The High Court
Case Details
THE HIGH COURT OF ORISSA AT CUTTACK CRLMC No. 3478 of 2016 (In the matter of an application under Section 482 of the Criminal Procedure Code, 1973) Soumen Chaudhry and another ……. Petitioners Sriniwas Gupta and others -Versus- ……. Opposite Parties For the Petitioners : Mr. A.C. Pradhan, Senior Advocate For the Opp. Parties : Mr. Gokul Parida, Advocate (For O.P. No.1) CORAM: THE HONOURABLE SHRI JUSTICE SIBO SANKAR MISHRA Date of Hearing: 13.03.2025 Date of Judgment: 10.04.2025 S.S. Mishra, J. In the present petition, the petitioners have challenged the order of cognizance dated 03.11.2015 passed in I.C.C No.513 of 2014 by the learned S.D.J.M. (S), Cuttack on the alleged commission of the offence punishable under Section 138 of the N.I. Act initiated by opposite party no.1 on the allegation of having dishonored of the cheque on presentation issued by the petitioners. 2.
Legal Reasoning
“The case record is put up today for order. Perused the complaint petition and initial statement of complt in shape of affidavit along with all original documents filed by the complt from which it reveals that there is a prima facie material against accused u/s. 138 of NI Act is made out. Hence cognizance of offence u/s. 138 of NI Act is taken. As there is sufficient material to proceed against the accused persons No. 7 to No. 12 only. So Issue process against the accused person No. 7 to No. 12. Complt is directed to file requisite within three days. Put upon 17.12.15 for appearance of accused. As there is no sufficient material to proceed against the accused person No. 1 to No. 6. So No process can be issued against the accused No. 1 to No. 6.” By the impugned order the learned SDJM has taken cognizance of the offence under Section 138 of the N.I. Act only against accused persons no.7 to 12, while refraining from taking Page 4 of 16 cognizance against accused persons no. 1 to 6. The rationale behind this distinction appears to be that accused nos.1 to 6 include the institution, IIPM, and individuals associated with it, who had merely taken the premises on lease and subsequently defaulted on rent payment. However, accused persons no.7 to 12 comprise a company and its associated individuals who were directly involved in the issuance of the dishonoured cheque. It is contended in the complaint that on the basis of settlement, the cheque was issued. Consequently, the learned SDJM upon finding sufficient material only against accused nos.7 to 12 proceeded to take cognizance against them, while declining to do so against accused nos.1 to 6 for lack of requisite material. The present petition has been filed by accused No.8 and 10. 6. It is pertinent to mention here that the present petitioners who have come before this Court assailing the order of cognizance are majorly related to the company which has issued the cheque in subject. The Petitioner no.1 who has been impleaded as accused no.10 in the instant case happens to be the Director of the company who has issued the cheque and petitioner no.2 who has been arrayed as accused no.8 in this instant case happens to be the authorized signatory for the company, who has signed the cheque in subject. Page 5 of 16 7. Mr. Pradhan, the learned Senior Counsel for the petitioners submits that, the petitioners have no direct liability to the complainant. There is no documentary evidence to establish that the petitioners took over the responsibility for paying the due rent by the International Institute of Planning and Management Private Limited (IIPM). The petitioners, according to the Senior Counsel, have not executed any agreement or signed any document binding them personally to discharge the debts or liabilities incurred by the principal Company. The petitioners, as Directors and authorized signatories of a separate Company, are being unjustly roped into the proceedings without any concrete evidence or specific averments that would establish their personal involvement to recover the liability. The learned Senior Counsel, therefore, prays that the petitioners be discharged from any liability, and the present criminal proceedings under Section 138 of the Negotiable Instruments Act (N.I. Act) against them be quashed. 8. Learned Senior Counsel, Mr. Pradhan to substantiate his claim relied upon the judgment of the Hon’ble Supreme Court in Page 6 of 16 Pooja Ravinder Devidasani v. State of Maharashtra,1 relevant part of which is reproduced as under: “17. There is no dispute that the appellant, who was wife of the Managing Director, was appointed as a Director of the Company—M/s Elite International (P) Ltd. on 1-7-2004 and had also executed a letter of guarantee on 19-1-2005. The cheques in question were issued during April 2008 to September 2008. So far as the dishonour of cheques is concerned, admittedly the cheques were not signed by the appellant. There is also no dispute that the appellant was not the Managing Director but only a non-executive Director of the Company. Non-executive Director is no doubt a custodian of the governance of the company but is not involved in the day-to-day affairs of the running of its business and only monitors the executive activity. To fasten vicarious liability under Section 141 of the Act on a person, at the material time that person shall have been at the helm of affairs of the company, one who actively looks after the day-to-day activities of the company and is particularly responsible for the conduct of its business. Simply because a person is a Director of a company, does not make him liable under the NI Act. 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 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 complaint that the Director (arrayed as an accused) is in charge of and responsible to the the company 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 the business of the conduct of for 1 (2014) 16 SCC 1 Page 7 of 16 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.”
Arguments
Heard Mr. A.C. Pradhan, learned Senior Counsel for the petitioners and Mr. Gokul Parida, learned Counsel for the opposite party no.1. Page 1 of 16 3. The opposite party no.1 filed four different complaint cases impleading as many as 12 accused persons in each of the complaint. Petitioner no.1 has been impleaded as accused no.10, whereas the petitioner no.2 has been arrayed as accused no.8 in all the complaint cases. 4. The facts of the present case are that the petitioners claiming themselves as the Founder and Director of the International Institute of Planning and Management Private Limited, having its Regd. Office at 48, Level-11, Community Centre, Naraina Vihar, Industrial Area, Phase-1, New Delhi-28 made an agreement on 13.03.2009 with the complainant and their co-sharer for monthly rent/tenancy basis to use the premises of the complainant for academic/educational institute and/or corporate office of IIPM or any other business directly or indirectly related to the business of the accused persons. The aforesaid agreement was executed by the accused no.4, who is the Director and authorized signatory of the IIPM. It is pertinent to the mention here that in latter part of 2011, the accused persons have defaulted in payment of the rent as per the agreement dated 13.03.2009 and after due discussions with the accused persons, the accused nos.7 and 8 had issued the cheque bearing no. 123249 dated 20.02.2014 amounting to Rs.14,95,555/- (Rupees Fourteen Lakhs Ninety Five Thousand Page 2 of 16 Five Hundred and Fifty Five) drawn on IDBI Bank Limited, Prakash House, 1-Mahipalpur, New Delhi-37 in favour of the complainant for part payment of the debt/outstanding rent of IIPM. The accused nos.1, 2 and 9 are the Companies and other accused persons are the Directors and accused no.12 is the Secretary of accused no.9-company and are in-charge and responsible for the conduct of the business of the company at the relevant time. They have actively participated in the day to day business of the company. Thereafter, the complainant presented the cheque in its account maintained in Axis Bank, Cuttack Branch for clearance, but the cheque was returned unpaid/dishonoured on account of reasons “funds insufficient” on 22.02.2014, which was communicated to the complainant by his banker on 26.02.2014. The complainant after receipt of the intimation from his Banker about dishonour of the cheque, issued a lawyer notice to the accused persons in their correct address on 10.03.2014 regarding dishonoured of cheque bearing no.123249 of Rs.14,95,555/- (Rupees Fourteen Lakhs Ninety Five Thousand Five Hundred and Fifty Five) requesting them to make payment within a period of 15 days. Though the lawyer notice was issued to the accused persons in their correct addresses but the accused persons have failed to make payment of the aforesaid cheque amount. The said cheque was Page 3 of 16 issued by the accused persons for discharge of their legally enforceable debt and liability arising out of tenancy rent/commercial transaction with the complainant. Therefore, the complainant instituted the criminal complaint against the accused persons under Section 138 of N.I. Act. 5. The statutory notice has been issued under Section 138 (b) of N.I. Act by opposite party no.1-complainant admitted to have been not reciprocated by the accused persons. Therefore, on different dates the opposite party no.1 has filed the complaint cases. The trial court, vide order dated 03.11.2015 has taken the cognizance of the offence U/s 138 of the NI Act and issued process, the impunged order reads thus:-