[PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd. IN THE COURT OF SHRI [ENTITY] ADDITIONAL SESSIONS JUDGE (PILOT COURT) WEST DISTRICT : TIS HAZARI COURTS : DELHI [CASE NUMBER] In the matter of : [ENTITY] Plot No.26 & 26A, ROZ-KA MEO Industrial Area, Phase-I, Sohna District : Mewat -121003, Haryana ALSO AT : B-604, Sushant Lok, Phase-1, Sikandarpur Ghosi (86), DLF QE, Gurgaon, Haryana - 121002 Revisionist (Accused No.3 before Ld Trial Court in Complaint Case) VERSUS M/S. LAMBA TIMBER WORKS PVT. LTD. Through its Proprietor / Partner At 2/4 (W.H.S.), Kirti Nagar, New Delhi-110015 Respondent (Complainant before Ld Trial Court in Complaint Case) Date of Institution : 05.01.2019 Date of reserving order : 06.05.2019 Date of pronouncement : 14.05.2019 For the Revisionist : Ms. [ENTITY], Advocate For the Respondent : Mr. [ENTITY], Advocate Page No.1 of 29 [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd. JUDGMENT
1. The present revision petition under [SECTION] [ACT] is filed against order dated 22.10.2018 passed by learned MM-03 ([ACT], as per which notice was framed in the Criminal Complaint under [SECTION] [ACT] (hereinafter referred to as [ACT]) filed by respondent / complainant M/s. Lamba Timber Works Pvt. Ltd. against all the accused i.e. :-
1. [ENTITY]
2. [ENTITY]
3. [ENTITY] (Revisionist)
4. [ENTITY]
2. Perusal of the trial court record reveals that a complaint case under [SECTION] [ACT] was filed by complainant M/s. Lamba Timber Pvt. Works Ltd. on 04.01.2017 and after examining the AR of complainant company as CW-1, the summoning order was passed on 01.03.2017 and all the aforesaid four accused persons were summoned. Finally notice under [SECTION] [ACT] was framed under [SECTION] [ACT] 1 Accused Company (Accused No.1 before Ld Trial Court) [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
against accused persons [ENTITY], [ENTITY] and [ENTITY] vide order dated 22.10.2018, which order has been challenged by way of the present revision petition.
3. The said order is reproduced as under:-
"Notice has been framed against all the accused under [SECTION] [ACT]. The notice has been read over and explained to the accused persons. The accused has pleaded not guilty and have claimed trial. Plea of defense of the accused have been recorded."
GROUNDS OF REVISION
4. The aforesaid impugned order has been challenged by way of the present revision petition which was filed on 05.01.2019 i.e. well within the limitation of 90 days as prescribed by [SECTION] of [ACT], on the following grounds:-
4.1. That the order taking cognizance ought to be a speaking order and it was incumbent upon the Magistrate to give reasons for exercising his discretionary powers and taking cognizance of the offence under [SECTION] [ACT].
4.2. That the learned MM has failed to give any reason whatsoever for passing the impugned order.
4.3. That the learned MM failed to appreciate that the complainant has no where stated in the complaint that the revisionist was handling the day to day affairs of the company [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
and was in charge of the company, which is mandatory requirement to proceed against an employee of the company under [SECTION] [ACT].
4.4. That no specific role of the revisionist has been alleged / specified by the complainant in the complaint which is a condition precedent for invoking [SECTION] [ACT] and to make the revisionist vicariously liable for the acts of the accused company.
4.5. That the revisionist is not a signatory to the cheques in question and no allegations have been made in the complaint regarding the involvement of the revisionist at the time when the cheques in question were issued or at any time prior thereto.
5. In support of the aforesaid grounds the revisionist also relied upon judgment titled [PRECEDENT]; [PRECEDENT]; [PRECEDENT]; [PRECEDENT]; [PRECEDENT]; [PRECEDENT] [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
National Small Industries Corporation Ltd. Vs. [ENTITY] and Anr. (2010) 3 SCC 330 AND [ENTITY] Vs. State (NCT of Delhi) SC 2007.
6. The observations made in the said judgments have also been reproduced / mentioned in revision petition and during course of arguments the learned counsel for the revisionist relied upon the said judgments.
7. In the reply filed to the present revision petition, the complainant / respondent had submitted that:-
7.1. The summoning order dated 01.03.2017 was never challenged by the revisionist and as such it has become final as far as taking of cognizance and summoning of the accused persons is concerned.
7.2. That the present petition has been filed merely to prolong the proceedings as even before the learned Trial Court the matter has been referred to Mediation twice at the request of accused persons, as the sole purpose of the accused persons is to prolong the proceedings.
7.3. As regards specific allegations against the revisionist, it is submitted that it has been specifically alleged in Para 2 (x) of the complaint that the revisionist alongwith other two [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
Directors (accused No.2 and 4 before learned Trial Court) were responsible for day to day running of the company and it was on their direction that the cheques in question were issued.
7.4. That it is not necessary for impleading the Director of a company in a complaint case under [SECTION] [ACT] that he should be the signatory to the cheques in question. 7.5. As regards the judgments mentioned in the revision petition itself, it is submitted that the mentioning of the said judgment as part of pleading is in contravention of cardinal rules of pleadings and during the course of arguments the counsel for respondent / complainant relied upon two judgments titled as [PRECEDENT] dated 06.04.2016 in [CASE NUMBER] & [PRECEDENT] dated 17.10.2014 in [CASE NUMBER], both of the honourable Apex Court.
8. Scope of [SECTION] of [ACT] which confers the power of revision to Session Courts, reads as under:-
"397. Calling for records to exercise powers of revision (1) The High Court or any Sessions Judge may [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
call for and examine the record of any proceeding before any inferior Criminal Court situate within its or his local jurisdiction for the purpose of satisfying itself or himself as to the correctness, legality or propriety of any finding, sentence or order, recorded or passed, and as to the regularity of any proceedings of such inferior Court, and may, when calling for such record, direct that the execution of any sentence or order be suspended, and if the accused is in confinement, that he be released on bail or on his own bond pending the examination of the record.
Explanation. All Magistrates, whether Executive or Judicial, and whether exercising original or appellate jurisdiction, shall be deemed to be inferior to the Sessions Judge for the purposes of this sub-section and of [SECTION].
(2) The powers of revision conferred by sub-section (1) shall not be exercised in relation to any interlocutory order passed in any appeal, inquiry, trial or other proceeding.
(3) If an application under this section has been made by any person either to the High Court or to the Sessions Judge, no further application by the same person shall be entertained by the other of them." (emphasis supplied) 8.2. In [PRECEDENT] Hon'ble Apex Court discussed the scope of revision in para 12 as under:-
"12. [SECTION] of the Code vests the court with the power to call for and examine the records of an inferior court for the purposes of satisfying itself as to the legality and regularity of any proceedings or order made in a case. The object of this provision is to set right a patent defect or an error of jurisdiction or law. There has to be a well-founded error and it may not be appropriate for the court to scrutinise the orders, which upon the face of it bears a token of careful consideration and appear to be in accordance with law. If one looks into the various judgments of this Court, it emerges that the revisional jurisdiction can be invoked where the decisions under challenge are grossly erroneous, there is no compliance with the provisions of law, the finding recorded is based on no evidence, material evidence is [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
ignored or judicial discretion is exercised arbitrarily or perversely. These are not exhaustive classes, but are merely indicative. Each case would have to be determined on its own merits." (emphasis supplied)
9. In light of the aforesaid legal position the question before the court is: whether the impugned order dated 22.10.2018 suffers from patent defect or an error of jurisdiction or law or whether it is so grossly erroneous that revisional jurisdiction needs to invoked by this court to correct that error?
9.1. In order to decide the aforesaid question, it would be appropriate to reproduce the allegations made by the respondent / complainant in the complaint filed before the learned Trial Court against the revisionist. The allegation specific to the revisionist are contained in Para 2 (x) on Page 4 of the complaint, which is reproduced as under:-
"That it would be pertinent to mention here that the accused No.2 to 4 are the Directors of the company and are responsible for day-to-day running of the company. Further, it was under his instructions of accused No. 2 to 4 that the cheques were issued."
9.2. Further in the pre-summoning evidence, CW-1 in his affidavit Ex. CW-1/A1 reiterated the aforesaid allegations against the accused persons including the revisionist in Para 13 of the affidavit as under:
[PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
"I say that it would be pertinent to mention here that the accused No.2 to 4 are the Directors of the company and are responsible for day-to-day running of the company. Further, it was under his instructions of accused No. 2 to 4 that the cheques were issued."
9.3. Based on the said allegations and pre-summoning evidence the learned Trial Court passed the summoning order on 01.03.2017. Admittedly, the said summoning order was not challenged by the revisionist even after the revisionist came to know about the said summoning order and appeared before the learned Trial Court. Therefore, as far as the summoning order is concerned, the said summoning order has attained finality.
9.4. Coming to the impugned order, the relevant portion of the said order has already been reproduced earlier in para 3 and from the order it seems that the point which is being addressed before this court was never raised before the learned Trial Court. It seems that the averments made in the present revision petition are for the first time being made by the revisionist before this court.
9.5. Moreover, no application seeking discharge was ever moved before the learned Trial Court after the accused [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
persons including the revisionist appeared before the learned Trial Court on 19.08.2017, till the framing of the notice more than a year later on 22.10.2018.
9.6. Further, it may be noted that even on the date of framing of the notice it was not the defence of any of the accused persons, including the revisionist, that they were not in charge of or responsible to the company for the conduct of business of the company or that the offence under [SECTION] [ACT] was committed without their knowledge. 9.7. It may be noted that the revisionist on 20.10.2018 pleaded not guilty and claimed trial when notice under [SECTION] [ACT] was framed against him and the plea of defense which he took before the learned Trial Court is as under:-
"The cheques in question were blank signed cheques given to the complainant for the purpose of security in view of the business transactions between me and the complainant company. I owe no liability toward the complainant company. I have received the legal notice from the complainant company."
9.8. It may be noted that when the said defense was taken by the revisionist and recorded by the Ld Trial Court, he was duly represented by a counsel, who had also filed his [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
vakalatnama on the same day. Hence, even in the plea of defense of the revisionist there is no mention that the revisionist is not in charge of or responsible to the company for the conduct of the business of the company, rather in the plea of defense taken by the revisionist, it is admitted by the revisionist that the cheques in question were issued to the complainant company as security in view of the business transaction between the revisionist and the complainant company. The revisionist therefore admitted in the plea of defense taken on 22.10.2018 before the learned Trial Court that there were business transactions between the revisionist and the complainant company and that the cheques in question were also handed over to the complainant company, though the same were issued for the purpose of security and same were issued in blank.
9.9. Thus, the present revision petition has been filed by revisionist after having admitted before the learned Trial Court, in reply to notice under [SECTION] [ACT], that there was direct business transaction between the revisionist and complainant company and thereby admitting the allegations made in the complaint [particularly in para 2 (x)] to the effect [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
that it was under the instructions of accused No. 2 to 4 (which includes the revisionist) that the cheques were issued. The questions whether the cheques were blank when the same were issued and that whether they were issued for the purpose of security or in discharge of legally enforceable debt, can only be decided after evidence is led by the parties during the course of trial, however, the plea of defense taken by the accused persons including the revisionist establishes that the revisionist was actively involved in the transactions with the complainant company and that it was within the knowledge of the revisionist that the cheques were issued to the complainant company by the accused company. 9.10. Now coming to the question as to whether from the allegations made in the complaint, offence under [SECTION] [ACT] is made out against the accused persons or not in view of [SECTION] [ACT]. The relevant portion of the said two sections is reproduced as under:-
"138. Dishonour of cheque for insufficiency, etc., of funds in the account. Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both: "
"[SECTION]. Offences by companies. (1) If the person committing an offence under [SECTION] is 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 person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence:
(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any Director, Manager, Secretary or other officer of the company, such Director, Manager, Secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation. For the purposes of this section
(a) "company" means any body corporate and includes a firm or other association of individuals; and
(b) "Director", in relation to a firm, means a partner in the firm."
(emphasis supplied) 9.11. In the present case the cheque in question has been issued by the accused company, which fact is admitted by accused No.2 to 3 (including the revisionist) in the plea of defense, though he claimed that the said cheques were blank signed when it was handed over to the complainant company. Therefore, as far as the accused company is concerned there [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
is no doubt that prima facie an offence under [SECTION] [ACT] is made out against the accused company.
9.12. However, as far as involvement of the other three accused persons is concerned, they are implicated in the present case by way of [SECTION] [ACT], as the said Section provides that if the person committing an offence under [SECTION] [ACT] is a company, then in that case 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 shall be deemed to be guilty for the offense under [SECTION] [ACT]. Therefore, the said section creates constructive liability on the persons responsible for the business of the company.
9.13. In the judgment titled [PRECEDENT], it was observed by Full Bench of the Honourable Apex Court that every person connected with the company shall not fall within the ambit of the provisions of [SECTION] [ACT], rather it is only those persons, who were in charge of and responsible for the conduct of business of company at the time of commission of the offence, who will be liable for criminal action. The [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
Honorable Apex Court further observed that even Director of 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 and the liability arises only from being in charge of and responsible for the conduct of business of the company at the relevant time when the offence was committed and not on the basis of designation or the office held by a person in a company. The honourable Apex Court also held that under [SECTION] [ACT] that even a person who is not holding any office or designation in a company may be liable for the offence under [SECTION] [ACT], 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. In one line, the Honorable Apex Court summed up the law on [SECTION] [ACT] by observing that the liability under the said Section depends on the role one plays in the affairs of a company and not on designation or status. The relevant para of the said judgment is reproduced as under:-
10. What is required is that the persons who are sought to be made criminally liable under [SECTION] should be, at the time the offence was committed, in charge of and responsible to the company for the conduct of the business of the company. Every person [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
connected with the 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 business of the company at the time of 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 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 as the person sought to be made liable is 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."
9.14. Honble Apex court in the said judgment concluded that merely being described as a Director in a company is not sufficient to satisfy the requirement of [SECTION]. A clear case should be spelled out in the complaint against the person sought to be made liable. It further held that 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. The court finally summed up its conclusions in para 19 of the judgment reproduced as under:-
[PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
19. In view of the above discussion, our answers to the questions posed in the reference are as under:
(a) It is necessary to specifically aver in a complaint under [SECTION] that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of [SECTION] and has to be made in a complaint. Without this averment being made in a complaint, the requirements of [SECTION] cannot be said to be satisfied.
(b) The answer to the question posed in [SECTION] has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under [SECTION] of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of [SECTION] is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases.
(c) The answer to Question (c) has to be in the affirmative. The question notes that the managing director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under [SECTION] of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under [SECTION]. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under [SECTION]. The said judgment was relied upon by the Hon'ble Apex Court in judgment titled [ENTITY] v. State (NCT of Delhi), (2007) 3 SCC 693 : (2007) 2 SCC (Cri) 135 5 in which case the averment made by the complainant were as under:
"13. The purported averments which have been made in the complaint petitions so as to make the appellant vicariously liable for 5 Judgment relied upon by the revisionist in the petition itself.
[PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
the offence committed by the Company read as under:
"That Accused 1 is a public limited company incorporated and registered under the [ACT], and Accused 2 to 8 are/were its Directors at the relevant time and the said Company is managed by the Board of Directors and they are responsible for and in charge of the conduct and business of the Company, Accused 1. However, cheques referred to in the complaint have been signed by Accused 3 and 8 i.e. Shri [ENTITY] and Shri [ENTITY] for and on behalf of Accused 1 Company."
Hon'ble Apex court held the said averments in the complaint to be insufficient to attract [SECTION] of [ACT] and observed as under:-
"14. Apart from the Company and the appellant, as noticed hereinbefore, the Managing Director and all other Directors were also made accused. The appellant did not issue any cheque. He, as noticed hereinbefore, had resigned from the directorship of the Company. It may be true that as to exactly on what date the said resignation was accepted by the Company is not known, but, even otherwise, there is no averment in the complaint petitions as to how and in what manner the appellant was responsible for the conduct of the business of the Company or otherwise responsible to it in regard to its functioning. He had not issued any cheque. How he is responsible for dishonour of the cheque has not been stated. The allegations made in para 3, thus, in our opinion do not satisfy the requirements of [SECTION] of the Act.
18. For the reasons aforementioned, we have no other option but to hold that the allegations made in the complaint petitions even if are taken to be correct in their entirety do not disclose any offence as against the appellant herein. The proceedings against him, thus, should have been quashed by the High Court. The impugned judgment, therefore, cannot be sustained which is set aside accordingly. The appeal is allowed." (emphasis supplied) 9.16. In the present case admittedly the revisionist is Director in the accused company and there is no plea that he had resigned from the company before the cheques in question were issued or thereafter. Moreover, when the allegations [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
made in the present case are compared with the allegations made in the aforesaid case6, it is found that in the present case it is categorically stated by the complainant that the cheques in question were issued by the accused company on the direction of accused no.2 to 4 (including the revisionist), which fact has also been admitted by the revisionist in the plea of defence taken by him in answer to the notice under [SECTION] [ACT]
9.17. It may be noted that practically it is very difficult for a person (complainant) who receives the cheque from a company to find out as to who is actually managing the affairs of the company. For a complainant who receives a cheque from the company, the person who transacted with the complainant on behalf of the company, who participated in the transaction and handed over the cheque is the person in charge of and responsible to the company for the conduct of the business of the company. Such complainant can tell as to who transacted with him on behalf of the company and if the said person is also a Director in the company then that would suffice for summoning of the said Director by invoking [SECTION] of [ACT].
6 [ENTITY] (supra) [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
9.18. In judgment titled National Small Industries Corpn.
Ltd. v. [ENTITY], (2010) 3 SCC 330 7, Hon'ble Apex Court culled out the principles relating to [SECTION] [ACT] as under:-
39. From the above discussion, the following principles emerge:
(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.
(ii) [SECTION] does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.
(iii) Vicarious liability can be inferred against a company registered or incorporated under the [ACT] only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.
(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred.
(v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.
(vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint.
(vii) The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases.
Apex Court applied the said principles to the facts of the case 7 Relied upon by the revisionist.
[PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
as under:-
40. Apart from the legal position with regard to compliance with [SECTION] of the Act, in the appeals of National Small Industries Corpn., Respondent 1 [ENTITY] was no more a Director of the Company when the cheques alleged in the complaint were signed and the same is evidenced from the sixth annual report for the year 1996-1997 of the accused Company. The said report is of dated 30-8-1997 and the same was submitted with the Registrar of Companies on 5-12-1997 and assigned as Document 42 dated 9-3-
1998 by the Department. Those documents have been placed before this Court by Respondent 1 as an additional document.
41. In view of these particulars and in addition to the interpretation relating to [SECTION] which we arrived at, no liability could be fastened on Respondent 1. Further, it was pointed out that though he was an authorised signatory in the earlier transactions, after settlement and in respect of the present cause of action, admittedly fresh cheques were not signed by the first respondent. In the same way, in the appeal of DCM Financial Services, the respondent therein, namely, [ENTITY] also filed additional documents to show that on the relevant date, namely, the date of issuance of cheque he had no connection with the affairs of the Company.
42. In the light of the above discussion and legal principles, we are in agreement with the conclusion arrived at by the High Court and in the absence of specific averment as to the role of the respondents and particularly in view of the acceptable materials that at the relevant time they were in no way connected with the affairs of the Companies, we reject all the contentions raised by the learned counsel for the appellants." (emphasis supplied) 9.19. In the present case admittedly the revisionist is Director in the accused company and there is no plea that he had resigned from the company before the cheques in question were issued or thereafter. No document has been placed on record by the revisionist to show that the revisionist had left the company before the cheques were issued or to show that he has absolutely no connection with the accused company. [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
Thus, the principles laid down in the said judgment 8 do not support the case of the revisionist in this case. 9.20. The revisionist also relied upon judgment titled [PRECEDENT], wherein it was observed that for maintaining the prosecution under [SECTION] of the Act, arraigning of a company as an accused is imperative. It was held in para 53 as under:-
53. It is to be borne in mind that [SECTION] of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in [SECTION] of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant.
The said judgment is of no assistance to the revisionist as in the present case the company has been impleaded as accused No.1 in the complaint case and the company has also been summoned by the Ld Trial Court.
9.21. Judgment titled [PRECEDENT], was cited by Ld Counsel for the revisionist before notice of the revision petition was issued, though the said judgment was no relied upon during the course of arguments on the revision petition 8 National Small Industries Corpn. Ltd. v. [ENTITY], (2010) 3 SCC 330 [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
after the notice was served on the respondent
In the said judgment, Hon'ble Delhi High Court culled out the guiding principles with reference to [SECTION] of the [ACT] in para 14 as under:-
14. The guiding principles with reference to [SECTION] of the [ACT], which are now well settled by judicial pronouncements, some of which have been noted above, may be summarised thus:
(i) It is only those persons who are in charge of or responsible for the conduct of the business of the company at the time of commission of the offence under [SECTION] of the [ACT] who can be subjected to criminal action with reference to [SECTION];
(ii). If the person committing an offence under [SECTION] of the [ACT] is a company, the person who was signatory to the cheque which is dishonoured is clearly responsible for the incriminating act and would be liable to be proceeded against under [SECTION] (2);
(iii). By virtue of the office they hold, the persons working in the capacity of the Managing Director or Joint Managing Director are deemed to be in charge of, and responsible for the conduct of the business of, the company and, therefore, can be proceeded against in terms of [SECTION];
(iv). Merely because a person is a director of the company is not sufficient to make him liable under [SECTION], there being no deeming that by holding such position he is in charge of, or responsible for the conduct of the business of, the company within the meaning of [SECTION];
(v). It is necessary for the complainant to specifically aver in the complaint that at the time the offence was committed, the person sought to be prosecuted was in charge of, or responsible for the conduct of the business of, the company in terms of [SECTION], there being no need for further particulars to be given in the complaint about his role, this being subject to proof at the trial;
(vi). The person who has been summoned as an accused for offence under [SECTION] of the [ACT] on the basis of averment that he was director of the company accused, he being in charge of or responsible for the conduct of its business cannot get the complaint quashed by the High Court by filing a [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
petition under [SECTION] of the [ACT] merely on the ground that no particulars as to his role have been set out in the complaint; and
(vii). The person who has been summoned as an accused for offence under [SECTION] of the [ACT] by invoking the provision contained in [SECTION] may persuade the High Court to quash the process in exercise of its inherent power under [SECTION] of the [ACT] by furnishing "some sterling incontrovertible material or acceptable circumstances" substantiating his contention that he was not in charge of nor responsible for the conduct of the business of the company "at the time the offence was committed" and thereby showing a case that making him stand the trial would be an abuse of the process of court, but not otherwise. (emphasis supplied) 9.22. The said principles were thereafter applied to the facts of the case and after reproducing the relevant allegations, Honorable Delhi High Court observed as under:-
15. A perusal of the eleven complaints from which the present proceedings arise reveals that they are founded on identical averments (some of the accused who are not before this court being not common), the exception being with regard to the particulars of the cheques or the background facts against which they had been issued or the dates on which they were presented or dishonored leading to demand notices in their respect being issued, there being no payment made pursuant to such demand notices. The averments crucial to pass the muster of [SECTION] of the [ACT], however, are identically worded in the said eleven cases. For illustration, the crucial averments appearing in one of such complaints ([CASE NUMBER]), it being the first in chronology, may be extracted as under:
"3. That the accused No. 3 Mr. [ENTITY], Accused No. 4 [ENTITY], Accused No. 5 [ENTITY] and the Accused No. 6 Mr. [ENTITY] are the Directors and Accused No. 7 Mr. [ENTITY] is the Authorised Signatory of the Accused No. 1 Company, namely M/s. Bush Foods Pvt. Ltd. and are actively engaged and responsible for and in-charge of dayto-day management, business activities and affairs of the Accused No. 1 firm. xxx
10. That despite the receipt of the above said Legal Notice [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
dated 05.02.2014, the Accused Persons have failed/refused/neglected to make the payment of the above said Cheques amount to the Complainant and have therefore made themselves liable to be prosecuted under the provisions of [SECTION], [SECTION] and [SECTION] of the [ACT]. It is further submitted that at the time of issuance of the said cheques, the accused persons have assured, promised and represented to the Complainant that the said cheques would be honored on presentation. However, the said Cheques, which are the subject matter of the present complaint, were dishonored on presentment. The accused persons have no intention to make the said payment to the Complainant. It is submitted that the Accused Persons have been responsible for all the business dealings for and on behalf of their said Accused no. 1 firm and also responsible for the circumstances that have lead to the dishonor of the aid cheques issued to the complainant." (emphasis supplied)
16. It is clear from the bare perusal of the above quoted averments that they are deficient to the effect that there is not even a whisper of allegation that the respondents are persons who were in charge of or responsible to the company accused for the conduct of its business "at the time the offence was committed".
17. The respondents are not stated to be signatories to the cheques in question. They cannot be roped in merely because they have been directors of the company accused. The general averments that they were responsible for all the business dealings and for the circumstances leading to the dishonour of the cheques or that they had given any assurance as to the cheques do not suffice. (emphasis supplied) It may be noted that the Hon'ble High Court in para 16 of the judgment laid emphasis on the point that in the complaint the complainant had not averred that the respondents were in charge of or responsible to the company accused for the conduct of its business at the time the offence was committed. It may be noted that even in the present case in [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
para 2(x)9 it is not categorically stated that accused no.2 to 4 were responsible for day-to-day running of the company at the time the offence was committed.
However, even without the said specific averment, in the opinion of the court [SECTION] [ACT] can be invoked against the revisionist in the present case because the complainant categorically alleged in the same paragraph that the cheques were issued on the instructions of accused No. 2 to 4, from which an inference can be drawn that accused No.2 to 4 were responsible for day-to-day running of the company at the time the offence was committed. Para 2(x) of the complainant has to read as a whole and when the said paragraph so read it is found that there are specific allegations against accused no 2 to 4 (including the revisionist) that they were responsible for day-to-day running of the company at the time the offence was committed.
9.23. In view of the aforesaid judgments and further in view of the specific allegations made in the complaint that accused No.2 to 4 are the Directors of the company and that they are also responsible to day to day running of the company and it 9 "That it would be pertinent to mention here that the accused No.2 to 4 are the Directors of the company and are responsible for day-to-day running of the company. Further, it was under his instructions of accused No. 2 to 4 that the cheques were issued." [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
was under their instructions that the cheques were issued, in the opinion of the court, there was sufficient material on record for summoning of the accused persons and also for framing of notice under [SECTION] [ACT] against them. 9.24. It may further be noted that the present revision petition is also liable to be dismissed as the summoning order dated 01.03.2017 was not challenged before this court or before the Hon'ble High Court and once the summoning order has attained finality, there is no provision in a complaint case under [SECTION] of [ACT] to discharge the accused person who has been summoned in a summons complaint case.
10. Final Order 10.1. For the aforesaid reasons the revision petition is dismissed.
10.2. It may however be pointed out that learned Trial Court while passing impugned order specifically mentioned that notice has been framed against all the accused under [SECTION] [ACT], however, perusal of the record reveals that the notice was framed only against accused No. 2 to 4 including the revisionist and not against accused no.1 company [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
through its authorized representative. It seems that the said omission was not brought to the knowledge of the learned Trial Court on 22.10.2018 and the same also missed the attention of the learned Magistrate. I hope that the Ld Magistrate would take note of the said omission upon receiving copy of this order and take necessary steps to rectify the same.
10.3. The court would also like to draw the attention of the Ld Trial Court to judgment titled [PRECEDENT] Dated 6.5.2013 Citation: [CASE NUMBER], in which Hon'ble Delhi High Court after considering judgments in S.M.S. Pharmaceuticals Ltd. (supra), [PRECEDENT] (supra), [PRECEDENT] and [PRECEDENT], issued instructions/directions to the Ld Magistrates in para 10 as under:-
"10. With a view to ensure that the Metropolitan Magistrates dealing with the complaint cases filed under [SECTION]/[SECTION] of the [ACT] have a clear and complete picture of the persons arrayed by the complainant so as to hold them vicariously liable for the commission of the offence by the accused company, I am inclined to direct that the Magistrates must seek copies of Form-32 from the complainant to prima facie satisfy the Court as to who were the directors of the accused company at the [PRECEDENT] [ENTITY] [ENTITY] Vs. M/s. Lamba Timber Works Ltd.
time of commission of the alleged offence and on the date of filing of the complaint case. In addition to the above, the Magistrates must also seek information as given in the following table which is to be annexed by the Complainant on a separate sheet accompanying the complaint:-
a. Name of the accused Company;
b. Particulars of the dishonoured cheque/cheques;
Person/Company in whose favour the cheque/cheques were issued Drawer of the cheque/cheques Date of issuance of cheque/cheques Name of the drawer bank, its location Name of the drawee bank, its location Cheque No./Nos.
Signatory of the cheque/cheques c. Reasons due to which the cheque/cheques were dishonoured;
d. Name and Designation of the persons sought to be vicariously liable for the commission of the offence by the accused Company and their exact role as to how and in what manner they were responsible for the commission of the alleged offence;
e. Particulars of the legal notice and status of its service; f. Particulars of reply to the legal notice, if any.
11. The Registry is directed to send a copy of this order to all the Metropolitan Magistrates posted in various district courts of Delhi for necessary compliance. Registry is further directed to send a copy of this order to all the Bar Associations of various district courts of Delhi, so that they can apprise the members of the Bar about the aforesaid directions." (emphasis supplied)
11. File be consigned to Record Room after necessary compliance.
[ENTITY] Digitally signed by [ENTITY] ([ENTITY]) Addl. Sessions Judge (Pilot Court) West District, THC Delhi/14.05.2019