the Section are "every person". These aregeneral words and take every person connected with aCompany within their sweep. Therefore, these words havebeen rightly qualified by use of the words "who, at the https://hcservices.ecourts.gov.in/hcservices/ time the offence was committed, was in charge of and wasresponsible to the Company for the conduct of thebusiness of the Company, as well as the Company, shallbe deemed to be guilty of the offence, etc." What isrequired is that the persons who are sought to be madecriminally liable under Section 141 should be at thetime the offence was committed, in charge of andresponsible to the Company for the conduct of thebusiness of the Company. Every person connected withthe Company shall not fall within the ambit of theprovision. It is only those persons who were in chargeof and responsible for conduct of business of theCompany at the time of commission of an offence, whowill be liable for criminal action. It follows fromthis that if a Director of a Company who was not incharge of and was not responsible for the conduct of thebusiness of the Company at the relevant time, will notbe liable under the provision. The liability arisesfrom being in charge of and responsible for conduct ofbusiness of the Company at the relevant time when theoffence was committed and not on the basis of merelyholding a designation or office in a Company.Conversely, a person not holding any office ordesignation in a Company may be liable if he satisfiesthe main requirement of being in charge of andresponsible for conduct of business of a Company at therelevant time. Liability depends on the role one playsin the affairs of a Company and not on designation orstatus. If being a Director or Manager or Secretarywas enough to cast criminal liability, the Section wouldhave said so. Instead of "every person" the Sectionwould have said "every Director, Manager or Secretary ina Company is liable" ... etc. The legislature is awarethat it is a case of criminal liability which meansserious consequences so far as the person sought to bemade liable is concerned. Therefore, only persons whocan be said to be connected with the commission of acrime at the relevant time have been subjected toaction. 6. In this case, there is no averment in the complaintas to how and in what manner, the Petitioner was responsible forthe conduct of the business of the Company or otherwise responsiblein regard to its functioning. The Petitioner has not issued thecheque. Except saying that he was looking after the business afterissuance of the cheque, no other averment satisfying therequirements of Section 141 of the Negotiable Instruments Act ismentioned in the complaint. To add, no notice has been sent to thePetitioner. Therefore, the statutory requirement is also notcomplied with, so as to attract an offence under Section 138 of theNegotiable Instruments Act. 7. The decision relied on by the learned counsel for https://hcservices.ecourts.gov.in/hcservices/ the Petitioner rendered in the case of B.Raman and others Vs ShasunChemicals and Drugs Limited by its Company Secretary (2006-4-CTC-529) and Lakshmi Srinivas Saving & Chit Funds Syndicate Pvt Limitedby its Foreman N.Sathiyan Vs. S.Bhojarajan (2007-1-CTC-291) thatdefective notice issued would not be construed to be a notice ascontemplated under Section 138 of the Negotiable Instruments Actsquarely applicable to the facts of the case on hand. In thiscase, even the notice sent to A1 has been returned unnerved and assuch, there was no notice at all as contemplated under Section 138of the Negotiable Instruments Act. Hence, viewed at any angle, thecomplaint cannot be maintained as against the Petitioner herein,who is neither responsible nor in charge of the conduct of thebusiness of the Company nor he is the drawer of the cheque. 8. For the above said reasons, this court is of theconsidered view that the impugned complaint deserves to be quashedand accordingly, it is quashed and this Criminal Original Petitionis allowed. Consequently, the connected MP is closed. Srcm Sd/Asst. Registrar/true copy/Sub Asst.RegistrarTo:The Judicial Magistrate II Puducherry.•+ 1 cc Mr. S. Sundaresan Advocate Sr.29516•+ 1 cc to Mr. V. Parthiban Advocate SR.29391.Pre Delivery Order inCrl.OP.No.6266/2006MDE (CO)EU 22.7.2009.