* 1 * IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL APPLICATION NO. 4238 OF 2008 W I T H CRIMINAL APPLICATION NO. 4239 OF 2008 Natsteel Equipments P.Ltd ...Applicant/Orig Complainant V/s. Mrs.R.S.Kamat & Anr. ....Respondent/ Accused no.12 ======= Mr.Ravindra Chalke i/by.Mr.Ramesh Prabhu, adv for applicant. Mr.R.N.Sukhija, adv.for respondent. Mr.H.J.Dedhia, APP for State. CORAM: SMT.R.P.SONDURBALDOTA, J. DATED: 20TH JANUARY, 2009. P.C. : 1. Heard Counsels. 2. This is a common order on the above two Criminal Applications. The parties to both the applications are the same. The applicant company filed criminal complaint against * 2 * respondent no.1 and 11 others under Section 138 read with Section 141 Negotiable Instruments Act being Cri.Complaints No.3107/SS/2005 and 3106/SS/2005 which are pending in the 7th Court, of Metropolitan Magistrate at Dadar, Mumbai. Respondent no.1 is one of the Directors of M/s. Ravish Infusions Ltd (accused no.1) a registered company. The applicant had sold and delivered to M/s.Ravish Infusions, accused no.1 machinery worth Rs.1,15,22,214/-. Accused no.1 had from to time paid a sum of Rs.54,00,000/- leaving a balance of Rs.52,20,564/-. Thereafter, accused no.1 issued six cheques each in the sum of Rs.13,00,000/- to the applicant in discharge of the above liability. When presented for payment, the cheques were dishonoured for the reasons “Account closed”. Thereafter, the applicant sent notice of demand dated 10th January,2001 addressed to all the accused including respondent no.1. As all the accused failed to pay the amount as per the Demand Notice, the complaints herein came to be filed. The learned Magistrate after recording the verification of the applicant issued process against all the accused by the order dated 24th July 2001. As respondent no.1 and all other accused persons were avoiding service of summons, the learned Magistrate issued bailable warrants against them. The bailable warrants against respondent no.1 was executed on 12th * 3 * July 2007. Thereafter, on 27th November 2007 respondent no.1 preferred revision applications being Revision Applications No. 342 of 2007 and Revision Application No. 343 of 2007 alongwith Misc. Applications No. 239 of 2007 and 240 of 2007 for condonation of delay before the Sessions Court for quashing the order of issuing process. 3. The applicant filed its reply to the Misc. Applications for condonation of delay on 7th December, 2007. That application was allowed by the Sessions court by its order dated 11th December, 2007. Thereafter, the Revision Applications were heard and allowed by the orders dated 14th July 2008. Being aggrieved by the two orders, the applicant has filed the present applications invoking inherent jurisdiction of this court for quashing the two orders. 4. Respondent no.1 in her Revision Applications before the learned Sessions Court, took up several contentions to challenge the order of issue of process by the learned Magistrate. She contends that the applicant has failed to produce proof of service of notice to each of the Directors. Secondly, the supply of machinery was made in the year 1994- 95. Therefore issuance of the cheque was against a time barred debt and not towards a legally enforceable liability. Thirdly, the demand notice was not issued within a period of * 4 * 15 days from the receipt of intimation from the bank. Fourthly, the name of respondent no.1 was incorrectly mentioned in the complaint and lastly respondent no.1 and (original accused no.12) is a Director of the company (accused no.1), and the complainant did not make out offences under Section 138 of Negotiable Instruments Act against her. The learned Sessions judge rejected all the contentions of respondent no.1 accept for the last one. She allowed the application with observations that the complaint did not contain any specific allegation as to how and in what manner accused nos.3 to 12, more particularly, accused no.12 committed offence punishable under Section 138 of Negotiable Instruments Act. With these observations, the Sessions court allowed the revision applications and set aside the orders issuing process against respondent no.1. In the circumstances, the questions that fall for consideration of this court in the two applications challenging orders dated 11th February, 2007 on the application for condonation of delay and 14th July 2008 and on the criminal revision applications are as follows : (i) Whether the respondent has made out sufficient cause for condonation of delay in filing the criminal revision applications ? * 5 * (ii) Whether the complaints as filed by the applicant satisfy the requirement of Section 141 of the Negotiable Instruments Act ? 5. The order dated 11th December 2007 on the application for condonation of delay is a very short and cryptic order. It does not even mention the grounds made out in the application indicating the difficulty on the part of the respondent in filing the criminal revision applications within the prescribed period. The learned judge baldly refers to the decision of this court reported in 2007 All M.R. Cri. (1055) Bombay, without even setting out the complete citation and holds that liberal approach is required to be adopted while condoning the delay. The learned judge has awarded cost of Rs.3,000/- to be deposited in the court and allowed the applications. This is an improper way of dealing with an application for condonation of delay particularly when the same is being opposed by the other side. The order reveals total non application of mind. The learned Judge ought to have looked into the grounds set out in the application for condonation and considered whether the same are satisfactory. Even the liberal view to be taken must be taken on the background of the specific facts of the case. Since that is not done, the order in fact cannot be sustained. However, * 6 * since there is also challenge on merit to the order on revision application, this order on the application for condonation of delay is being ignored. 6. The learned sessions judge has allowed the two revision applications on the ground that the complaints as filed do not satisfy the requirements of Section 141 Negotiable Instruments Act which makes the Directors of the company vicariously liable to the offence punishable under Section 138. It will be convenient to set out at this place the averments made in the complaint touching the same. “. Accused no.1 is a limited company, accused no.2 is the Managing Director, Accused nos.3 to 12 are Directors and accused no.2 is the authorised signatory of accused no.1. At all material times, relevant to the present complaint, accused nos.2 to 12, are and were the persons incharge of and responsible of the conduct of the business of accused no.1. It is submitted that accused nos.2 to 12, alongwith accused no.1 are also liable to be prosecuted for having consented and/or convicted at, in the commission of the present offence in their respective capacities as aforesaid and further the offence is attributable to accused nos.2 to 12, on account of their neglect to ensure and make adequate arrangements to honour the cheques issued by them and further on account of their neglect to comply with the requisitions made in the demand notice issued under the provisions of Section 138(c) of the Negotiable Instruments Act, within the stipulated period. Accused nos.2 to 12, along with accused no.1 are therefore, liable to be proceeded against.” * 7 * 7. The leading authority on the question of vicarious liability of the Directors of the company is S.M.S. Pharmaceuticals Ltd V/s.Neeta Bhalla reported in 2005(2) Bom C.R. (Cri.) page 696. It has been held by the apex court that merely being a Director of the company is not sufficient to make the person liable under Section 141 of the Act. The liability arises from being in-charge of and responsible for 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 of 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 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. The Director in a company cannot be deemed to be in- charge and responsible of the company for conduct of his business. The requirement of Section 141 is that the persons sought to be made liable should be in-charge and responsible for the conduct of business of the company at the relevant time. There has to be a specific averment in the complaint stating so. This has to be averred as a fact as there is no deemed liability of a Director in such cases. * 8 * 8. After the above decision on the scope and requirement of the vicarious liability under Section 141, the Apex Court considered the question of what should be the averments in a complaint involving vicarious liability. The discussion thereon at paras 15 to 18 contains references to decisions of various High Court and earlier decisions of the Apex Court on the question. At the end it has extensively quoted from it's earlier decision which is reproduced below : “18.......The latest in the line is the judgment of this court in (Monaben Ketanbhai Shah and Another v. State of Gujarat and Others) 2004(2)Bom.C.R.(Cri.)(S.C.)512. It was observed as under: “4. It is not necessary to reproduce the language of Section 141 verbatim in the complaint since the complaint is required to be read as a whole. If the substance of the allegations made in the complaint fulfill the requirements of Section 141, the complaint has to proceed and is required to be tried with. It is also true that in construing the complaint a hyper-technical approach should not be adopted so as to quash the same. The laudable object of preventing bouncing of cheques and sustaining the credibility of commercial transactions resulting in enactment of Sections 138 and 141 has to be borne in mind. These provisions create a statutory presumption of dishonesty, exposing a person to criminal liability if payment is not made within the statutory period even after issue of notice. It is also true that the power of quashing is required to be exercised very sparingly and where, read as a whole, factual foundation for the offence has been laid in the complaint, it should not be quashed. All the same, it is also to be remembered that it is the duty of the court to discharge the accused if taking everything stated in the complaint as correct and construing the allegations made therein liberally in favour of the complainant, the ingredients of the offence are altogether lacking. The present case falls * 9 * in this category as would be evident from the facts noticed hereinafter.” It was further observed : “6. The criminal liability has been fastened on those who, at the time of the commission of the offence, were in charge of and were responsible to the firm for the conduct of the business of the firm. These may be sleeping partners who are not required to take any part in the business of the firm; they may be ladies and others who may not know anything about the business of the firm. 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 of 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 complainant makes necessary averments in the complaint and establishes the fact. The present case is of total absence of requisite averments in the complaint.” 9. The above test is required to be applied to the averments in the case on hand. The averments made in the complaint are reproduced above. From perusal of the same, it cannot be said that the ingredients of Section 141 are altogether lacking therefrom. Mr.Sukhija learned counsel for respondent no.1 submits that it was necessary for the applicant to aver in the complaint to show as to how the present accused was responsible for conduct of the business. We cannot forget the stage at which adequacy of the averment in complaint is being considered. The evaluation of the adequacy of the averment in the complaint and the other material produced by the * 10 * complainant at the state of issuance of process and at the stage of proceedings under Section 482 Cr.P.C. is completely different from that at the stage of trial. It has been rightly submitted on behalf of the applicant that exact positions of the Directors in the company and distribution of the work made internally would not be known to the complainant. However, at the same time he is required to make the basic averment in the complaint regarding the responsibility of the director in dealing with the day to day affairs of the company. Once this basic averments are made in the complaint, it is for the respondent to establish that she is not liable for the dishonour of the cheque because she is not actually concerned with the day-to-day affairs of the company. This however is required to be established by her during the course of the trial where the applicant would also get an opportunity to establish the responsibility of the accused. This view is supported by another decision of the Apex Court in Rajesh Bajaj vs. State NCT of Delhi reported in AIR 1999 S.C.page 1216 where the Apex Court has held that in a petition u/s 482 Code of Criminal Procedure, it is not permissible to adopt a strictly hyper-technical approach and “seive the complaint through a cullendar of finest gauzes for testing the ingredients” of the offence alleged against the accused, and * 11 * that as to whether the person in question was really in- charge of the affairs of the company or not, and as to what functions, he was assigned in the affairs of the company and whether those functions could be considered sufficient to hold that he was in-charge of the affairs of the company are matters which have to be gone into during the trial. 10. The learned Sessions Judge has made a reference to several decisions in the impugned order and quoted from the head notes. Perusal of these judgments show that in all those cases, there was deficiency of basic requirement seen above. Therefore, the orders therein discharging the accused persons had been passed. The facts of the present case however are entirely different. The applicant has made the necessary averments at para-2 of its complaint, which satisfies the requirement of Section 141 of the Negotiable Instruments Act. In that circumstance, the order discharging respondent no.2 would not be correct. The applicant must get an opportunity of establishing its case by leading the evidence thereon. Hence, the applications are allowed. The orders 11th December, 2007 and 14th July, 2008 passed by the learned Sessions Judge in Revision Application No. 342 of 2007 and the Revision Application No. 343 of 2007 are set aside. The learned metropolitan magistrate before whom the trials are * 12 * pending, shall appreciate the evidence before him and decide the same in accordance with law uninfluenced by the observations made above, which are made at the prima-facie view of the matter. Mr.Chalke, learned counsel for the applicant states that the next date of hearing on the trial is 2nd March, 2009. Respondent no.1 shall remain present in the court on that date. The trial court to take up the hearing of the trial and dispose the same as early as possible. [SMT.R.P.SONDURBALDOTA, J]