* 1 * WPs-1789&1910-2009 15. Nov. 2011 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL WRIT PETITION NO. 1789 OF 2009 ALONGWITH CRIMINAL WRIT PETITION NO. 1910 OF 2009 CFL Capital Financial Services Ltd .... Petitioner V/s. The State of Maharashtra & Ors. ..... Respondents * * * * * * Mr. D’lima i/by. M/s. D’lima and Associates, Advocate for the petitioner. Mr. S.A. Shaikh, APP for State-respondent no.1. Mr. Manohar Ramsinghani with Mr. T.J. Pandian, Advocate for respondents no.2 and 3. CORAM :- Smt. R.P. SondurBaldota, J. 15 November, 2011. P.C. :- 1. Rule. Rule, made returnable forthwith. By consent, taken up for hearing immediately. 2. Heard learned Counsel for both sides. 3. This is a common order on the above two petitions which are directed against a common order dated 8th July, 2008 passed by the Sessions Court allowing Criminal Revision Applications filed by the respondents. 3. The petitioner-company carrying on business of financial services had * 2 * WPs-1789&1910-2009 15. Nov. 2011 given bill discounting facility to Krishna Plastochem Limited ( the company” “ for short). In discharge of the liability under the facility, the company had issued various post-dated cheques in favour of the petitioner. Four of the cheques dishonoured when presented for payment. Therefore, the petitioner had filed complaints being C.C. No. 2137/S/97 and C.C. No. 485/S/2002 against the company and its nine Directors for the offences punishable under Sections 138 read with Section 141 of the Negotiable Instruments Act (referred to as the N.I. Act” for short). In both the complaints, the trial “ Court by its orders dated 3rd April, 1997 and 12th February, 1998 issued process against the company and all the Directors. The respondents to Writ Petition No. 1789 of 2009 who are original accused nos. 2 and 6 in C.C. No. 2137/S/97 (renumbered now as `C.C.No. 2424/SS of 2007) preferred Criminal Revision Application No. 699 of 2007 to the Sessions Court to challenge the order of issuance of process against them. The respondents to Writ Petition No. 1910 of 2009 who are original accused nos.2, 4, 6 and 8 in C.C. No. 485/S/2002 filed Criminal Revision Application No. 321 of 2008 to challenge the order of issuance of process against them. Both the Revision Applications were heard together and decided by a common order by the Sessions Court since the averments made in the complaints were substantially same giving rise to identical question for consideration. The common order impugned in the above two petitions allows the two Revision * 3 * WPs-1789&1910-2009 15. Nov. 2011 Applications and sets aside the order of issuance of process against the respondents to the petitions. 4. The respondents had contended before the trial Court and the Sessions Court that the complaints as filed by the petitioners did not satisfy the requirement of Section 141 of the N.I. Act so as to make the respondents vicariously liable for the offence punishable under Section 138 of the N.I. Act. Original accused nos. 2 and 6 had agitated one more grievance before the Sessions Court in Criminal Revision Application No. 699 of 2007. They contended that since the petitioner had not served the statutory notice upon them in respect of dishonour of the cheque involved in C.C. No. 2137/S/97, the offence as against them was not complete and as such no cause of action had arise against them for their prosecution. Undisputedly, none of the respondents to the petition is either the Managing Director of the company or the signatory to the cheque. 5. The description of the respondents as given in the cause title of the complaint after enumeration of names of all the accused persons, reads as follows : 2. “ S.V.S. Raghavan, 3. K. Ranganathan, 4. C. Dorairaj, 5. S.C. Mittal, 6. K. Lakshminarayanan, 7. K. Ravindran, 8. C.N. Ramachandran, * 4 * WPs-1789&1910-2009 15. Nov. 2011 9. T.V. Ramani, 10. M.A. Shenoy, Accused Nos.2 to 10, the Chairman, Managing Directors and Directors respectively of Accused No.1, Company” The other relevant averments in the body of the complaint made at paragraphs-3 and 8 read as follows : 3. “ The Accused No.1 is a company incorporated under the provisions of the Companies Act, 1956 of which company, Accused Nos.2 to 10 are the Chairman, Managing Director and Directors respectively.” 8. “ I say that Accused No.1 through Accused Nos.2 to 10 who are the Chairman, Managing Director and Directors of the Company and who are responsible for the management of the company, had issued the said cheque in favour of the company, for discharging their aforesaid liability. I say that the said cheque having been dishonoured by the Accused’s bankers, as the Accused had failed to maintain proper balance to honour the said cheques on presentment, and, the Accused having not made payment of the amount due under the dishonoured cheques, within the grace period of 15 days from the receipt of the said notice, the Accused have, in the circumstances, committed an offence under Section138 of the Negotiable Instruments Act, 1881 and, are therefore, liable to be punished under the penal provisions of the said Act.” 6. Whether the above averments can be said to satisfy the requirements of Section 141 of the N.I. Act is the question now to be considered. Mr. D’lima, the learned counsel for the petitioners, submits that since the petitioners have averred in the complaint that the respondents are responsible for the management of the company, the same should be treated as sufficient * 5 * WPs-1789&1910-2009 15. Nov. 2011 compliance of the provision. 7. It would be convenient to note at this stage the legal position as regards the vicarious liability under Section 141 of the N.I. Act settled by various decisions of the Apex Court, and this Court. The three decisions cited by Mr. Ramsinghani on the proposition are : (i) Mrs. Anita Malhotra V/s. Apparel Export Promotion Council Ltd & Ors. unreported decision of Supreme Court in Criminal Appeal No. 2033 of 2011 (Arising out of SLP (Crl.) No. 85 of 2011 dated 8th November, 2011. (ii) National Small Industries Corp. Ltd V/s. Harmit Singh Paintal & Ors. reported in (2010) 3 SCC page 330. (iii) Parag Bhikalal Tejani & Ors. V/s. State of Maharashtra reported in 2001 (3) Crimes 715 (Bom). 8. The latest decision of the Apex Court is in Anita Malhotra’s case (supra). At paragraph-15 of the decision, the Apex Court observes as follows : 15) This Court has repeatedly held that in case of a Director, “ complaint should specifically spell out how and in what manner the Director was in charge of or was responsible to the accused Company for conduct of its business and mere bald statement that he or she was in charge of and was responsible to the company for conduct of its business is not sufficient. [Vide National Small Industries Corporation Limited vs. Harmeet Singh Paintal and Another, (2010) 3 SCC 330]. In the case on hand, particularly, in para 4 of the complaint, * 6 * WPs-1789&1910-2009 15. Nov. 2011 except the mere bald and cursory statement with regard to the appellant, the complainant has not specified her role in the day to day affairs of the Company. We have verified the averments as regard to the same and we agree with the contention of Mr. Akhil Sibal that except reproduction of the statutory requirements the complainant has not specified or elaborated the role of the appellant in the day to day affairs of the Company. On this ground also, the appellant is entitled to succeed.” 9. The question has been elaborated in the decision of the Apex Court in National Small Industries Corporation Limited (supra) in the following manner : 13) Section 141 is a penal provision creating vicarious liability, and “ which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent No.1 was in- charge of or was responsible to the accused company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability. 14) A company may have a number of Directors and to make any or all the Directors as accused in a complaint merely on the basis of a statement that they are in-charge of and responsible for the conduct of the business of the company without anything more is not a sufficient or adequate fulfillment of the requirements under Section 141. 15) In a catena of decisions, this Court has held that for making Directors liable for the offences committed by the company under Section 141 of the Act, there must be specific averments against the Directors, showing as to how and in what manner the Directors were responsible for the conduct of the business of the company.” * 7 * WPs-1789&1910-2009 15. Nov. 2011 In this decision, the Apex Court reiterated its decision in S.M.S. Pharmaceuticals Ltd (I) V/s. Neeta Bhalla reported in (2005) 8 SCC page 89 that the Managing Director or Joint Managing Director of the Company would be admittedly incharge of the Company and responsible to the Company for the conduct of its business. Therefore, holders of such positions in a Company, become liable under Section 141 of the Act alongwith the signatory of a cheque who is clearly responsible for the incriminating act and covered by Section 141(2) of the N.I. Act. As regards the nature of the allegations required to be set out in the complaint inrespect of six persons other than the Managing Director and signatory of the cheque, the Apex Court held as follows : 22. Therefore, this Court has distinguished the case of persons who are in-charge of and responsible for the conduct of the business of the company at the time of the offence and the persons who are merely holding the post in a company and are not in-charge of and responsible for the conduct of the business of the company. Further, in order to fasten the vicarious liability in accordance with Section 141, the averment as to the role of the Directors concerned should be specific. The description should be clear and there should become unambiguous allegations as to how the Directors concerned were alleged to be in-charge of and were responsible for the conduct and affairs of the company.” 10. Coming to the allegations against the respondents in the complaint quoted at paragraph-5 above, in view of the decisions of the Apex Court, they are found to be inadequate to fasten vicarious liability under Section 141 of * 8 * WPs-1789&1910-2009 15. Nov. 2011 the N.I. Act. There are as many as 9 directors of the Company. It would be difficult to accept that each director is involved into every transaction of the Company. It was therefore necessary for the petitioner to indicate in a broad manner complicity of the respondents into the transaction involved in the cheques in question. Otherwise, the averments made would amount to mere reproduction of the language of Section 141 of N.I. Act. In the circumstances, the Sessions Court was correct in allowing the Criminal Revision Applications filed by the respondents. 11. The respondents are further correct in their submission that in the absence of service of statutory notice upon them, the offence under Section 138 of N.I. Act was not complete. The offence can be said to have been committed only on failure on the part of the accused in complying with the requisition made in the statutory notice. Infact, the notice gives an opportunity to the accused to make payment of the amount under the cheques in question. If that opportunity is not given, no offence can be said to have been committed. 12. In the above circumstances, I find no merit in the petitions. The petitions are dismissed. The Rule is discharged. [SMT. R.P. SONDURBALDOTA, J]