V.N.Narayanan v. S.Sadhsivan

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 24.07.2009CORAM:THE HONOURABLE MRS.JUSTICE ARUNA JAGADEESANCrl.OP.Nos.8089 & 8090/2002Cr.MP.Nos.3849 & 3851/2002V.N.NarayananPetitioner in both OPS VsS.SadhsivanProprietor of M/s.Layam AdvertisingChennai-18Respondent in both OPSPrayer:- These Criminal Original Petition are filed to call for therecords in CC.Nos.5493 & 5494/2001 on the file of the XVIIIMetropolitan Magistrate, Saidpaet, Chennai 600015 and quash thesame.For Petitioner:Mr.B.RaviORDER The Petitioner, who is arrayed as A4, is facing trial forthe alleged offence under Sections 138 and 142 of the NegotiableInstruments Act and he has come forward with these petitions toquash the proceedings in CC.Nos.5493 & 5494/2001 on the file of thelearned XVIII Metropolitan Magistrate, Chennai-15.2. According to the Respondent/complainant, A1 is thePrivate Limited Company by name M/s.Momentum Consultancy Services(P) Limited (herein after referred to as the Company) and A2 to A4are its Directors and the said Company is carrying on the businessof managing, marketing and consultancy services for all productsand the Petitioner/A4 is one of the Directors of the said Companyand four cheques bearing Nos.336016 to 336019 each for a sum ofRs.15,421/- dated 15.3.2001, 15.12.2000, 15.02.2001 and 15.2.2001respectively drawn on Bank of Baroda, Chennai-18 in favour of thecomplainant concern namely M/s.Layam Advertising were issued todischarge the liability and the same were returned with anendorsement "insufficient funds", when they were presented forencashment on 13.6.2001 and the same was intimated by the accusedbank on 14.6.2001. 3. According to the complainant, A1 to A4 are liable to https://hcservices.ecourts.gov.in/hcservices/ pay the cheque amounts. Since the accused failed to honour thesaid cheque in favour of the complainant, the complainant hadissued a demand notice dated 30.6.2001 to the accused. ThePetitioner sent reply dated 9.7.2001, stating that he had resignedfrom the Directorship from 13.7.2000. Since the accused failed topay the amount within fifteen days even after the receipt of thenotice, the complaint under Section 138 and 142 of NegotiableInstruments Act has been filed.6. The learned counsel for the Petitioner has contendedthat even as per the admitted allegation contained in thecomplaint, the disputed cheques were signed and issued only by A2on behalf of the Company. It is contended by the learned counselthat as far as the Petitioner herein is concerned, he has nothingto do with the day to day affairs of the Company, as he hasresigned from the Directorship as early as on 13.7.2000, which isevident from the certified copy of Form-32 dated 14.7.2000 filedwith the Registrar of Companies.7. The learned counsel for the Petitioner furtherpointed out that the disputed cheques in this case were issued on15.3.2001, 15.12.2000, 15.02.2001 and 15.2.2001 and during therelevant period, the Petitioner herein was nowhere in the pictureand he has nothing to do with the day to day affairs of the Companyand was not responsible or in charge of the business of the Companyat the relevant point of time and as such, the Petitioner cannot beheld vicariously liable for the offence committed by the Companyand other accused. 8. It is further contended by the learned counsel forthe Petitioner that there is no averment in the complaint, exceptstating that the Petitioner is the Director to implicate him in thecommission of the offence. He would point out that there is noallegation that the Petitioner was responsible for the conduct ofthe business of the Company nor with his connivance the chequeswere issued. He would contend that in the absence of any suchaverment in the complaint, the cognizance taken by the learnedMagistrate is illegal.9. It is seen that the Petitioner has been arrayed as A4and he is facing the trial for the offence under Sections 138 and142 of the Negotiable Instruments Act. A perusal of the complaintdiscloses that it is merely stated that the Petitioner/A4 is one ofthe Directors and no specific allegation is made against him thathe was in charge and responsible for the day today affairs of theCompany at the relevant point of time. 10. It has been held by the Honourable Supreme Court inthe case of Ashok Muthanna, Managing Director, M/s.FidelityIndustries Limited and three others Vs. Wipra Finance Limited byArea Manager, Chennai-18 [2001-1-LW-Crl-603], relying on anotherdecision of the Honourable Supreme Court rendered in the case of https://hcservices.ecourts.gov.in/hcservices/ Satish Mehra V. Delhi Administration and another (1996-93-Crimes-85-SC) that the court is within its powers to consider evenmaterials which the accused may produce even before thecommencement of trial for the purpose of deciding whether theaccused could be discharged, when those documents are not indispute. 11. In the case on hand, as discussed above, thedocument viz. Form-32, a certified copy of which is filed by thePetitioner, would reveal that the Petitioner was not the Directorwho was in charge and responsible for the day to day affairs of theCompany during the relevant period when the cheque was issued. TheHonourable Supreme Court even in the earlier decision rendered inthe case of SMS Pharmaceutical Limited Vs. Neeta Bhalla andanother[2006-1-LW-Crl-1=2005-8-SCC-89) has held as under:-"with a view to make a Director of a Companyvicariously liable for the acts of the Company, it wasobligatory on the part of the complainant to makespecific allegations as are required in law."12. In another decision rendered in the case of N.K.WahiVs. Shekahr Singh and others (2007-2-SC-811), the HonourableSupreme Court has held as under:"To launch a prosecution therefore, against thealleged Directors must be a specific allegation in thecomplaint as to the part played by them in thetransaction . There should be clear and unambiguousallegation."13. The Honourable Supreme Court has also held in anotherdecision rendered in the case of Saroj Kumar Poddar Vs. State (NCTof Delhi)(2007-1-CTC-529) as under:-"13. The purported averments which have been made inthe complaint petitions so as to make the appellantvicariously liable for the offence committed by theCompany read as under:-"That the accused No.1 is a public Limited Companyincorporated and registered under the Companies Act,1956 and the accused 2 to 8 are/were its Directors atthe relevant time and the said Company is managed bythe Board of Directors and they are responsible for thein charge of the conduct and business of the Companyaccused No.1. However, cheques referred to in thecomplaint have been signed by the accused NO.3 and 8i.e. Shri K.K.Pilania and Shri N.K.Munjal for and onbehalf of the accused Company No.1"14. .... there is no averment in the complaint petition https://hcservices.ecourts.gov.in/hcservices/ as to how and in what manner the appellant wasresponsible for the conduct of the business of theCompany or otherwise responsible for it in regard toits functioning. He had not issued any cheque. How heis responsible for dishonour of the cheque has not beenstated. The allegations made in paragraph 3, thus inour opinion do not satisfy the requirements of Section141 of the Act."14. The well settled principle laid down by theHonourable Supreme Court, in a catena of decisions cited supra issquarely applicable to the facts of the case on hand, as in thiscase also there is only a bald and vague allegations made againstthe Petitioner and such bald and vague allegations itself is notsufficient without making any specific averment as to as to how andin what manner the Petitioner was responsible for the conduct ofthe business of the Company. That too when he has resigned from theDirectorship as early as on 13.7.2000, it cannot be said that heis vicariously liable.16. In view of the said reasons and in the light of theprinciples laid down by the Honourable Supreme Court, thecognizance taken by the learned Judicial Magistrate is notsustainable and hence, the criminal proceedings in so far as thePetitioner/A4 is concerned on the file of the XVIII MetropolitanMagistrate, Saidpaet, Chennai 600015 is liable to be quashed andaccordingly, it is quashed and this Criminal Original Petitions areallowed. Consequently, the connected MPs are closed. Sd/Asst.Registrar/true copy/Sub Asst.RegistrarSrcm To:1.The XVIII Metropolitan Magistrate, Chennai 6000152.-do- Thro'The Chief Judicial Magistrate,Egmore, Chennai.3.The Public Prosecutor, High Court, Madras +2cc to Mr.R.Subramanian, AdvocateSr34529KGK(CO)km/4.8.Crl.OP.Nos.8089 & 8090/2002