IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 26.06.2009 CORAM: THE HONOURABLE MRS.JUSTICE ARUNA JAGADEESAN Crl.OP.No.17737/2006 Crl.MP.No.1 & 2/2006 M.O.Srinivasan Petitioner Vs M/s.Jindal Pipes Limited by its Liasion Officer S.Manickam, Chennai-1 Respondent Prayer:- This Criminal Original Petition is filed to call for the records in CC.No.5370/1998 on the file of the learned VII Metropolitan Magistrate, George Town, Chennai and quash the same. For Petitioner : Mr.B.Natarajan For Respondents : Mr.C.P.R.Kamaraj ORDER This Criminal Original Petition is filed to quash the proceedings in CC.No.5370/1998 on the file of the learned VII Metropolitan Magistrate, George Town, Chennai. 2. The Petitioner is arrayed as the 3rd accused in the complaint. It appears that the Respondent had filed the complaint in CC.No.5370/1998 before the learned VII Metropolitan Magistrate under Section 138 of the Negotiable Instruments Act, alleging that three cheques dated 31.12.1997 were dishonoured. The Metropolitan Magistrate, after taking cognizance of the complaint, dismissed the complaint under Section 256(1) of the Code of Criminal Procedure and acquitted the accused, as the complainant was not participating in the proceedings and displayed lack of interest in pursuing the complaint. It appears that the Respondent had preferred an appeal before this Court in Crl.A.No.332/2001 and this court by order dated 13.3.2006 allowed the said criminal appeal and remanded the matter back to the VII Metropolitan Magistrate for fresh disposal. 3. In the complaint, the 1st accused is the Company and the accused 2 and 4 are said to be the Directors of the said Company. 4. The learned counsel for the Petitioner has submitted that in cases where a person committing an offence is a Company, only such person, who was in charge and responsible to the Company for the conduct of the business of the Company at the time of committing the offence could be proceeded with and the Hon'ble Supreme Court and https://hcservices.ecourts.gov.in/hcservices/ various High Courts in several cases held that there must be specific averment in the complaint to the above said effect in respect of each of the accused. He would further submit that as regards this petitioner, who is arrayed as one of the accused and the Director of the Company, there is no specific averment in respect of the role played by him in order to fasten vicarious liability on the part of the Petitioner for the offence committed by the Company. 5. On a perusal of the complaint, it is averred that the Petitioner, who is arrayed as A3 and the other accused 2 and 4 are the Directors of the 1st accused Company, are taking active part in the business of the Company. Again in the body of the complaint, it is stated that the accused 2 and 4 are taking active part in the business of the Company. In the complaint, it is stated that the Company issued the cheques and the Company was represented by its Director one V.S.Narayanan, S/o. T.S.Varadhachari. Admittedly, the Petitioner is not the drawer of the Cheque. There is no averment in the complaint as to how the Petitioner has become liable as a Director of the Company and what has he played in the conduct of the business of the Company. 6. The offender in Section 138 of the Negotiable Instruments Act is the drawer of the cheque. It is because of Section 141 of the Act that penal liability under Section 138 of the Act is caused on other persons committed by the Company. Three categories of persons can be discerned from the said provision who are brought within the purview of the penal liability through the legal fiction envisaged in the Section viz. (1) The Company the principal offender, which committed the offence, (2) every one who was in-charge of and was responsible for the business of the Company and (3) any other person who is a Director or a manager or a Secretary or officer of the Company, with whose connivance or due to whose neglect the Company has committed the offence. There must be specific accusation against each of the person arrayed as accused that such person was in-charge of and responsible for the conduct of the business of the Company at the relevant time when the offence was committed by the Company. Mere mention in the complaint that a particular person was a Director is not sufficient to bring him under the mischief of Section 138 of the Negotiable Instruments Act. 7. As per Section 141(2) of the Negotiable Instruments Act, there must be positive allegations in the complaint that the Petitioner was in-charge or responsible for the conduct of the business of the Company, since he is not the drawer of the cheque. It is not necessary to incorporate the words of Section 141(1) in the complaint, but the substance of the allegation read as a whole should fulfill its requirements. The vicarious liability of the Petitioner to be prosecuted for commission of the offence by the Company would arise only if at the relevant point of time he was in charge and responsible for the conduct of the business of the Company. In the complaint, there is no averment required to hold that the Petitioner was vicariously liable. https://hcservices.ecourts.gov.in/hcservices/ 8. The Hon'ble Supreme Court in the case of Savitha Ramamurthy Vs. R.V.S. Channavasa (2006-Cri.LJ-4602 (SC), has held that it is not necessary for the complainant to specifically reproduce the wording of the section but what is required is a clear statement of facts, so as to enable the court to arrive at a prima facie opinion that the accused are vicariously liable. By reason of the Section 141 of the Negotiable Instruments Act, a person although is not personally liable for commission of such an offence would be vicariously made liable thereof and before a person can be made vicariously liable, strict compliance with the statutory requirements would be insisted. It makes it clear that the complainant is bound to make statement on oath as to how the offence has been committed by the Petitioner and how the accused persons are responsible thereof. It becomes necessary to have averments in the complaint that the Petitioner was in-charge and was also responsible to the Company for the conduct of the business of the Company. Merely stating that he took active part in the business of the Company is not sufficient to make him vicariously liable. 9. As stated by the Hon'ble Supreme Court in the case of S.M.S.Pharmaceuticals Limited Vs. Neeta Bhalla (2005-Cri.LJ-4140 (SC), the liability under Section 141 arises from being in charge of and responsible for conduct of business of the Company at the relevant point of time when the offence was committed and not on the basis of merely holding a designation or office in the Company. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied. 10. It is reiterated by the Hon'ble Supreme Court in the case of Saroj Kumar Poddar Vs. State (2007-1-Supreme-239) that with a view to make a Director of a Company vicariously liable for the acts of the Company, it is obligatory on the part of the complainant to make specific allegation as are required in law. In this instant case, apart from the Company, three Directors including the Petitioner have been arrayed as accused and there is no averment that they were in- charge of the company or responsible for the conduct of the business. On looking into the averments made in the complaint, it is clear that the allegations made in the complaint do not disclose any averment as against the Petitioner. 11. The next contention raised by the learned counsel for the Petitioner is that there was no notice to the Petitioner as required under Section 138 of the Negotiable Instruments Act. It is seen that a notice has been sent by the complainant to the Company and to one A.R.Santhanakrishnan, denoting him as Managing Director. According to the Petitioner, he is totally unconnected with the Company. His contention is countenanced by the fact that the name of the A.R.Santhanakrishnan does not find a place in the complaint and he is not arrayed as an accused. Admittedly, no notice has been sent to the Petitioner before filing the complaint under Section 138 of the Negotiable Instruments Act. Even on the said ground the compliant is liable to be quashed. https://hcservices.ecourts.gov.in/hcservices/ 12. In view of the reasons stated above, the complaint and the consequential proceedings deserve to be quashed and accordingly, they are quashed and this Criminal Original Petition is allowed as prayed for. Consequently, the connected MPs are closed. Sd/- Asst. Registrar / True Copy / Sub.Asst Registrar Srcm To. 1.The VII Metropolitan Magistrate, George Town,Chennai. 2.-do-Thro' The Chief Metropolitan Magistrate, Egmore,Chennai. Crl.OP.No.17737/2006 DM(CO) EM/20.7.09 https://hcservices.ecourts.gov.in/hcservices/