Nitesh Sharma v. Chander Kanta Chandel

learned Trial Court for the commission of an offence punishable under Section 138 read with Sections 141 and 142 of the N.I. Act against the accused. It was asserted that the accused No.1 M/s Pride NATC Co-operative Society Limited is registered under the H.P. Co-operative Societies Act. It opened one Branch office at Theog, District Shimla, H.P by hiring the premises of the complainant in the year 2017 for carrying out commercial activities. It remained the tenant of the complainant till

31.01.2023. Accused No.2 being the President of accused No.1 and accused No.6 being the Secretary of accused No.1 visited the office on 20.01.2023 and expressed their desire to vacate the premises on 31.01.2023. The complainant demanded an amount of ₹2,40,000/- being the arrears of rent from June 2022 to

31.01.2023. They issued a post-dated cheque of ₹2,40,000/-, which was signed by accused No.2 and accused No.6 on behalf of accused No.1. The complainant presented the cheque but it was 3 dishonoured with an endorsement of “funds insufficient”. The complainant issued a notice demanding the amount but no amount was paid. Accused No. 2 to 8 are office bearers of the Managing Committee of accused No.1. Hence, the complaint was filed against the accused for taking action against them as per law.

#3. Learned Trial Court found sufficient reasons to summon the accused vide order dated 02.08.2023.

#4. Being aggrieved from the filing of the complaint and issuance of summons, the petitioners Nitish Sharma and Rohit Sharma arrayed as accused No. 7 and 4 have approached this Court asserting that the learned Trial Court erred in summoning them. The order does not show an application of mind. The complaint does not contain any allegations against the petitioners. The petitioners were arrayed as accused being the Members of the Managing Committee of accused No.1. Petitioners have not signed the cheque. As per averments made in the complaint, the cheque was signed by accused No. 2 and 6 on behalf of accused No.1, therefore, only they can be held liable for the commission of an offence punishable under Section 138 4 of N.I.Act. The proceedings against the petitioners amount to an abuse of the process of law. Therefore, it was prayed that the present petition be allowed and the complaint pending before the learned Trial Court be quashed.

#5. I have heard Mr Jeet Singh and Mr Karan Veer Dhawan, learned counsel for the petitioners, and Mr Vinay Thakur, learned Counsel for the respondent/complainant.

#6. Mr. Jeet Singh, learned counsel for the petitioners submitted that the petitioners are not responsible for the acts of accused No. 2 and 6. The complaint does not mention that the petitioners are in charge of accused No.1 and responsible for its affairs. The petitioners cannot be summoned in the absence of any such averments; therefore, he prayed that the present petition be allowed and proceedings pending before the learned Trial Court qua the petitioners be quashed. He relied upon the judgment of the Hon’ble Supreme Court in Siby Thomas vs. M/s Somany Ceramics Ltd. 2023 INSC 890 in support of his submission.

#7. Mr. Vinay Thakur, learned counsel respondent/complainant submitted that the petition raises a 5 disputed question of fact which cannot be adjudicated by this Court while deciding a petition under Section 528 of BNSS, hence, he prayed that the present petition be dismissed.

#8. I have given considerable thought to the submissions made at the bar and have gone through the records carefully.

#9. The relating quashing FIR/complaints/criminal cases was explained by the Hon’ble Supreme Court in B.N. John v. State of U.P., 2025 SCC OnLine SC 7 as under: - “7. As far as the quashing of criminal cases is concerned, it is now more or less well settled as regards the principles to be applied by the court. In this regard, one may refer to the decision of this Court in State of Haryana v. Ch. Bhajan Lal, 1992 Supp (1) SCC 335, wherein this Court has summarized some of the principles under which FIR/complaints/criminal cases could be quashed in the following words: “102. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power under Article 226 or the inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and 6 sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised. the allegations made (1) Where information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused. the allegations (2) Where information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code. (3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused. (4) Where the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code. investigation (5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. (6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding instituted) to the institution and continuance of the 7 is a specific proceedings and/or where there provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party. (7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.” (emphasis added)

#8. Of the aforesaid criteria, clause no. (1), (4) and (6) would be of relevance to us in this case. In clause (1) it has been mentioned that where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused, then the FIR or the complaint can be quashed. As per clause (4), where the allegations in the FIR do not constitute a cognizable offence but constitute only a non- cognizable offence, no investigation is permitted by a police officer without an order dated by the Magistrate as contemplated under Section 155 (2) of the CrPC, and in such a situation, the FIR can be quashed. Similarly, as provided under clause (6), if there is an express legal bar engrafted in any of the provisions of the CrPC or the concerned Act under which the criminal proceedings are instituted, such proceeding can be quashed.”

#10. This position was reiterated in Ajay Malik v. State of Uttarakhand, 2025 SCC OnLine SC 185 wherein it was observed: “8. It is well established that a High Court, in exercising extraordinary powers under Section 482 of the CrPC, may issue orders to prevent the abuse of court processes or to secure the ends of justice. These inherent powers are 8 neither controlled nor limited by any other statutory provision. However, given the broad and profound nature of this authority, the High Court must exercise it sparingly. The conditions for invoking such powers are embedded within Section 482 of the CrPC itself, allowing cases of clear the High abuse of process or where intervention is essential to uphold the ends of justice. Court to

#9. It is in this backdrop that this Court, over the course of several decades, has laid down the principles and guidelines that High Courts must follow before quashing criminal proceedings at the threshold, thereby pre-empting the Prosecution from building its case before the Trial Court. The grounds for quashing, inter alia, contemplate the following situations : (i) the criminal complaint has been filed with mala fides; (ii) the FIR represents an abuse of the legal process; (iii) no prima facie offence is made out; (iv) the dispute is civil in nature; (v.) the complaint contains vague and omnibus allegations; and (vi) the parties are willing to settle and compound the dispute amicably (State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335)

#11. The present petition is to be decided as per the parameters laid down by the Hon’ble Supreme Court.

#12. It was specifically asserted in para 2 of the complaint that M/S Pride NATC Co-operative Society Limited is registered under the provisions of the H.P. Co-operative Societies Act. Therefore, it is an association of persons and falls within the definition of the Company as per explanation ‘A’ to Section 141 of the N.I.Act. 9

#13. The Hon’ble Supreme Court dealt with the liability of the Company and its Directors in Pawan Kumar Goel v. State of U.P., 2022 SCC OnLine SC 1598 and held that only a person, who is in charge of and responsible to the Company for its affairs can be summoned and punished under Section 138 read with Section 141 of NI Act. It was observed: “22. A two-judge Bench of this Court in the case of K.K. Ahuja v. V.K. Vora (2005) 8 SCC 89 after analysing the provisions contained in Section 141 of the Act, observed as under:— “16. Having regard to section 141, when a cheque issued by a company (incorporated under the Companies Act, 1956) is dishonoured, in addition to the company, the following persons are deemed to be guilty of the offence and shall be liable to be proceeded against and punished: (i) 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; (ii) any Director, Manager, Secretary or other officer consent and connivance, the offence under section 138 has been committed; and company with whose (iii) any Director, Manager, Secretary or other officer of the company whose negligence resulted in the offence under section 138 of the Act, being committed by the company. While the liability of persons in the first category arises under sub-section (1) of Section 141, the liability of persons mentioned in categories (ii) and (iii) arises under sub-section (2). The scheme of the Act, therefore is, that a 10 person who is responsible to the company for the conduct of the business of the company and who is in charge of the business of the company is vicariously liable by reason only of his fulfilling the requirements of subsection (1). But if the person responsible to the company for the conduct of business of the company, was not in charge of the conduct of the business of the company, then he can be made liable only if the offence was committed with his consent or connivance or as a result of his negligence.

#17. The criminal liability for the offence by a company under section 138, is fastened vicariously on the persons referred to in sub-section (1) of section 141 by virtue of a legal fiction. Penal statutes are to be construed strictly. Penal statutes providing constructive vicarious liability should be construed much more strictly. When conditions are prescribed for extending such constructive criminal liability to others, courts will insist upon strict literal compliance. There is no question of inferential or implied compliance. Therefore, a specific averment complying with the requirements of section 141 is imperative. As pointed out in K. Srikanth Singh v. North East Securities Ltd. - (2007) 12 SCC 788, the mere fact that at some point of time, an officer of a company had played some role in the financial affairs of the company, will not be sufficient to attract the constructive liability under section 141 of the Act.

#18. Sub-section (2) of section 141 provides that a Director, Manager, Secretary or other officer, though not in charge of the conduct of the business of the company will be liable if the offence had been committed with his consent or connivance or if the offence was a result of any negligence on his part. The liability of persons mentioned in subsection (2) is not on account of any legal fiction but on account of specific part played-consent and connivance or negligence. If a person is to be made liable under sub-section (2) of section 141, then it is necessary to aver consent and connivance, or negligence on his part.” 11

#23. The scope of Section 141 of the NI Act was again exhaustively in S.M.S Pharmaceuticals Ltd. v. Neeta Bhalla (2005) 8 SCC 89.: this Court considered “10. ….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 the company. Every person connected with 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 the business of the company at the time of the 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 the 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 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… to be made the person sought liable

#18. To sum up, there is an almost unanimous judicial opinion that necessary averments ought to be contained in 12 a complaint before a person can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelt out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of Section 141 has to be spelt out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within Section 141, he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of Section 141. Even a non-director can be liable under Section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial.” (emphasis supplied)

#14. This position was reiterated in Rajesh Viren Shah v. Redington India Ltd., (2024) 4 SCC 305: 2024 SCC OnLine SC 143 wherein it was observed: “3. The position of law as to the liability that can be fastened upon a Director for non-realisation of a cheque is no longer res integra. Before adverting to the judicial position, we must also take note of the statutory provision — Section 141 of the NI Act, which states that every person who at the time of the offence was responsible for the affairs/conduct of the business of the company, shall be held liable and proceeded against under Section 138 of the NI Act, with exception thereto being 13 that such an act if done without his knowledge or after him having taken all necessary precautions, would not be held liable. However, if it is proved that any act of a company is proved to have been done with the connivance or consent or may be attributable to (i) a Director; (ii) a Manager; (iii) a Secretary; or (iv) any other officer — they shall be deemed to be guilty of that offence and shall be proceeded against accordingly.

#4. Coming to the judicial position, we notice a judgment of this Court in Monaben Ketanbhai Shah v. State of Gujarat [Monaben Ketanbhai Shah v. State of Gujarat, (2004) 7 SCC 15: 2004 SCC (Cri) 1857] wherein it was observed that: (SCC pp. 18-19, para 6) “6. … The primary responsibility is on the complainant to make necessary averments in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every partner knows about the transaction. The obligation of the appellants to prove that at the time the offence was committed, they were not in charge of and were not responsible to the firm for the conduct of the business of the firm, would arise only when first the in the complainant makes necessary averments complaint and establishes that fact.” in S.M.S. 5. A Bench Bhalla [S.M.S. Pharmaceuticals Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89: 2005 SCC (Cri) 1975] observed: (SCC p. 102, para 18) learned Ltd. v. Neeta Judges “18. To sum up, there is an almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. … A clear case should be spelt out in the complaint made against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls 14 within the parameters of Section 141 has to be spelt out.”

#6. We also notice this Court to have observed, in regard to the exercise of the inherent powers under Section 482CrPC, in cases involving negotiable instruments that interference would not be called for, in the absence of “some unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of process of Court. (Ashutosh Ashok Parasrampuriya case [Ashutosh Ashok Parasrampuriya v. Gharrkul Industries (P) Ltd., (2023) 14 SCC 770: 2021 SCC OnLine SC 915], SCC para 24)” This in S.M.S. Pharmaceuticals [S.M.S. principle Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89: 2005 SCC in Ashutosh Ashok Parasrampuriya v. Gharrkul Industries (P) Ltd. [Ashutosh Ashok Parasrampuriya v. Gharrkul Industries (P) Ltd., (2023) 14 SCC 770: 2021 SCC OnLine SC 915]” 1975] was as held followed (Cri)

#15. It was held by the Hon’ble Supreme Court in Susela Padmavathy Amma v. Bharti Airtel Ltd., 2024 SCC OnLine SC 311 that a person can be vicariously liable if he is in charge and responsible to the Company for the conduct of its business. it was observed: “18. In the case of State of Haryana v. Brij Lal Mittal (1998) 5 SCC 343, this Court observed thus: “8. Nonetheless, we find that the impugned judgment of the High Court has got to be upheld for an altogether different reason. Admittedly, the three respondents were being prosecuted as directors of the manufacturers with the aid of Section 34(1) of the Act which reads as under: 15 “34. Offences by companies.—(1) Where an offence under this Act has been 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, as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub- section shall render any such person liable to any punishment provided in this Act if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.” It is thus seen that the vicarious liability of a person for being prosecuted for an offence committed under the Act by a company arises if, at the material time, he was in charge of and was also responsible to the company for the conduct of its business. Simply because a person is a director of the company it does not necessarily mean that he fulfils both the above requirements so as to make him liable. Conversely, without being a director a person can be in charge of and responsible to the company for the conduct of its in question we, business. From the complaint however, find that except for a bald statement that the respondents were directors of the manufacturers, there is no other allegation to indicate, even prima facie, that they were in charge of the company and also responsible to the company for the conduct of its business.”

#19. It could thus be seen that this Court had held that simply because a person is a director of the company, it does not necessarily mean that he fulfils the twin requirements of Section 34(1) of the said Act so as to make him liable. It has been held that a person cannot be 16 made liable unless, at the material time, he was in charge of and was also responsible to the company for the conduct of its business. company

#20. In the case of S.M.S. Pharmaceuticals Ltd. (supra), this Court was considering the question as to whether it was sufficient to make the person liable for being a director of a the Negotiable Instruments Act, 1881. This Court considered the definition of Section 2(13) of the Companies Act, 1956. This Court observed thus: the word “director” as defined Section 141 of “8. ……. There is nothing which suggests that simply by being a director in a company, one is supposed to discharge particular functions on behalf of a company. It happens that a person may be a director in a company but he may not know anything about the day-to-day functioning of the company. As a director, he may be attending meetings of the Board of Directors of the company where usually they decide policy matters and guide the course of business of a company. It may be that a Board of Directors may appoint sub-committees consisting of one or two directors out of the Board of the company who may be made responsible for the day-to-day functions of the company. These are matters which form part of resolutions of the Board of Directors of a company. Nothing is oral. What emerges from this is that the role of a director in a company is a question of fact depending on the peculiar facts in each case. There is no universal rule that a director of a company is in charge of its everyday affairs. We have discussed about the position of a director in a company in order to illustrate the point that there is no magic as such in a particular word, be it director, manager or secretary. It all depends upon the respective roles assigned to the officers in a company. …..” 17

#21. It was held that merely because a person is a director of a company, it is not necessary that he is aware of the day-to-day functioning of the company. This Court held that there is no universal rule that a director of a company is in charge of its everyday affairs. It was, therefore, necessary, to aver as to how the director of the company was in charge of the day-to-day affairs of the company or responsible to the affairs of the company. This Court, however, clarified that the position of a managing director or a joint managing director in a company may be different. This Court further held that these persons, as the designation of their office suggests, are in charge of a company and are responsible for the conduct of the business of the company. To escape liability, they will have to prove that when the offence was committed, they had no knowledge of the offence or that they exercised all due diligence to prevent the commission of the offence.

#22. In the case of Pooja Ravinder Devidasani v. State of Maharashtra (2014) 16 SCC 1 this Court observed thus: “17. …… Every person connected with the Company will not fall into the ambit of the provision. Time and again, it has been asserted by this Court that only those persons who were in charge of and responsible for the conduct of the business of the Company at the time of the commission of an offence will be liable for criminal action. A Director, 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 for an offence under Section 141 of the NI Act. In National Small Industries Corpn. [National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330 : (2010) 1 SCC (Civ) 677 : (2010) 2 SCC (Cri) 1113] this Court observed : (SCC p. 336, paras 13-14) “13. Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a 18 complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent 1 was in charge of or was responsible to the accused Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability.

#14. A company may have a number of Directors and to make any or all the Directors as accused in a complaint merely on the basis of a statement that they are in charge of and responsible for the conduct of the business of the company without anything more is not a sufficient or adequate fulfilment of the requirements under Section 141.” (emphasis in original)