Case: Paresh P.Rajda Vs. State Of Maharashtra

of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.(b) The answer to the question posed in sub-para (b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases.(c) The answer to Question (C) has to be in the affirmative. The question notes that the managing director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141." 6. As this matter had come before the three-Judge Bench on a reference, the Bench reverted the matter for a discussion on facts to a Bench of two-Judges. It was this matter which was again examined by the Bench and reported as S.M.S. Pharmaceuticals Ltd. (2007) 4 SCC 70 and it was found that the necessary averments had been made in the complaint so as to attract the provisions of Section 141 of the Act. The appeal filed by the company was accordingly dismissed. This matter once again came up for consideration in Rangacharis case (supra) and in paragraph 21 it was observed: "A person normally having business or commercial dealings with a company, would satisfy himself about its creditworthiness and reliability by looking at its promoters and Board of Directors and the nature and extent of its business and its memorandum or articles of association. Other than that, he may not be aware of the arrangements within the company in regard to its management, daily routine, etc. Therefore,, when a cheque issued to him by the company is dishonoured, he is expected only to be aware generally of who are in charge of the affairs of the company. It is not reasonable to expect him to know whether the person who signed the cheque was instructed to do so or whether he has been deprived of his authority to do so when he actually signed the cheque. Those are matters peculiarly within the knowledge of the company and those in charge of it. So, all that a payee of a cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in charge of its affairs. The Directors are prima facie in that position." 7. A reading of this passage would reveal a slight departure vis-à-vis the other judgments in favour of the complainant. It will be noticed that this decision too was rendered on a consideration of both the judgments in S.M.S. Pharmaceuticals. The matter came up yet again for consideration in N.K. Wahi case (supra) which reiterated the earlier view and held that where there were no clear averment in the complaint or the evidence with regard to the role played by the Directors and as to whether and they were in charge and responsible for the conduct of the affairs of the company, it would not be possible to maintain the prosecution against them and they were entitled to acquittal. It may however be noticed that this was a case where an acquittal was recorded after trial.8. It will be clear from the afore quoted judgments that the entire matter would boil down to an examination of the nature of averments made in the complaint though we observe a slight digression in the judgment in N. Rangachari case (supra). It is in this background, that the complaint needs to be examined. Paragraphs 2 and 8 are reproduced below: "(2) I know the all the accused. The accused No.1 is company registered under the Companies Act, 1956. Accused No.2 is the Chairman of the accused No.1. Accused No.3 is the Joint Managing Director of the Accused No.1 and accused No.4, 5 and 6 are the Directors of the accused No.1.(8) The accused No.2 is the Chairman of accused No.1 and is responsible for the day to day affairs of accused No.1 and therefore he is liable to repay amount of dishonoured cheques. Accused No.3 being Joint Managing Director and accused No.4,5 and 6 being the Director of the accused No.1 are responsible officer of accused No.1 and therefore they are liable to repay the amounts of the dishonoured cheques. As the accused have failed to make the payment within the stipulated period of 15 days after receipt of statutory notice they have committed and offence punishable under Section 138 r/w 141 of the Negotiable Instruments Act 1881 (As amended). Hence this complaint is filed before this Honble Court." 9. A perusal of the aforesaid paragraphs would show that accused No.2 is Paresh Rajda, the Chairman of the Company, and as per the impugned judgment of the High Court, the question of his responsibility for the business of the Company has not been seriously challenged. We, nonetheless, find clear allegations against both the accused/appellants to the effect that they were officers and responsible for the affairs of the company.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]6. As this matter had come before the three-Judge Bench on a reference, the Bench reverted the matter for a discussion on facts to a Bench of two-Judges. It was this matter which was again examined by the Bench and reported as S.M.S. Pharmaceuticals Ltd. (2007) 4 SCC 70  and it was found that the necessary averments had been made in the complaint so as to attract the provisions of Section 141 of the Act. The appeal filed by the company was accordingly dismissed. This matter once again came up for consideration in Rangacharis case (supra) and in paragraph 21 it wasperson normally having business or commercial dealings with a company, would satisfy himself about its creditworthiness and reliability by looking at its promoters and Board of Directors and the nature and extent of its business and its memorandum or articles of association. Other than that, he may not be aware of the arrangements within the company in regard to its management, daily routine, etc. Therefore,, when a cheque issued to him by the company is dishonoured, he is expected only to be aware generally of who are in charge of the affairs of the company. It is not reasonable to expect him to know whether the person who signed the cheque was instructed to do so or whether he has been deprived of his authority to do so when he actually signed the cheque. Those are matters peculiarly within the knowledge of the company and those in charge of it. So, all that a payee of a cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in charge of its affairs. The Directors are prima facie in that position.A reading of this passage would reveal a slight departure vis-à-vis the other judgments in favour of the complainant. It will be noticed that this decision too was rendered on a consideration of both the judgments in S.M.S. Pharmaceuticals. The matter came up yet again for consideration in N.K. Wahi case (supra) which reiterated the earlier view and held that where there were no clear averment in the complaint or the evidence with regard to the role played by the Directors and as to whether and they were in charge and responsible for the conduct of the affairs of the company, it would not be possible to maintain the prosecution against them and they were entitled to acquittal. It may however be noticed that this was a case where an acquittal was recorded after trial.8. It will be clear from the afore quoted judgments that the entire matter would boil down to an examination of the nature of averments made in the complaint though we observe a slight digression in the judgment in N. Rangachari case (supra). It is in this background, that the complaint needs to be examined. Paragraphs 2 and 8 are reproducedI know the all the accused. The accused No.1 is company registered under the Companies Act, 1956. Accused No.2 is the Chairman of the accused No.1. Accused No.3 is the Joint Managing Director of the Accused No.1 and accused No.4, 5 and 6 are the Directors of the accused No.1.(8) The accused No.2 is the Chairman of accused No.1 and is responsible for the day to day affairs of accused No.1 and therefore he is liable to repay amount of dishonoured cheques. Accused No.3 being Joint Managing Director and accused No.4,5 and 6 being the Director of the accused No.1 are responsible officer of accused No.1 and therefore they are liable to repay the amounts of the dishonoured cheques. As the accused have failed to make the payment within the stipulated period of 15 days after receipt of statutory notice they have committed and offence punishable under Section 138 r/w 141 of the Negotiable Instruments Act 1881 (As amended). Hence this complaint is filed before this Honble Court.A perusal of the aforesaid paragraphs would show that accused No.2 is Paresh Rajda, the Chairman of the Company, and as per the impugned judgment of the High Court, the question of his responsibility for the business of the Company has not been seriously challenged. We, nonetheless, find clear allegations against both the accused/appellants to the effect that they were officers and responsible for the affairs of the company.