Case: Paresh P.Rajda Vs. State Of Maharashtra

3. Tata Finance Limited, which had commercial dealings with the accused, filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter called the "Act") alleging that the accused had issued two cheques dated 25th November 2001 and 18th December 2001, each for Rupees One Lakh, which had been dishonoured on 20th December 2001 with the remarks "Exceeds Arrangements". Notice was issued to accused No.1 i.e. the Company, including accused No.2 Paresh P.Rajda, the Chairman and accused No.4 Vijay Shroff, a director of the Company and they appeared reluctantly before the court after bailable warrants had been issued. Accused Paresh Rajda thereupon moved an application that as per the averments made in the complaint itself, no case for summoning him had been made out as no overt act with regard to the issuance of the dishonoured cheques had been attributed to him. The High Court, however, vide its order dated 9th June 2004 directed that the application under Section 395 of the Code of Criminal Procedure, 1974 which had already been made before the Metropolitan Magistrate be decided at the first instance. The Magistrate, however, rejected the application on 18th October 2004 holding that he had no jurisdiction in the matter, as process under Section 395 of the Code had already been issued. It is in this circumstance that the accused once again moved the High Court. The High Court in its order dated 20th December 2005 held that the argument that the accused had been arrayed as such merely because he was a Director of the Company was wrong inasmuch as an over-all reading of the complaint showed that specific allegations had been levelled against him as being a responsible officer of the accused Company and therefore equally liable, and that if it was ultimately found that the accused had, in fact, no role to play, he would be entitled to an acquittal. The petition was accordingly dismissed. It is in this background that the present appeal is before us.

Court's reasoning:
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.