Criminal Misc. No. M- 5054 of 2010 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Criminal Misc. No. M- 5054 of 2010 Date of decision:- 10.5.2011 [ENTITY] and another Petitioners Versus M/s [ENTITY] through its sole Prop. Sandeep Sood Respondent
CORAM: HON'BLE MS. JUSTICE [ENTITY] Present:- Mr. [ENTITY], Advocate for the petitioners.
Mr. [ENTITY], Advocate for the respondent.
[ENTITY] J.
This petition under Section 482 Cr.P.C. is for quashing of Criminal Complaint No.54/2 dated 10.4.2001 under [SECTION] of [ACT] (Annexure P-1) and summoning order dated 10.7.2003 passed by the Judicial Magistrate 1st Class, Ludhiana and all subsequent proceedings arising therefrom.
The case of the petitioners is that respondent M/s [ENTITY] had supplied the knitted fabrics to M/s Magnum spinners, a partnership firm vide Bill No.53 dated 23.1.2001 worth Rs.2,66,840/- and vide Bill No.56 dated 28.1.2001 worth Rs.1,73,160/- total amounting to Rs.4,40,000/-. In order to discharge this liability a cheque No.000306 dated 09.2.2001 drawn on Central Bank of India, Brown road, Ludhiana from the account of M/s Magnum Spinners was issued by Mr. [ENTITY], one of the partner of the said firm. The said cheque was presented with the bankers Punjab and Sind Bank, Model Town, Extension, Ludhiana. This cheque was received back with the remarks "Stopped Payment". A legal notice dated 22.2.2001 was served on M/s Magnum Spinners, [ENTITY], [ENTITY], [ENTITY] and [ENTITY]. In the above background, the criminal complaint under [SECTION] of [ACT] was filed by the respondent M/s [ENTITY].
Mr. [ENTITY], Advocate for the petitioners has argued that in the complaint (Annexure P-1) it was not stated that the petitioners were partners in the partnership firm. He has further submitted that no legal notice was served upon the petitioners nor the petitioners are signatories to the cheque. The petitioners cannot be made liable under [SECTION] of [ACT]. The summoning order issued by the Judicial Magistrate has been passed in an atbitrary manner. Reliance has been placed on the judgment of the Supreme Court in [PRECEDENT] and [PRECEDENT] to contend that the petitioners were not partners of the company nor they were the signatories to the cheque. They are not involved in day to day functioning of the company.
Counsel for the respondent Mr. [ENTITY], Advocate has vehemently argued that in the complaint (Annexure P-1) the role of petitioners has been specifically attributed. A specific role has been attributed to the petitioners, who were conducting the affairs of the company. They had approached the complainant at his house in the month of January 2001 and asked him to supply knitted fabrics of specific quality to the other concern M/s Magnum Spinners in which the wives of the petitioners namely [ENTITY] and [ENTITY] were partners. They promised that they would give the payment by cheque. As per the arrangement Magnum Spinners told to the complainant that all the accounts were kept by [ENTITY] and [ENTITY] whereas [ENTITY] was performing duty in the factory premises of M/s Magnum Spinners. [ENTITY] and [ENTITY] were present when the deal was struck. They assured the complainant that after the supply the payment would be made through cheque. When the cheque amounting to Rs.4,40,000/- was given duly signed by [ENTITY], the complainant was re-assured by accused No.3 and 4 [ENTITY] and [ENTITY] that the cheque will be honoured by the banker as they had arranged sufficient funds. Vide order dated 10.7.2003 the petitioners had been summoned to face the trial on the basis of the evidence given by complainant and allegations specifically levelled in the complaint that the business dealings have been initiated by the petitioners on behalf of M/s Magnum Spinners. The counsel relies on the judgment of the Supreme Court in [PRECEDENT] contend that under [SECTION] of [ACT] every person who at the time of the offence was incharge and was responsible for the conduct of business of the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against the punishment accordingly.
I have heard learned counsel for the parties and have gone through the case file carefully. In the present case specific allegations have been made against the petitioners in the complaint that they were conducting the affairs of the company by taking orders from the complainant company for supply of yarn.
It is not disputed that the petitioners are not the partners in the firm M/s Magnum Spinners. The next question would be whether they are incharge and responsible for the conduct of the business to make them liable for offence under [SECTION] and [SECTION] of [ACT]. In the complaint specific allegations against them that in January 2001 they had approached the petitioner Company and got orders for sale of yarn from the petitioners. The complainant had all transactions with the company M/s [ENTITY] through the present petitioners. In the complaint, it has been specifically mentioned that when the cheque of Rs.4,40,000/- was given, an objection was raised by the complainant that why the petitioners have not signed the cheque. The petitioners re-assured that the payment will be made on presentation of the cheque. [SECTION] of the [ACT] reads as under:-
"[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 the 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: [Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.] (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."
From [SECTION] of [ACT] one thing is clear that there are general words that every person connected with the Company, who at the time of offence was committed, was incharge of and was responsible to the company shall be deemed to be guilty of the offence. It is only those persons, who were incharge and responsible for conduct of business of the company at the time of commission of offence would be liable for criminal action. The Supreme Court in [PRECEDENT] (supra) has held that a person not holding any office or designation in a company may be liable if he is responsible for the conduct of the company at the relevant time. Liability depends upon the role one plays in the affairs of the company and not on the designation or status. Being a Director or Manager or Secretary was enough to caste criminal liability, the Section would have said so. Therefore, only persons who can be said to be involved in the commission of crime at the relevant time have been subject to the action. The Supreme Court has concluded that the liability arises on account of conduct, act or omission on the part of a person and not merely holding an office or position in the company. The complainant must discloses the necessary facts which make a person liable. The Supreme Court in [PRECEDENT] has held that 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 a 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 business. The Supreme Court in [PRECEDENT] and [PRECEDENT] And another [PRECEDENT] and [PRECEDENT] consistently held that when there were bald allegations in the complaint that the accused was a partner and was responsible for the conduct of business of the firm, it was held no offence was committed by the accused and the complaint was quashed.
In the present case there are clear allegations in the complaint that the petitioners had approached the complainant for taking orders of yawn for sale in January 2001 and get orders for sale of yarn. The complainant had all transactions with the company M/s [ENTITY] through the present petitioners. In the complaint, it has been specifically mentioned that when the cheque of Rs.4,40,000/- was given, an objection was raised by the complainant that why the petitioners have not signed the cheque. The petitioners re-assured that the payment will be made on presentation of the cheque. They had presented the cheque of Rs.4,40,000/- to the complainant which was duly signed by [ENTITY]. The allegations in the complaint are very clear and as per the Supreme Court judgments, the petitioners are vicariously liable for the offence under [SECTION] and [SECTION] of the [ACT].
The criminal miscellaneous petition is dismissed.
10.5.2011 ( [ENTITY] ) [ENTITY] JUDGE