IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 28 .10.2010 CORAM THE HONOURABLE MR. JUSTICE G.M. AKBAR ALI CRL.O.P.No.15204 of 2010 and M.P.Nos.1 and 2 of 2009 and 1 of 2010 Rajasekar .. Petitioner vs. M/s U.M.S. Radio Factory Limited A Public Limited Company incorporated under the Companies Act 1956 and having its Head Office at Gopal Bagh, Avinashi Road Coimbatore, represented by its Assistant Company Secretary B. Srinivasan .. Respondent Criminal Original Petition filed under Section 482 Cr.P.C. for the reliefs as stated therein. For petitioner : Mr.K.S. Rajagopalan for Mr.M. Thiagarajan For respondent : Mr.S. Ganesh O R D E R The petition is filed seeking a direction to call for the records in C.C.No.750 of 2000 on the file of the learned Judicial Magistrate No.II, Coimbatore and quash the same. 2. The petitioner is the Accused No.5 in a private complaint given by the respondent for the offences 138 of Negotiable Instruments Act. The respondent is a Public Limited Company. One M/S Fidality Industries Limited is also a Public Limited Company (hereinafter referred as debtor company) . The said Company received two inter corporate deposits of Rs.25,00,000/-each, from the respondent Company on 7.8.1998 and on 24.9.1998. The said deposits were for 90 days, repayable with interest at 22% per annum. The deposits were renewed from time to time. The deposit dated 7.8.1998 was renewed upto 4.11.1999 and became due and payable on 2.2.2000. The deposit dated 24.9.1998 was renewed upto 18.12.1999 and became due and payable on 18.3.2000. 3. Two promissory notes were also executed, each for Rs.26,05,780/-, thereby the said amount become legally enforceable debt. The debtor Company issued two post dated cheques drawn on Allahabad Bank, Chennai. The respondent company presented the cheque to their bankers M/s Tamil Nadu Mercantile Bank, Coimbatore. The cheques returned with an endorsement "insufficient funds", through the Memorandum dated 26.7.2000. Another cheque was also deposited and the same was returned with an endorsement "insufficient funds" through a Memorandum dated 25.7.2000. The respondent company issued legal notice dated 7.8.2000 calling upon the debtor Company and the Directors to make payment of the cheques within fifteen days. Except one Director, other Directors and the Company received the notice. Since the amount was not repaid, the respondent had initiated proceedings under Sec.138 r/w 141 of NI Act (hereinafter referred as Act) which was taken on file by the learned Judicial Magistrate No.II Coimbatore in CC No.750 of 2000. 4. The Company, Managing Director, two Directors, two Company Secretaries and the Senior Manager were arrayed as accused in their order. The petitioner, who has been arrayed as A.5 and described as Company Secretary has come forward with this petition to quash the proceedings as far as the petitioner is concerned on the following grounds: 1. The petitioner is neither in-charge nor responsible for the conduct of the day today affairs of the company. 2. The petitioner had resigned from the post of the Director and his resignation was accepted on 7.6.2000. 3. When the cheques were returned from the Bank, the petitioner was no longer a Director of the Company. 4. The petitioner is not the signatory in the cheques. 5. Mr.K.S. Rajagopalan for Mr. M. Thiyagarajan, learned counsel for the petitioner submitted that admittedly the cheques were post dated cheques and the petitioner was not the signatory for the cheques. The learned counsel pointed out that the petitioner has resigned from the post of Director as early as 7.6.2000 and the cheques were presented only on 25.7.2000 and 26.7.2000, a month after the resignation. The learned counsel pointed out that the petitioner is not liable as he was not the Director director of the company and was in charge of the company. The learned counsel relied on a decision reported in 2008 (3) SCC (Crl) 401 (DCM FINANCIAL SERVICES LIMITED VS J.S. SAREEN AND ANOTHER) "A person who had resigned with the knowledge of the complainant in 1996 could not be a person in charge of the Company in 1998 when the cheque was dishonoured. He had no say in the matter of seeing that the cheque is honoured. He could not ask the Company to pay the amount. He as a Director or otherwise could not have been made responsible for payment of the cheque on behalf of the Company or otherwise". 6. The learned counsel also relied on a decision reported in 2010 SAR (Crl) 250 SC (National Small Industries Corp. Ltd vs Harmeet singh Paintal & Anr), wherein the Apex Court has held as follows" "It is very clear from the above provision that what is required is that the persons who are sought to be made vicariously liable for a criminal offence under Section 141 should be, 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. Every person connected with the company shall not fall within the ambit of the provision. 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. It follows from the fact 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 for a criminal offence under the provisions. The liability arises from being in-charge of and responsible for the conduct of the 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. 7. On the contrary, Mr.Suresh, the learned counsel for the respondent submitted that the petitioner was also in-charge of the day today affairs of the company and the subsequent resignation will not absolve the liability of the petitioner. The learned counsel pointed out that the petitioner was the Director when the amount was due and became payable as early as 2.2.2000 and 18.3.2000. The learned counsel relied on a decision reported in 2007 3 CTC 495 (N. Rangachari vs Bharat Sanchar Nigam Ltd), wherein the Apex Court held as follows" "Therefore, a person in the commercial world having a transaction with a Company is entitled to presume that the directors of the company are incharge of the affairs of the company. If any restrictions on their powers are placed by the memorandum or articles of the company, it is for the directors to establish it at the trial. It is in that context that Section 141 of the Negotiable Instruments Act provides that when the offender is a company, every person, who at the time when the offence was committed was incharge of and was responsible to the company for the conduct of the business of the Company, shall also be deemed to be guilty of the offence along with the Company. It appears to us that an allegation in the complaint that the named accused are directors of the company itself would usher in the element of their acting for and on behalf of the company and of their being incharge of the company...." 8. I have carefully considered the rival contentions and perused the materials available on record. 9. Admittedly, two inter corporate deposits of Rs.25,00,000/- each, were made on 7.9.1998 and 24.9.2008 with M/s Fidelity Industries Limited. It was periodically renewed and became due and payable on 2.2.2000 and on 18.3.2000. The Company had issued two post dated cheques signed by the accused Nos.6 and 7. One cheque was drawn on Allahabad Bank dated 2.2.2000 and another cheque was drawn on Union Bank of India, Chennai dated 18.3.2000. The complainant had presented both the cheques and both the cheques were dishonoured with Memorandum dated 25.7.2000 and 26.7.2000. The petitioner resigned on 7.6.2000 and the resignation was also accepted. 10. Sec.141 of the Act reads as follows: "141. Offences by companies  (1) If the person committing an offence under Section 138 is a company, every person who, at the time of 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. 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". 11. Therefore, every person who at the time the offence was committed was incharge 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. The above provision makes it clear that the persons who are sought to be made vicariously liable for criminal offence should be at the time the offence was committed was incharge of and was responsible to the Company for the conduct of the business of the Company. 12. In (2008 (3) SCC (Crl) 401 (DCM FINANCIAL SERVICES LIMITED VS J.S. SAREEN AND ANOTHER) it was held as follows: "While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a Company. The key words which occur in the section are "every person". These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words: "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, etc." 13. It is well settled that the liability of a Director of a Company arises when he is in-charge of and responsible for the conduct of the 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. Sec.141 of the Act provides for a constructive liability. Therefore, it requires strict compliance of the provision. In the matters of post dated cheques which were presented on later dates, the relevant time, of the Commission of the offence is very important. For constituting an offence under Sec.138 of the Act, the following ingredients are to be satisfied: a) a cheque must be drawn; b) it must be presented and returned un-paid with a remark"insufficient fund"; c) a notice for payment shall be served on the accused; d) the accused has failed to make the payment of the said amount to the payee within 15 days from the date of receipt of notice; 14. Only on the cumulative effect of the all the above ingredients an offence is said to have committed. Cheque drawn is not an offence. Presentation and return will constitute commencement of the offence. Statutory notice served and failure of payment will be the conclusion of the offence giving raise to initiation of prosecution. 15. Therefore, in the case of post dated cheques, the relevant time of commission of an offence is the date of presentation and dishonour of the cheque. Any person in-charge of and responsible for the conduct of the business of the Company at this point of time alone are vicariously liable and the person who had resigned from the Directorship of the Company cannot be held responsible unless specific allegations are made that the said person was incharge of and responsible for the conduct of the business of the company even after resignation. In 2008 (3) SCC (Crl) 401 (DCM FINANCIAL SERVICES LIMITED VS J.S. SAREEN AND ANOTHER)(cited supra) in a similar situation, it is held " he had no say in the matter seeing that the cheque is honoured he could not ask the company to pay the amount". It is also pertinent to note that the petitioner was not the signatory of the cheques. Therefore, I am of the considered view that the petitioner cannot be held liable for the dishonour of the cheque. 16. In the result, the criminal original petition is allowed and the proceedings in C.C.No.C.C.No.750 of 2000 on the file of the learned Judicial Magistrate No.II, Coimbatore is quashed as far as this petitioner is concerned. Consequently, connected Mps are closed. sr To Judicial Magistrate No.II, Coimbatore