concerned with Directors who issued the cheques. This
authority, as we notice, has to be appositely understood. The
two-Judge Bench referred to SMS Pharma I and other earlier
decisions, and came to hold that:-
“30. When a petition is filed for quashing the
process, in a given case, on an overall reading of the
complaint, the High Court may find that the basic
averment is sufficient, that it makes out a case
against the Director; that there is nothing to suggest
that the substratum of the allegation against the
Director is destroyed rendering the basic averment
insufficient and that since offence is made out
against him, his further role can be brought out in
the trial. In another case, the High Court may
quash the complaint despite the basic averment. It
may come across some unimpeachable evidence or
acceptable circumstances which may in its opinion
lead to a conclusion that the Director could never
have been in charge of and responsible for the
conduct of the business of the company at the
relevant time and therefore making him stand the
trial would be an abuse of process of court as no
offence is made out against him.
31. When in view of the basic averment process is
issued the complaint must proceed against the
Directors. But, if any Director wants the process to
be quashed by filing a petition under Section 482 of
the Code on the ground that only a bald averment is
made in the complaint and that he is really not
concerned with the issuance of the cheque, he must
in order to persuade the High Court to quash the
process either furnish some sterling incontrovertible
material or acceptable circumstances to
substantiate his contention. He must make out a
case that making him stand the trial would be an
abuse of process of court. He cannot get the
complaint quashed merely on the ground that apart
from the basic averment no particulars are given in
the complaint about his role, because ordinarily the
basic averment would be sufficient to send him to
trial and it could be argued that his further role
could be brought out in the trial. Quashing of a
complaint is a serious matter. Complaint cannot be
quashed for the asking. For quashing of a complaint
it must be shown that no offence is made out at all
against the Director.”
[Emphasis supplied]
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NOS.271-273 OF 2016
(Arising out of S.L.P.(Crl.) Nos.484-486 of 2016)
Standard Chartered Bank
V
State of Maharashtra and Others Etc.
Dipak Misra, J.
Citation:(2016)6 SCC62
2. The present appeals, by special leave, are directed
against the order dated 13th October, 2015, passed by the High
Court of Judicature at Bombay in Criminal Writ Petition Nos.
1482-1484 of 2015 whereby the learned single Judge by the
common impugned order has quashed the orders of issuance
of summons against the respondent Nos. 2 and 3 herein
(original accused Nos. 5 and 4) by the Metropolitan Magistrate,
23rd Court at Esplanade, Mumbai, under Section 138 of the
Negotiable Instruments Act, 1881 (for short, ‘the Act’). Be it
noted that the High Court has declined to quash the order of
the Magistrate issuing summons against the respondent No. 4
(original accused No. 2), but the said accused has not
approached this Court.
3. The facts, briefly stated, are that M/s ABG Shipyard Ltd.
is a company registered under the Companies Act, 1956. On
being approached by the authorities of the company, a short
term loan facility for a sum of Rs. 200 crores was granted by
the appellant-bank to the company on 28.04.2012. As averred
in the complaint, the company executed an indemnity in
favour of the appellant-bank and agreed to repay the amount
in three instalments; one on 15.12.2012, the second on
15.01.2013 and the last on 15.02.2013. The company issued
three cheques, one dated 15.12.2012 for Rs.66,67,00,000/-,
and the two others dated 15.01.2013 and 15.02.2013 forPage 3
3
Rs.66,67,00,000/- and Rs.66,66,00,000/- respectively
towards the repayment of the liability. As per the dates
mentioned in the cheques, they were presented before the
bank but due to “insufficient funds” and “account blocked” the
cheques were dishonoured. The appellant-bank issued
requisite statutory notice for each cheque. As no response was
given by the respondents, the appellant filed three complaints,
being C.C. No. 451/SS of 2013, C.C. No. 843/SS of 2013 and
C.C. No. 1145/SS of 2013 under Section 138 of the Act before
the Metropolitan Magistrate, 23rd Court at Esplanade, Mumbai
who took cognizance and issued summons against all the
accused persons.
4. The respondent nos. 2 to 4 herein, being grieved by the
orders issuing summons, preferred three revision petitions,
that is, Revision Application Nos. 1123 to 1125 of 2014 before
the City Civil & Sessions Court, Mumbai, and the revisional
court after due deliberation did not perceive any merit in the
said challenge and dismissed the revision petitions.
5. The dismissal order constrained the respondents to
prefer criminal writ petitions, bearing Criminal Writ Petition
Nos. 1482 to 1484 of 2015, before the High Court of
Judicature at Bombay and the learned single Judge by the
order impugned allowed the writ petitions preferred by
accused nos. 4 and 5 holding that the complainant had
averred the said respondent to be responsible without making
any specific assertion in the complaint about their role. As
mentioned earlier, the High Court dismissed the writ petition
preferred by the respondent no.4.
6. On a perusal of the impugned order, it transpires that
the learned Single Judge of the High Court has quashed the
summons singularly on the ground that there are no
allegations against the successful writ petitioners connecting
them with the affairs of the Company.
7. Criticizing the aforesaid order passed by the High Court,
it is submitted by Mr. Divan, learned senior counsel appearing
for the appellant-bank that the High Court has failed to
properly scrutinize the assertions made in the complaint, for
the complaint has clearly stated about the role of the accused
persons in the complaint. Learned counsel would submit that
it is a case where the respondents had availed loan of Rs.200
crores and the cheques that had been issued were
dishonoured on due presentation, the High Court should not
have exercised the inherent jurisdiction under Section 482
CrPC to set aside the order issuing summons against the
Executive Director and the whole-time Director who are really
the persons responsible and in charge of day to day affairs of
the company.
8. Resisting the aforesaid submissions put forth by Mr.
Divan, Ms. Indu Malhotra, learned senior counsel appearing
for the respondents would contend that the learned Magistrate
had taken cognizance in a mechanical manner without
perusing the averments made in the complaint petition and,
therefore, the exercise of jurisdiction by the High Court in
setting aside the order issuing summons cannot be faulted.
She has commended us to the decisions in S.M.S.
Pharmaceuticals Ltd. v. Neeta Bhalla and another1
1
(hereinafter referred to as ‘SMS Pharma I’), Gunmala
Sales Pvt. Ltd. v. Anu Mehta and Ors.2
, National Small
Industries Corpn. Ltd. v. Harmeet Singh Paintal & Anr.3
,
Tamil Nadu News Print & Papers Ltd. v. D. Karunakar &
Ors.4
, A.K. Singhania v. Gujarat State Fertilizer Company
Ltd. & Anr.5
.
9. To appreciate the controversy in proper perspective, it is
appropriate to refer to Sections 138 and 141 of the Act.
Section 138 reads as follows:-:-
“138. Dishonour of cheque for insufficiency,
etc., of funds in the account.—Where any
cheque drawn by a person on an account
maintained by him with a banker for payment of
any amount of money to another person from out
of that account for the discharge, in whole or in
part, of any debt or other liability, is returned by
the bank unpaid, either because of the amount of
money standing to the credit of that account is
insufficient to honour the cheque or that it
(2005) 8 SCC 89
2
(2015) 1 SCC 103
3
(2010) 3 SCC 330
4
(2015) 8 SCALE 733
5
(2013) 16 SCC 630
exceeds the amount arranged to be paid from
that account by an agreement made with that
bank, such person shall be deemed to have
committed an offence and shall, without
prejudice to any other provision of this Act, be
punished with imprisonment for a term which
may be extended to two years, or with fine which
may extend to twice the amount of the cheque, or
with both:
Provided that nothing contained in this section
shall apply unless—
(a) the cheque has been presented to the bank
within a period of six months from the date on
which it is drawn or within the period of its
validity, whichever is earlier;
(b) the payee or the holder in due course of the
cheque, as the case may be, makes a demand for
the payment of the said amount of money by
giving a notice in writing, to the drawer of the
cheque, within thirty days of the receipt of
information by him from the bank regarding the
return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the
payment of the said amount of money to the
payee or as the case may be, to the holder in due
course of the cheque, within fifteen days of the
receipt of the said notice.
Explanation.—For the purposes of this section,
‘debt or other liability’ means a legally
enforceable debt or other liability.”
10. On a studied scrutiny of the aforesaid provision, it is
quite limpid that to constitute the criminal liability the
complainant is required to show that a cheque was issued;
that it was presented in the bank in question; that on due
presentation, it was dishonoured; that, as enshrined in the
provision, requisite notice was served on the person who was
sought to be made liable for criminal liability; and that in spite
of service of notice, the person who has been arraigned as an
accused did not comply with the notice by making payment or
fulfilling other obligations within the prescribed period, that is,
15 days from the date of receipt of notice.
11. Section 141 of the Act deals with offences by companies.
It 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 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 subsection
shall render any person liable toPage 9
9
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 subsection
(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) ‘director’, in relation to a firm, means a
partner in the firm.”
12. On a perusal of the aforesaid provision, it is clear as
crystal that if the person who commits an offence under
Section 138 of the Act is a company, the company as well as
other person in charge of or responsible to the company for
the conduct of the business of the company at the time of
commission of the offence is deemed to be guilty of the offence.
Thus, it creates a constructive liability on the persons
responsible for the conduct of the business of the company.
13. At one point of time, an issue had arisen before this
Court, whether a complaint could be held to be maintainable
without making the company a party. The said controversy
has been put to rest by a three-Judge Bench decision in
Aneeta Hada v. Godfather Travels and Tours Private
Limited6
wherein it has been held that when the company can
be prosecuted, then only the persons mentioned in the other
categories could be vicariously liable for the offence subject to
the averments in the petition and proof thereof. It has been
further held therein that there cannot be any vicarious liability
6
(2012) 5 SCC 661Page 11
11
unless there is a prosecution against the company. In the
case at hand, the company has been arrayed as the accused
No. 1 along with the Chairman and other Directors.
14. Now, we must go back in time to appreciate what has
been stated in S.M.S. Pharma I (supra), wherein a
three-Judge Bench answered a reference on three issues. The
answers on two issues which are relevant for the present
purpose are as follows:-
“(a) ………
(b) Whether a director of a company would be
deemed to be in charge of, and responsible to, the
company for conduct of the business of the
company and, therefore, deemed to be guilty of
the offence unless he proves to the contrary.
(c) Even if it is held that specific averments are
necessary, whether in the absence of such
averments the signatory of the cheque and or the
managing directors or joint managing director
who admittedly would be in charge of the
company and responsible to the company for
conduct of its business could be proceeded
against.”
15. The three-Judge Bench referred to Section 138 and 141
of the Act, Sections 203 and 204 of CrPC and observed that a
complaint must contain material to enable the Magistrate to
make up his mind for issuing process and if this were not the
requirement, consequences would be far-reaching. If a
Magistrate has to issue process in every case, the burden of
work before the Magistrate as well as the harassment caused
to the respondents to whom process has to be issued would be
tremendous. It has been observed therein that Section 204 of
the CrPC commences with the words “if in the opinion of the
Magistrate taking cognizance of an offence there is sufficient
ground for proceeding” and that apart, the words “sufficient
ground for proceeding” again suggest that ground should be
made out in the complaint for proceeding against the
respondent. The three-Judge Bench has ruled that it is
settled law that at the time of issuing of the process, the
Magistrate is required to see only the allegations in the
complaint and where the allegations in the complaint or the
chargesheet do not constitute an offence against a person, the
complaint is liable to be dismissed. Page 13
13
16. After so stating, the Court adverted to the complaint filed
under Section 138 of the Act and opined that the complaint
should make out a case for issue of process. As far as the
officers responsible for conducting the affairs of the company
are concerned, the Court referred to various provisions of the
Companies Act, 1956 and analysed Section 141 of the Act to
lay down as follows:-
“What is required is that the persons who are
sought to be made criminally liable under Section
141 should be, at the time the offence was
committed, in charge of and 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. It is only those persons who were in
charge of and responsible for the conduct of
business of the company at the time of
commission of an offence, who will be liable for
criminal action. It follows from this 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 under the provision. The liability
arises from being in charge of and responsible for
the conduct of 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. Conversely, a
person not holding any office or designation in a
company may be liable if he satisfies the main
requirement of being in charge of and responsible
for the conduct of business of a company at the
relevant time. Liability depends on the role one
plays in the affairs of a company and not on
designation or status. If being a director or
manager or secretary was enough to cast
criminal liability, the section would have said so.
Instead of “every person” the section would have
said “every director, manager or secretary in a
company is liable”…, etc. The legislature is aware
that it is a case of criminal liability which means
serious consequences so far as the person sought
to be made liable is concerned. Therefore, only
persons who can be said to be connected with the
commission of a crime at the relevant time have
been subjected to action”.
17. After so stating, the Court placed reliance on
sub-Section 2 of Section 141 of the Act for getting support of
the aforesaid reasoning as the said sub-Section envisages
direct involvement of any Director, Manager, Secretary or
other officer of a company in the commission of an offence.
The Court proceeded to observe that the said provision
operates when in a trial it is proved that the offence has been
committed with the consent or connivance or is attributable to
neglect on the part of any of the holders of the offices in a
company. It has also been observed that provision has been
made for directors, managers, secretaries and other officers ofPage 15
15
a company to cover them in cases of their proved involvement.
It is because a person who is in charge of and responsible for
conduct of business of a company would naturally know why a
cheque in question was issued and why it got dishonoured
and simultaneously it means no other person connected with
a company is made liable under Section 141 of the Act. The
liability arises, as the three-Judge Bench opined, on account
of conduct, act or omission on the part of an officer and not
merely on account of holding office or position in a company
and, therefore, in order to bring a case within Section 141 of
the Act, the complaint must disclose the necessary facts which
makes a person liable. In the said case, the Court has referred
to the decisions in Secunderabad Health Care Ltd. v.
Secunderabad Hospitals (P) Ltd.7
, V. Sudheer Reddy v.
State of A.P.8
, R. Kanan v. Kotak Mahindra Finance Ltd.9
,
Lok Housing ad Constructions Ltd. v. Raghupati Leasing
7
(1999) 96 Comp Cas 106 (AP)
8
(2000) 107 Comp Cas 107 (AP)
9
(2003) 115 Comp Cas 321 (Mad)Page 16
16
and Finance Ltd.10
, Sunil Kumar Chhaparia v. Dakka
Eshwaraiah11
, State of Haryana v. Brij Lal Mittal12
, K.P.G.
Nair v. Jindal Menthol India Ltd.13
, Katta Sujatha v.
Fertilizers & Chemicals Travancore Ltd.14 and eventually
expressed thus:-
“A liability under Section 141 of the Act is sought
to be fastened vicariously on a person connected
with a company, the principal accused being the
company itself. It is a departure from the rule in
criminal law against vicarious liability. A clear
case should be spelled out in the complaint
against the person sought to be made liable.
Section 141 of the Act contains the requirements
for making a person liable under the said
provision. That the respondent falls within the
parameters of Section 141 has to be spelled out.
A complaint has to be examined by the
Magistrate in the first instance on the basis of
averments contained therein. If the Magistrate is
satisfied that there are averments which bring
the case within Section 141, he would issue the
10
(2003) 115 Comp Cas 957 (Del)
11
(2002) 108 Comp Cas 687 (AP)
12
(1998) 5 SCC 343
13
(2001) 10 SCC 218
14
(2002) 7 SCC 655Page 17
17
process. We have seen that merely being
described as a director in a company is not
sufficient to satisfy the requirement of Section
141. Even a non-director can be liable under
Section 141 of the Act. The averments in the
complaint would also serve the purpose that the
person sought to be made liable would know
what is the case which is alleged against him.
This will enable him to meet the case at the trial”.
18. On the basis of the aforesaid analysis, the Court in this
regard concluded that:-
“It is necessary to specifically aver in a complaint
under Section 141 that at the time the offence
was committed, the person accused was in
charge of, and responsible for the conduct of
business of the company. This averment is an
essential requirement 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”.
19. After the three-Judge Bench answered the reference, the
matter was placed before a two-Judge Bench. The two-Judge
Bench, hearing S.M.S. Pharmaceuticals Ltd. v. Neeta
Bhalla and another15 (hereinafter referred to as ‘SMS
Pharma II’), reproduced a passage from Sabitha
15
(2007) 4 SCC 70Page 18
18
Ramamurthy v. R.B.S. Channabasavaradhya16 which reads
as follows:-
“7. A bare perusal of the complaint petitions
demonstrates that the statutory requirements
contained in Section 141 of the Negotiable
Instruments Act had not been complied with. It
may be true that it is not necessary for the
complainant to specifically reproduce the
wordings of the section but what is required is a
clear statement of fact so as to enable the court
to arrive at a prima facie opinion that the
accused are vicariously liable. Section 141 raises
a legal fiction. By reason of the said provision, a
person although is not personally liable for
commission of such an offence would be
vicariously liable therefor. Such vicarious liability
can be inferred so far as a company registered or
incorporated under the Companies Act, 1956 is
concerned only if the requisite statements, which
are required to be averred in the complaint
petition, are made so as to make the accused
therein vicariously liable for the offence
committed by the company. Before a person can
be made vicariously liable, strict compliance with
the statutory requirements would be insisted.”
20. Thereafter the Court referred to the authority in Saroj
Kumar Poddar v. State (NCT of Delhi) and another17 and
noted the observations which we think it apt to reproduce:-
16
(2006) 10 SCC 581
17
(2007) 3 SCC 693Page 19
19
“14. Apart from the Company and the appellant,
as noticed hereinbefore, the Managing Director
and all other Directors were also made accused.
The appellant did not issue any cheque. He, as
noticed hereinbefore, had resigned from the
directorship of the Company. It may be true that
as to exactly on what date the said resignation
was accepted by the Company is not known, but,
even otherwise, there is no averment in the
complaint petitions as to how and in what
manner the appellant was responsible for the
conduct of the business of the Company or
otherwise responsible to it in regard to its
functioning. He had not issued any cheque. How
he is responsible for dishonour of the cheque has
not been stated. The allegations made in para 3,
thus, in our opinion do not satisfy the
requirements of Section 141 of the Act.”
21. The said observations were clarified by stating that:-
“26. A faint suggestion was made that this Court
in Saroj Kumar Poddar (supra) has laid down the
law that the complaint petition not only must
contain averments satisfying the requirements of
Section 141 of the Act but must also show as to
how and in what manner the appellant was
responsible for the conduct of the business of the
company or otherwise responsible to it in regard
to its functioning. A plain reading of the said
judgment would show that no such general law
was laid down therein. The observations were
made in the context of the said case as it was
dealing with a contention that although no direct
averment was made as against the appellant of
the said case fulfilling the requirements of
Section 141 of the Act but there were otherPage 20
20
averments which would show that the appellant
therein was liable therefor.”
22. The said clarification was reiterated in Everest
Advertising (P) Ltd. v. State, Govt. of NCT of Delhi and
others18
.
23. In the said case, taking note of the assertions in the
complaint which were really vague, the Court declined to
interfere with the order passed by the High Court which had
opined that the complainant did not disclose commission of
offence against the accused persons.
24. Be it noted, the observations made in Saroj Kumar
Poddar (supra) and clarification given in SMS Pharma II
(supra) and Everest Advertising (P) Ltd. (supra) were taken
note of in K.K. Ahuja v. V.K. Vora and Anr19. In the said
case, the Court explaining the position under Section 141 of
the Act has stated thus:-
18
(2007) 5 SCC 54
19
(2009) 10 SCC 48Page 21
21
“The position under Section 141 of the Act can be
summarised thus:
(i) If the accused is the Managing Director or a Joint
Managing Director, it is not necessary to make an
averment in the complaint that he is in charge of,
and is responsible to the company, for the conduct
of the business of the company. It is sufficient if an
averment is made that the accused was the
Managing Director or Joint Managing Director at
the relevant time. This is because the prefix
“Managing” to the word “Director” makes it clear
that they were in charge of and are responsible to
the company, for the conduct of the business of the
company.
(ii) In the case of a Director or an officer of the
company who signed the cheque on behalf of the
company, there is no need to make a specific
averment that he was in charge of and was
responsible to the company, for the conduct of the
business of the company or make any specific
allegation about consent, connivance or negligence.
The very fact that the dishonoured cheque was
signed by him on behalf of the company, would give
rise to responsibility under sub-section (2) of
Section 141.
(iii) In the case of a Director, secretary or manager
[as defined in Section 2(24) of the Companies Act] or
a person referred to in clauses (e) and (f) of Section
5 of the Companies Act, an averment in the
complaint that he was in charge of, and was
responsible to the company, for the conduct of the
business of the company is necessary to bring the
case under Section 141(1) of the Act. No further
averment would be necessary in the complaint,Page 22
22
though some particulars will be desirable. They can
also be made liable under Section 141(2) by making
necessary averments relating to consent and
connivance or negligence, in the complaint, to bring
the matter under that sub-section.
(iv) Other officers of a company cannot be made
liable under sub-section (1) of Section 141. Other
officers of a company can be made liable only under
sub-section (2) of Section 141, by averring in the
complaint their position and duties in the company
and their role in regard to the issue and dishonour
of the cheque, disclosing consent, connivance or
negligence.”
25. In Harmeet Singh Paintal (supra), a two-Judge Bench
did not agree with the stand of the appellant, emphasized on
the averments and found that in the complaint petition there
were no specific averments and, accordingly, dismissed the
appeal filed by the appellant-Corporation therein. The Court
in paragraphs 17 and 18 of the judgment reproduced the part
of the complaint. We have carefully perused the said
averments in the claim petition and we are of the opinion that
there cannot be any shadow of doubt that the assertions made
therein did not meet the requirements of Section 141 of the
Act.Page 23
23
26. In A.K. Singhania (supra), after referring to the previous
judgments, the Court found that it was difficult to infer that
there was any averment that the two accused persons who
had come to this Court, were in charge and responsible for the
conduct of the business of the Company at the time the
offence was committed. The allegation in the complaints in
sum and substance was that business and financial affairs of
the Company used to be decided, organized and administered
by accused persons along with other Directors.
27. In Gunmala Sales Pvt. Ltd. (supra) the Court was
concerned with Directors who issued the cheques. This
authority, as we notice, has to be appositely understood. The
two-Judge Bench referred to SMS Pharma I and other earlier
decisions, and came to hold that:-
“30. When a petition is filed for quashing the
process, in a given case, on an overall reading of the
complaint, the High Court may find that the basic
averment is sufficient, that it makes out a case
against the Director; that there is nothing to suggest
that the substratum of the allegation against the
Director is destroyed rendering the basic averment
insufficient and that since offence is made out
against him, his further role can be brought out in
the trial. In another case, the High Court may
quash the complaint despite the basic averment. It
may come across some unimpeachable evidence or
acceptable circumstances which may in its opinion
lead to a conclusion that the Director could never
have been in charge of and responsible for the
conduct of the business of the company at the
relevant time and therefore making him stand the
trial would be an abuse of process of court as no
offence is made out against him.
31. When in view of the basic averment process is
issued the complaint must proceed against the
Directors. But, if any Director wants the process to
be quashed by filing a petition under Section 482 of
the Code on the ground that only a bald averment is
made in the complaint and that he is really not
concerned with the issuance of the cheque, he must
in order to persuade the High Court to quash the
process either furnish some sterling incontrovertible
material or acceptable circumstances to
substantiate his contention. He must make out a
case that making him stand the trial would be an
abuse of process of court. He cannot get the
complaint quashed merely on the ground that apart
from the basic averment no particulars are given in
the complaint about his role, because ordinarily the
basic averment would be sufficient to send him to
trial and it could be argued that his further role
could be brought out in the trial. Quashing of a
complaint is a serious matter. Complaint cannot be
quashed for the asking. For quashing of a complaint
it must be shown that no offence is made out at all
against the Director.”
[Emphasis supplied]
28. After so stating, the Court proceeded to summarise its
conclusions, appreciated the averments made in the complaint
petition and opined thus:-
“… Pertinently, in the application filed by the
respondents, no clear case was made out that at the
material time, the Directors were not in charge of
and were not responsible for the conduct of the
business of the Company by referring to or
producing any incontrovertible or unimpeachable
evidence which is beyond suspicion or doubt or any
totally acceptable circumstances. It is merely stated
that Sidharth Mehta had resigned from the
directorship of the Company on 30-9-2010 but no
incontrovertible or unimpeachable evidence was
produced before the High Court as was done in
Anita Malhotra20 to show that he had, in fact,
resigned long before the cheques in question were
issued. Similar is the case with Kanhaiya Lal Mehta
and Anu Mehta. Nothing was produced to
substantiate the contention that they were not in
charge of and not responsible for the conduct of the
business of the Company at the relevant time. In
the circumstances, we are of the opinion that the
matter deserves to be remitted to the High Court for
fresh hearing. However, we are inclined to confirm
the order passed by the High Court quashing the
process as against Shobha Mehta. Shobha Mehta is
stated to be an old lady who is over 70 years of age.
Considering this fact and on an overall reading of
the complaint in the peculiar facts and
circumstances of the case, we feel that making her
stand the trial would be an abuse of process of
20
(2012) 1 SCC 520
court. It is however, necessary for the High Court to
consider the cases of other Directors in light of the
decisions considered by us and the conclusions
drawn by us in this judgment.”
.
29. We have referred to the aforesaid decision in extenso, as
we are of the convinced opinion that the analysis made therein
would squarely apply to the case at hand and it shall be clear
when we reproduce certain passages from the complaint.
30. Prior to that, we may profitably refer to a two-Judge
Bench decision in Tamil Nadu News Print & Papers Ltd. v.
D. Karunakar and Others21. In the said case, the Court has
referred to the decision rendered in S.M.S. Pharma I (supra)
and, thereafter, taken note of the averments made in the
complaint. Be it noted, in the said case it had been averred in
the complaint petition that the accused Nos. 2 to 9 were
Directors and were in day to day management of the accused
company and in that context the Court has opined as follows:-
“Upon perusal of the complaint, we find that an
averment has been made to the effect that
Accused Nos.3 to 10 were in fact, in-charge of the
day-to-day business of Accused No.1-company.”
21
(2015) 8 SCALE 733Page 27
27
31. We have referred to these decisions as they explicitly
state the development of law and also lay down the duty of the
High Court while exercising the power of quashing regard
being had to the averments made in the complaint petition to
attract the vicarious liability of the persons responsible under
Section 141 of the Act.
32. Now, is the time to scan the complaint. Mr. Divan,
learned senior counsel appearing for the appellant-bank, has
drawn our attention to paragraphs 2, 4 and 10 of the
complaint petition. They read as follows:-
“2. I further say that I know the accused above
named. The accused No.1 is a Company
incorporated under the Companies Act, 1956
having its registered address as mentioned in the
cause title. The accused Nos.2 to 7 are the
Chairman, Managing Director, Executive Director
and whole time Director and authorized
signatories of accused No.1 respectively. As such
being the Chairman, Managing Director,
Executive Director and Whole Time Director were
and are the persons responsible and in charge of
day to day business of the accused No.1 viz.
When the offence was committed. The accused
Nos.6 and 7 being signatories of the cheque are
aware of the transaction and therefore the
accused Nos.2 to 7 are liable to be prosecuted
jointly or severally for having consented and/or
connived in the commission of present office in
their capacity as the Chairman, Managing
Director, Executive Director, Whole Time Director
and authorized signatories of accused No.1,
further the offence is attributable to accused
Nos.2 to 7 on account of their neglect to ensure
and make adequate arrangements to Honour the
cheque issued by accused No.1 and further on
account of the neglect of accused Nos.1 to 7 to
comply with the requisition made in the Demand
Notice issue under the provisions of Section
138(c) of the Negotiable Instruments Act within
the stipulated period. The accused are therefore
liable to be proceeded.
4. I say that the Accused No. 1 through
Accused Nos. 2 and 3 approached the
Complainant Bank at its Branch situated at
Mumbai for a Short Term Loan facility for a sum
of Rs. 200 Crore to meet the expenditure of Four
ORV vessels being built at ABG Shipyard. After
verifying the documents submitted the
Complainant Bank vide its sanction letter dated
28th April 2012 sanctioned the said Facility for
the purpose mentioned therein. The said terms
and conditions mentioned in the sanction letter
dated 28th April 2012 were duly accepted by the
Accused No. 1 by signing the same. Accused No.
1 also agreed to pay interest at the negotiated
rate by the Complainant bank. Hereto annexed
the marked as Exhibit ‘B’ is a copy of the said
sanction letter dated 28th April 2012.
10. I say that the accused Nos.1 to 7 were
aware that the aforesaid cheque would be
dishonoured for being “Account Blocked” and all
the accused, in active connivance mischievously
and intentionally issued the aforesaid cheques in
favour of the complainant Bank.”
33. The aforesaid averments, as we find, clearly meet the
requisite test. It is apt to mention here that there are seven
accused persons. Accused No.1 is the Company, accused
Nos.2 and 3 are the Chairman and Managing Director
respectively and accused Nos.6 and 7 were signatory to the
cheques. As far as the accused Nos.4 and 5 were concerned,
they were whole-time Directors and the assertion is that they
were in charge of day to day business of the Company and all
of them had with active connivance, mischievously and
intentionally issued the cheques in question.
34. Thus, considering the totality of assertions made in the
complaint and also taking note of the averments put forth
relating to the respondent Nos. 2 and 3 herein that they are
whole-time Director and Executive Director and they were in
charge of day to day affairs of the Company, we are of the
considered opinion that the High Court has fallen into grave
error by coming to the conclusion that there are no specific
averments in the complaint for issuance of summons against
the said accused persons. We unhesitatingly hold so as the
asseverations made in the complaint meet the test laid down
in Gunmala Sales Pvt. Ltd. (supra).
35. Resultantly, the appeals are allowed and the order
passed by the High Court is set aside. The learned Magistrate
is directed to proceed with the complaint cases in accordance
with law.
……....................J.
[Dipak Misra]
……....................J.
[Shiva Kirti Singh]
New Delhi
April 06, 2016.
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