Question
before Court:
(a)
whether for purposes of Section 141 of the Negotiable
Instruments Act, 1881, it is sufficient if the substance
of the allegation read as a whole fulfill the requirements
of the said section and it is not necessary to specifically
state in the complaint that the persons accused was
in charge of, or responsible for, the conduct of the
business of the company.
(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 of 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."
Held
:
“…..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 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 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
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.
A reference to Sub-section (2) of Section 141 fortifies
the above reasoning because Sub-section (2) envisages
direct involvement of any Director, Manager, Secretary
or other officer of a company in commission of an offence.
This section 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 these offices in a company. In such a
case, such persons are to be held liable. Provision
has been made for Directors, Managers, Secretaries and
other officers of a company to cover them in cases of
their proved involvement.
“The
conclusion is inevitable that the liability arises on
account of conduct, act or omission on the part of a
person and not merely on account of holding an office
or a position in a company. Therefore, in order to bring
a case within Section 141 of the Act the complaint must
disclose the necessary facts which make a person liable.
Para
14
”There
is almost unanimous judicial opinion that necessary
averments ought to be contained in a complaint before
a persons can be subjected to criminal process. 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
respondent tails within 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 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.”
”In
view of the above discussion, our answers to the questions
posed in the Reference are as under:
(a)
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.
(b)
The answer to question posed in sub-para (b) has to
be in 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
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 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 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 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.
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