'Company' means any body corporate and includes a firm or other association of individuals; and (b) 'director', in relation to a firm, means a partner in the firm."
Section 141 is a penal provision creating vicarious liability and which, as per settled law, must be strictly construed. It would not be sufficient to make a bald and vague statement in a complaint that a partner (arrayed as an accused) in a firm is Incharge of and responsible to the firm for the conduct of the business of such firm. The complainant would be bound to spell out as to how and in what manner respondent No.1 was Incharge of or was responsible to the accused-firm for the conduct of its business. This proposition would be in consonance with the strict interpretation of penal statutes and more so where such statutes create vicarious liability.
Referring back to the facts of the present case, neither in the complaint filed by the complainant i.e. the present petitioner nor in his testimony as CW3, it was stated that respondent No.1 was responsible for running the affairs of the accused-firm. The lower Appellate Court has specifically taken notice of such fact and has even referred to the cross- examination of the complainant-petitioner Bhagwan Singh wherein he had stated that he was unaware as regards the number of partners in the accused-firm. Learned counsel appearing for the petitioner has not been able to rebut such factual position. In my considered view, the lower Appellate Court has taken the correct view in holding respondent No.1 to be not liable towards discharge of any alleged financial liability of the accused-firm on account of non-compliance of the essentials ofSection 141 of the Negotiable Instruments Act. For the same very reason, even the submission raised by the learned counsel that the cheque in question bore the signatures of respondent No.1 would not be of any consequence inasmuch as it was the case of the complainant himself that such cheque had been issued towards discharge of liability of the accused-firm and not of any personal liability of respondent No.1.
Punjab-Haryana High Court
Bhagwan Singh vs Adarsh Chhibbar And Another on 3 February, 2014
Citation;2015 CRLJ(NOC)475 P&H
2. This is an application preferred under Section 378 (4) of the Code of Criminal Procedure for grant of special leave to appeal against the judgment dated 12.10.2010 passed by the learned Sessions Judge, Faridkot acquitting respondent No.1- accused.
3. Brief facts are that the complainant, the present petitioner, namely, Bhagwan Singh preferred a complaint dated 19.8.2004 stating that M/s Chhibbar Motors, Kotkapura (for short to be referred as 'the firm') owed certain amount to the complainant and to clear such liability, the accused-firm through Malik Sushama Rani 2014.02.13 15:40 I attest to the accuracy and integrity of this document CRIMINAL MISC. NO.A-95-MA of 2011 /2/ its partner, namely, Adarsh Chhibbar issued Cheque No.032342 dated 11.4.2004 drawn on Oriental Bank of Commerce, Satta Bazar, Kotkapura. The complainant is stated to have deposited the cheque to his Banker i.e. Punjab and Sind Bank, Sandhwan for encashment, but the same was dishonoured on account of insufficiency of funds. A legal notice dated 30.6.2004 was stated to have been sent through registered AD post within 30 days. The accused even after due service of notice having failed to make good the payment, the commission of offence under Section 138 read with Section 142 of the Negotiable Instruments Act was made out leading to the filing of the complaint. After recording preliminary evidence, the trial Court vide order dated 19.8.2004 summoned the accused to face trial.
4. The trial Court vide order dated 3.12.2008 held the accused i.e. the respondent herein to be guilty for commission of offence punishable under Section 138 of the Negotiable Instruments Act and convicted him thereunder and vide order of even date i.e. 3.12.2008 sentenced the accused to undergo rigorous imprisonment for one year and to pay a fine of `5,000/-, and in default thereof, to further undergo imprisonment for one month. The appeal preferred by the accused, respondent No.1, has been accepted vide impugned judgment dated 20.10.2010 passed by the learned Sessions Judge, Faridkot and, accordingly, he stands acquitted.
5. It is against such brief factual backdrop that the instant application under Section 378(4) of the Code of Criminal Procedure praying for grant of special leave to appeal against the Malik Sushama Rani 2014.02.13 15:40 I attest to the accuracy and integrity of this document CRIMINAL MISC. NO.A-95-MA of 2011 /3/ judgment dated 20.10.2010 of the learned Sessions Judge, Faridkot has been filed.
6. Learned counsel appearing for the applicant-appellant has argued that sufficient evidence had been led to prove that cheque No.032342 dated 11.4.2004 for `2,88,000/- had been issued by respondent No.1 under his signatures for discharge of the liability of the accused-firm, namely, M/s Chhibbar Motors, Kotkapura and for which the respondent was liable to discharge such debt. It is argued that the lower Appellate Court has wrongly acquitted respondent No.1. Furthermore, learned counsel would argue that signatures of respondent No.1 on the cheque having been admitted, a presumption would be raised in favour of the appellant under Section 139 of the Negotiable Instruments Act and such presumption had not been rebutted. Learned counsel has argued that the lower Appellate Court has not appreciated the evidence adduced on record in the correct perspective.
7. Having heard learned counsel for the applicant- appellant at length and having perused the case file, I am of the considered view that no basis for interference is made out.
8. Section 141 of the Negotiable Instruments Act reads as under:
"141. Offences by companies.--(1) If the person committing an offence under Section 138 is a company, every person 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 Malik Sushama Rani 2014.02.13 15:40 I attest to the accuracy and integrity of this document CRIMINAL MISC. NO.A-95-MA of 2011 /4/ 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. Explanation.-- For the purposes of this section,--
(a) 'company' means any body corporate and includes a firm or other association of individuals; and (b) Malik Sushama Rani 2014.02.13 15:40 I attest to the accuracy and integrity of this document CRIMINAL MISC. NO.A-95-MA of 2011 /5/ 'director', in relation to a firm, means a partner in the firm."
9. Section 141 is a penal provision creating vicarious liability and which, as per settled law, must be strictly construed. It would not be sufficient to make a bald and vague statement in a complaint that a partner (arrayed as an accused) in a firm is Incharge of and responsible to the firm for the conduct of the business of such firm. The complainant would be bound to spell out as to how and in what manner respondent No.1 was Incharge of or was responsible to the accused-firm for the conduct of its business. This proposition would be in consonance with the strict interpretation of penal statutes and more so where such statutes create vicarious liability.
10. The Hon'ble Supreme Court of India in National Small Industries Corp.Ltd. v. Harmeet Singh Paintal & Anr., 2010(3) SCC 330 had examined the scope and ambit of Section 141 of the Negotiable Instruments Act and had held as follows:
"From the above discussion, the following principles emerge :
(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.
(ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be Malik Sushama Rani 2014.02.13 15:40 I attest to the accuracy and integrity of this document CRIMINAL MISC. NO.A-95-MA of 2011 /6/ fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.
(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make accused therein vicariously liable for offence committed by company along with averments in the petition containing that accused were in- charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.
(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred.
(v) If accused is Managing Director or Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.
(vi) If accused is a Director or an Officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint.
(vii) The person sought to be made liable should Malik Sushama Rani 2014.02.13 15:40 I attest to the accuracy and integrity of this document CRIMINAL MISC. NO.A-95-MA of 2011 /7/ be incharge 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."
11. Referring back to the facts of the present case, neither in the complaint filed by the complainant i.e. the present petitioner nor in his testimony as CW3, it was stated that respondent No.1 was responsible for running the affairs of the accused-firm. The lower Appellate Court has specifically taken notice of such fact and has even referred to the cross- examination of the complainant-petitioner Bhagwan Singh wherein he had stated that he was unaware as regards the number of partners in the accused-firm. Learned counsel appearing for the petitioner has not been able to rebut such factual position. In my considered view, the lower Appellate Court has taken the correct view in holding respondent No.1 to be not liable towards discharge of any alleged financial liability of the accused-firm on account of non-compliance of the essentials ofSection 141 of the Negotiable Instruments Act. For the same very reason, even the submission raised by the learned counsel that the cheque in question bore the signatures of respondent No.1 would not be of any consequence inasmuch as it was the case of the complainant himself that such cheque had been issued towards discharge of liability of the accused-firm and not of any personal liability of respondent No.1.
12. It is settled that interference in an appeal would be called for only if the judgment under appeal is found to be Malik Sushama Rani 2014.02.13 15:40 I attest to the accuracy and integrity of this document CRIMINAL MISC. NO.A-95-MA of 2011 /8/ perverse or based on mis-reading of the evidence. Interference would not be justified merely because this Court was to be inclined to take a different view. Learned counsel for the applicant-appellant has failed to point out any perversity/mis- reading of oral or documentary evidence on record by the Sessions Judge, Faridkot, in the impugned judgment dated 20.10.2010.
13. For the reasons recorded above, no case for interference is made out. The application seeking grant of special leave to appeal against the impugned judgment dated 20.10.2010 is dismissed and consequently, even the accompanying appeal is dismissed.
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