M.O. Srinivasan v. M/s Jindal Pipes Limited by its Liaison Officer S. Manickam

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 26.06.2009CORAM:THE HONOURABLE MRS.JUSTICE ARUNA JAGADEESANCrl.OP.No.17737/2006Crl.MP.No.1 & 2/2006M.O.SrinivasanPetitioner VsM/s.Jindal Pipes Limited by its Liasion Officer S.Manickam, Chennai-1RespondentPrayer:- This Criminal Original Petition is filed to call for therecords in CC.No.5370/1998 on the file of the learned VIIMetropolitan Magistrate, George Town, Chennai and quash the same.For Petitioner:Mr.B.NatarajanFor Respondents:Mr.C.P.R.KamarajORDER This Criminal Original Petition is filed to quash theproceedings in CC.No.5370/1998 on the file of the learned VIIMetropolitan Magistrate, George Town, Chennai. 2. The Petitioner is arrayed as the 3rd accused in thecomplaint. It appears that the Respondent had filed the complaint inCC.No.5370/1998 before the learned VII Metropolitan Magistrate underSection 138 of the Negotiable Instruments Act, alleging that threecheques dated 31.12.1997 were dishonoured. The MetropolitanMagistrate, after taking cognizance of the complaint, dismissed thecomplaint under Section 256(1) of the Code of Criminal Procedure andacquitted the accused, as the complainant was not participating inthe proceedings and displayed lack of interest in pursuing thecomplaint. It appears that the Respondent had preferred an appealbefore this Court in Crl.A.No.332/2001 and this court by order dated13.3.2006 allowed the said criminal appeal and remanded the matterback to the VII Metropolitan Magistrate for fresh disposal.3. In the complaint, the 1st accused is the Company and theaccused 2 and 4 are said to be the Directors of the said Company. 4. The learned counsel for the Petitioner has submitted thatin cases where a person committing an offence is a Company, only suchperson, who was in charge and responsible to the Company for theconduct of the business of the Company at the time of committing theoffence could be proceeded with and the Hon'ble Supreme Court and https://hcservices.ecourts.gov.in/hcservices/ various High Courts in several cases held that there must be specificaverment in the complaint to the above said effect in respect of eachof the accused. He would further submit that as regards thispetitioner, who is arrayed as one of the accused and the Director ofthe Company, there is no specific averment in respect of the roleplayed by him in order to fasten vicarious liability on the part ofthe Petitioner for the offence committed by the Company. 5. On a perusal of the complaint, it is averred that thePetitioner, who is arrayed as A3 and the other accused 2 and 4 arethe Directors of the 1st accused Company, are taking active part inthe business of the Company. Again in the body of the complaint, itis stated that the accused 2 and 4 are taking active part in thebusiness of the Company. In the complaint, it is stated that theCompany issued the cheques and the Company was represented by itsDirector one V.S.Narayanan, S/o. T.S.Varadhachari. Admittedly, thePetitioner is not the drawer of the Cheque. There is no averment inthe complaint as to how the Petitioner has become liable as aDirector of the Company and what has he played in the conduct of thebusiness of the Company. 6. The offender in Section 138 of the Negotiable InstrumentsAct is the drawer of the cheque. It is because of Section 141 of theAct that penal liability under Section 138 of the Act is caused onother persons committed by the Company. Three categories of personscan be discerned from the said provision who are brought within thepurview of the penal liability through the legal fiction envisaged inthe Section viz. (1) The Company the principal offender, whichcommitted the offence, (2) every one who was in-charge of and wasresponsible for the business of the Company and (3) any other personwho is a Director or a manager or a Secretary or officer of theCompany, with whose connivance or due to whose neglect the Companyhas committed the offence. There must be specific accusation againsteach of the person arrayed as accused that such person was in-chargeof and responsible for the conduct of the business of the Company atthe relevant time when the offence was committed by the Company. Meremention in the complaint that a particular person was a Director isnot sufficient to bring him under the mischief of Section 138 of theNegotiable Instruments Act. 7. As per Section 141(2) of the Negotiable Instruments Act,there must be positive allegations in the complaint that thePetitioner was in-charge or responsible for the conduct of thebusiness of the Company, since he is not the drawer of the cheque. Itis not necessary to incorporate the words of Section 141(1) in thecomplaint, but the substance of the allegation read as a whole shouldfulfill its requirements. The vicarious liability of the Petitionerto be prosecuted for commission of the offence by the Company wouldarise only if at the relevant point of time he was in charge andresponsible for the conduct of the business of the Company. In thecomplaint, there is no averment required to hold that the Petitionerwas vicariously liable. https://hcservices.ecourts.gov.in/hcservices/

8. The Hon'ble Supreme Court in the case of SavithaRamamurthy Vs. R.V.S. Channavasa (2006-Cri.LJ-4602 (SC), has heldthat it is not necessary for the complainant to specificallyreproduce the wording of the section but what is required is a clearstatement of facts, so as to enable the court to arrive at a primafacie opinion that the accused are vicariously liable. By reason ofthe Section 141 of the Negotiable Instruments Act, a person althoughis not personally liable for commission of such an offence would bevicariously made liable thereof and before a person can be madevicariously liable, strict compliance with the statutory requirementswould be insisted. It makes it clear that the complainant is boundto make statement on oath as to how the offence has been committed bythe Petitioner and how the accused persons are responsible thereof.It becomes necessary to have averments in the complaint that thePetitioner was in-charge and was also responsible to the Company forthe conduct of the business of the Company. Merely stating that hetook active part in the business of the Company is not sufficient tomake him vicariously liable. 9. As stated by the Hon'ble Supreme Court in the case ofS.M.S.Pharmaceuticals Limited Vs. Neeta Bhalla (2005-Cri.LJ-4140(SC), the liability under Section 141 arises from being in charge ofand responsible for conduct of business of the Company at therelevant point of time when the offence was committed and not on thebasis of merely holding a designation or office in the Company.Without this averment being made in a complaint, the requirements ofSection 141 cannot be said to be satisfied. 10. It is reiterated by the Hon'ble Supreme Court in the caseof Saroj Kumar Poddar Vs. State (2007-1-Supreme-239) that with a viewto make a Director of a Company vicariously liable for the acts ofthe Company, it is obligatory on the part of the complainant to makespecific allegation as are required in law. In this instant case,apart from the Company, three Directors including the Petitioner havebeen arrayed as accused and there is no averment that they were in-charge of the company or responsible for the conduct of the business.On looking into the averments made in the complaint, it is clear thatthe allegations made in the complaint do not disclose any averment asagainst the Petitioner. 11. The next contention raised by the learned counsel for thePetitioner is that there was no notice to the Petitioner as requiredunder Section 138 of the Negotiable Instruments Act. It is seen thata notice has been sent by the complainant to the Company and to oneA.R.Santhanakrishnan, denoting him as Managing Director. Accordingto the Petitioner, he is totally unconnected with the Company. Hiscontention is countenanced by the fact that the name of theA.R.Santhanakrishnan does not find a place in the complaint and he isnot arrayed as an accused. Admittedly, no notice has been sent tothe Petitioner before filing the complaint under Section 138 of theNegotiable Instruments Act. Even on the said ground the compliant isliable to be quashed. https://hcservices.ecourts.gov.in/hcservices/

12. In view of the reasons stated above, the complaint andthe consequential proceedings deserve to be quashed and accordingly,they are quashed and this Criminal Original Petition is allowed asprayed for. Consequently, the connected MPs are closed. Sd/- Asst. Registrar / True Copy / Sub.Asst Registrar Srcm To.1.The VII Metropolitan Magistrate,George Town,Chennai.2.-do-Thro' The Chief Metropolitan Magistrate,Egmore,Chennai.Crl.OP.No.17737/2006DM(CO)EM/20.7.09