This is an application under section 482 of the Criminal Procedure Code, 1973, seeking to quash proceedings in C.C. No. 121 of (the opinion contains both 1998 and 1997 at different places) pending before the 10th Metropolitan Magistrate, Secunderabad, in which the petitioner is arrayed as A‑4.

The petitioner is described in the opinion as a director of M/s. Direct Finance and Investment Ltd., New Delhi, and contends that she submitted her resignation from the directorship (the opinion records both April 15, 1994 and April 5, 1994 at different places) and was not associated thereafter. The first respondent (complainant) filed a complaint under section 138 of the Negotiable Instruments Act, 1881, against the company (referred to as A‑1) and three others (A‑2 to A‑4).

The complaint alleges that A‑1 (through its directors) accepted an inter‑corporate deposit of Rs. 2.00 crores for 15 days at 25% per annum, executed a demand promissory note and later issued cheques (dated August 15, 1996) for the principal and interest. The cheques were dishonoured for “insufficient funds” and returned to the complainant's bankers with a memo on September 9, 1996. The complainant served a statutory notice dated September 21, 1996; according to the complaint, A‑2 and A‑3 received the notice on September 25, 1996, while A‑1 and A‑4 returned the notice unserved but had knowledge of it. The petitioner challenged the maintainability of the complaint against her and filed the present petition to quash the proceedings insofar as they relate to A‑4.

Legal Issues Presented

Whether the complaint and the materials accompanying it disclose clear, specific and unambiguous allegations that the petitioner (A‑4) was “in charge of, and responsible to” the company for conduct of its business at the time the alleged offence under section 138 was committed, as required by section 141 of the Negotiable Instruments Act.
Whether the complaint may be quashed under section 482 Cr.P.C. on the ground that it does not make out an offence against the petitioner on its face.
Whether the documents relied upon by the complainant (notably a board resolution dated February 15, 1995 certified by the petitioner) establish a prima facie case against the petitioner with respect to responsibility for the company's business at the material time (August 1996, when the cheques were dated).

Arguments of the Parties

Petitioner's Arguments (A‑4)

The allegations in the complaint against the petitioner are vague and not specific; the complaint must contain clear, unambiguous and specific allegations against each accused showing that the person was in charge of and responsible to the company for conduct of its business when the offence was committed.
A mere bald allegation that all directors are liable is insufficient to maintain a complaint under section 138/141 of the Act.
The petitioner had tendered resignation as director (the petitioner's counsel referred to a resignation dated April 5/15, 1994 and that a copy was sent to the company and the Registrar of Companies), and therefore she was not liable to be proceeded against.

Complainant's Arguments (First Respondent)

The complaint must be read as a whole and the cumulative effect of the averments should be taken; it is not necessary to use the precise words of section 141 (“magic words”) as long as the substance of the allegations discloses the ingredients of the offence.
The complainant disputed the fact of the petitioner's resignation and contended that evidence on record would show that the petitioner continued as director after the Delhi High Court order.
The complainant relied on material placed with the complaint, notably a certified true copy of a board resolution dated February 15, 1995 (certified by the petitioner), to establish the petitioner's connection with the company's affairs or the board's dealings with inter‑corporate deposits.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Girdhari Lal Gupta v. D.N. Mehta, (1971) 3 SCC 189 (AIR 1971 SC 2162)	Interpreting an FERA provision in pari materia with section 141: "person in charge" means overall control of day‑to‑day business; penal provisions to be strictly construed.	The court relied on this to emphasize that "in charge" must connote overall control and that such penal vicarious liability provisions should be strictly construed.
Sham Sunder v. State of Haryana, (1989) 4 SCC 630 (AIR 1989 SC 1982)	Penal provisions must be strictly construed; no vicarious liability in criminal law unless statute so provides; partners not automatically liable.	Used to underline that mere status (e.g., partner or director) does not automatically attract criminal vicarious liability absent clear statutory or factual basis.
K.P.G. Nair v. Jindal Menthol India Ltd., [2001] 104 Comp Cas 290 : [2001] 2 Supreme 311	Sections 138 and 141: only persons who were in charge of and responsible to the company for conduct of business at the material time can be proceeded against; complaint need not repeat section 141 verbatim but substance must satisfy the statutory ingredient.	Applied to hold that the complaint must, by its substance, disclose that the accused was in charge and responsible; absence of such averment is fatal.
Municipal Corporation of Delhi v. Ram Kishan Rohtagi, (1983) 1 SCC 1 (AIR 1983 SC 67)	Under section 482 Cr.P.C., proceedings can be quashed at initial stages if on the face of complaint no offence is constituted.	The court applied the "face of the complaint" test to decide whether, without adding or subtracting, the complaint discloses an offence against the petitioner.
Municipal Corporation of Delhi v. Purshotam Dass Jhunjunwala, (1983) 1 SCC 9 (AIR 1983 SC 158)	Complaint cannot be quashed if it contains clear allegations showing active role of directors and extent of their liability; the sufficiency of evidence is not examined at quashing stage.	Distinguished to explain that where clear averments are made about active role, quashing is inappropriate; conversely, absence of such averments supports quashing.
Haryana State Board for the Prevention and Control of Water Pollution v. Bharat Carpets Ltd., [1995] 84 Comp Cas 681	Analogy: managing director/chairman in overall control of day‑to‑day business could be held liable; other directors not so if not in charge.	Reinforced the proposition that only those in overall control (discernible from averments) can be subjected to vicarious liability.
State of Haryana v. Brij Lai Mittal, [1998] 93 Comp Cas 329	Vicarious liability arises only if, at material time, person was in charge of and responsible to the company for conduct of business; being a director alone is not enough.	Used to support the conclusion that mere directorship does not automatically attract liability; factual foundation required.
Avon Industries Ltd. v. Integrated Finance Co. Ltd., [2001] 105 Comp Cas 259 : [2001] 1 ALD (Crl.) 461 (AP)	Where averments in the complaint disclose that certain directors (e.g., managing director) were in charge and responsible, liability can be inferred even if the complaint lacks particular phrasing.	The court noted the decision but rejected the broad submission that all managing/joint managing/executive directors are automatically vicariously liable; Avon was applied narrowly for its facts.
Renewable Energy Systems Ltd. v. State, [2000] 2 ALD (Crl.) 701 : [2002] 111 Comp Cas 786	Focus is whether complaint lays a foundation to take cognizance against persons other than the promisor; inartistic drafting will not defeat a complaint if the averments disclose the accusation.	Accepted the principle that courts should look for foundation in complaint and not be defeated by inartistic drafting, but still require substantive averments against each accused.
Rohinton Noria v. N.C.C. Finance Ltd., [2000] 1 ALD (Crl.) 664 : [2001] 105 Comp Cas 227	Complainants should not routinely proceed against all directors by mere repetition of section 141; enquiry and ascertainment are required before roping in directors.	Relied upon to criticize routine roping‑in of directors and to stress the need for foundation in the complaint regarding each director's role.
Jord Engineers India Ltd. v. Nagarjuna Finance Ltd., [2000] 100 Comp Cas 691	There must be specific averment regarding the role played by each director for them to be liable under section 138.	Applied to reaffirm that specific averments about each director's role are necessary in the complaint.
Secunderabad Health Care v. Secunderabad Hospitals, [1998] 4 ALD 613 : [1999] 96 Comp Cas 106 (AP)	Requirement of clear, unambiguous and specific allegations against persons impleaded as accused that they were in charge of and responsible for company's business at the material time.	Relied upon heavily to restate the test for averments required in complaints under sections 138 and 141.
Smt. K. Janaki Manoharan v. Gayatri Sugar Complex Ltd., [2000] 2 ALT (Crl.) 278 : [2002] 108 Comp Cas 899	Mere directorship at the time of offence does not automatically attract prosecution; only those who played some part or whose consent/connivance/neglect is shown can be proceeded against.	Applied to emphasize that only those directors who played a role or whose negligence/consent/connivance is alleged are liable; mere titular directorship insufficient.

Court's Reasoning and Analysis

The court began by setting out the statutory framework in section 141 of the Negotiable Instruments Act, which makes persons who were “in charge of, and responsible to” a company for conduct of its business vicariously liable for offences committed by the company under section 138, subject to a proviso that permits a defence that the offence was committed without the person's knowledge or despite due diligence.

The court reviewed authoritative precedents (both Supreme Court and High Court/Division Bench decisions) interpreting analogous or identical statutory phrases in section 141 and similar provisions. From those precedents the court distilled key legal principles:

Penal provisions that create vicarious liability should be strictly construed; mere status (director/partner) does not automatically create liability.
The expression “in charge” implies overall control of the day‑to‑day business and cannot be lightly inferred;
Clear, specific and unambiguous allegations in the complaint are necessary to fasten vicarious liability on individual directors; mere repetition of the words of section 141 is insufficient.
At the quashing stage under section 482 Cr.P.C., the court must apply the "face of the complaint" test — it cannot undertake a roving inquiry into disputed facts or probabilities but must be satisfied that the complaint, read as it stands (and the accompanying material where relevant), discloses the statutory ingredients against the accused.

Applying these principles to the present case, the court examined paragraph 2 of the complaint which, according to the opinion, states that A‑1 is a company represented by director A‑2, and that A‑3 and A‑4 are also directors and that A‑2 to A‑4 are “actively involved in the management of the affairs” of A‑1. The court held that the averment that A‑2 to A‑4 are “actively involved in the management” is vague and indefinite and does not amount to an allegation that the petitioner was in overall control of the day‑to‑day business or was responsible to the company for conduct of its business at the material time.

The court also considered material relied upon by the complainant — notably a certified true copy of a board resolution dated February 15, 1995 (certified by the petitioner) authorizing a director (Mr. Rajiv Anand) to sign and execute promissory notes and post‑dated cheques to obtain an intercorporate deposit of Rs. 2 crores. The court observed that:

The resolution reflects a board decision to avail an intercorporate deposit and authorized a specific director to execute documents; it does not disclose commission of any offence on that date.
The resolution is dated more than a year prior to the dates of the cheques (August 15, 1996) and their dishonour (memo dated September 9, 1996), and thus does not remotely demonstrate that the petitioner was overall in charge of day‑to‑day business at the material time.
There was no other material placed on record which disclosed the petitioner’s role or responsibility for the company's business at the relevant time.

On this basis, the court concluded that the complaint, read as a whole and including the material, did not disclose any specific role played by the petitioner and therefore failed to meet the requirement of section 141 for fastening vicarious liability. The court emphasized that the prosecution against the petitioner amounted to an abuse of process and that further proceedings would result in manifest injustice.

The court expressly refrained from deciding other contentions (for example, on the petitioner's resignation or the validity of the statutory notice) because they were unnecessary in view of the finding on the sufficiency of the complaint.

Holding and Implications

Holding: The petition is allowed and the proceedings in C.C. No. 121 of 1997/1998 (as referred to in the opinion) pending before the learned 10th Metropolitan Magistrate, Secunderabad, are quashed insofar as they relate to the petitioner A‑4.

Implications:

Direct effect: The prosecution insofar as it relates to A‑4 is terminated; the learned Magistrate is directed to proceed with the trial against the other accused uninfluenced by the observations in this order.
On precedent and wider law: The judgment reiterates existing legal principles (as established by cited authorities) that vicarious criminal liability of directors under section 141 requires clear, specific and unambiguous allegations showing that the accused was in charge of and responsible to the company for its business at the material time; mere directorship or bald repetition of statutory language is insufficient. The court applied these settled principles to the facts and quashed the complaint against the petitioner; the opinion does not purport to create a new legal rule beyond those authorities.

Show all summary ...

The Judgment of the Court was delivered by

Sudershan Reddy, J.:— This is an application filed under section 482 of the Criminal Procedure Code, 1973, to quash the proceedings in C.C No. 121 of 1998 on the file of the learned 10th Metropolitan Magistrate, Secunderabad, in which the petitioner is arrayed as A-4.

2. Before adverting to the question as to whether the petitioner is entitled to any relief in this application, it may be necessary to briefly notice the relevant facts leading to the filing of this application.

3. The petitioner herein is a director of the company known as M/s. Direct Finance and Investment Ltd., New Delhi. It is the case of the petitioner that she submitted her resignation from the directorship on April 15, 1994, sending a copy of the letter to the company and also to the Registrar of Companies, New Delhi. She was never associated with the company thereafter at any point of time. It is not necessary to further dwell on this aspect of the matter, since the court does not propose to express any opinion on this question, as there is any amount of controversy regarding resignation of the petitioner, as the director of the company. The first respondent herein filed a complaint against the petitioner and three others for the offence punishable under section 138 of the Negotiable Instruments Act, 1881, as amended by Act 66 of 1988 (for short “the Act”). In the said complaint it is inter alia stated that A-1 is a duly incorporated company having its registered office at 353, Bhora Enclave, Outer Ring Road, Paschim Vihar, Delhi-110041. According to the first respondent/complainant A-1-company is represented by A-2, a director of the company. A-3 and A-4 are also directors of the A-1-company. A-2 to 4 are actively involved in the management of the affairs of A-1-company. It is further alleged that the A-1-company, represented by A-2 had called for intercorporate deposits from the first respondent-company for a short period of fifteen days to the extent of Rs. 2.00 crores. The first respondent-company accordingly agreed for the said deposit of Rs. 2.00 crores. The rate of interest agreed by A-1 was 25 per cent, per annum payable on Rs. 2.00 crores. A-1-company represented by A-2 executed a demand promissory note for the said amount of Rs. 2.00 crores deposited by the complainant with A-1-company. The date of maturity of the deposit was March 15, 1995.

4. It is further alleged that after expiry of the period of deposit A-1-company represented by A-2 issued cheque bearing No. 705093 for Rs. 2.00 crores; cheque bearing No. 705094 for Rs. 1,58,219.00 and another cheque No. 519302 for Rs. 8,33,334.00 all drawn on Canara Bank, Janpath, New Delhi. All cheques were dated August 15, 1996. The cheques for Rs. 8,33,334.00 and Rs. 1,58,219.99 represented the interest part on the deposit of Rs. 2 crores for fifteen days. It is further alleged that the accused agreed to pay the balance within a short period.

5. It is further alleged that on presentation for encashment, the cheques issued by A-1-company were dishonoured on the ground of “insufficient funds” and were returned by the complainant's bankers, Global Trust Bank Ltd., SD Road, Secunderabad, with a memo on September 9, 1996. The complainant immediately and within time got issued a notice dated September 21, 1996, directing A-1-company to make payment of Rs. 2,09,91,553.00 payable under the said cheques together with interest thereon at 25 per cent, per annum from March 16, 1995, and Rs. 5,000.00 towards the charges for the notice within fifteen days from the date of receipt of the said notice. It is stated that A-1, A-4 managed to return the notice unserved; but however A-2 and A-3 received the same on September 25, 1996. A-1 and A-4 have full knowledge of the notice issued by the complainant. In spite of the notice, the accused neither paid the amount nor gave any reply. This is the sum and substance of the complaint filed by the first respondent.

6. In this application, Sri Vedula Srinivas, learned counsel appearing for the petitioner-A4 submits that the accusations and allegations made in the complaint filed by the first respondent against the petitioner are vague and there are no specific allegations/accusations as such made against the petitioner. It is the submission of learned counsel for the petitioner that the accusations/allegations made in the complaint must be clear, unambiguous and specific against each of the accused and such allegations must reveal that each of the accused were in charge of and were responsible to the company for the conduct of its business at the material time when the offence was committed by the company. A bald allegation that all the directors of the company are liable is not sufficient for the purpose of maintaining a complaint under section 138 of the Act. In the absence of specific allegations, the complaint is not maintainable against the petitioner. It is also submitted by learned counsel for the petitioner that the petitioner had already submitted her resignation to the company on April 5, 1994, and also sent a copy of the same to the Registrar of Companies. This aspect of the matter is evident from the order passed by the Delhi High Court in C.A No. 174 of 1999.

7. Sri D. Srinivas Prasad, learned counsel for the first respondent-complainant submits that the allegations and accusations made in the complaint must be read as a whole and taken at its face value. It is not necessary to repeat the “magic words” contained in section 141 of the Act and it would be enough if the cumulative effect of the allegations reveals the offence punishable under section 138 of the Act. Learned counsel for the respondent/complainant seriously disputed the factum of resignation tendered by the petitioner. It is contended that the evidence on record would show that the petitioner continued as director of the company, even after the order passed by the Delhi High Court.

8. The crucial question that arises for consideration in the instant case is as to whether the complaint filed by the respondent-complainant satisfies the requirement in law. At this stage, it would be appropriate to notice section 141 of the Act.

“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 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.

(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) ‘director’, in relation to a firm, means a partner in the firm.”

9. A plain reading of section 141 of the Act would make it clear that in case an offence under section 138 of the Act has been committed by the company, not only the company but every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of its business shall also be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Sub-section (2) of section 141 of the Act would further make it clear that in the case of an offence committed by a company, not only the company but all its directors, managers, secretary or other officers of the company shall also be deemed to be guilty of the offence and shall also be liable to be proceeded against and punished accordingly, provided the offence has been committed by the company with the consent or connivance of, or is attributable to, any neglect on their part. In such case, such directors, managers, secretary or other officers of the company shall also be deemed to be guilty of the offence and are liable to be proceeded against and punished accordingly.

10. This court as well as the Supreme Court had an occasion to interpret section 141 of the Act and other enactments containing analogous and similar provisions as that of section 141 of the Act. It would be appropriate to notice the relevant decisions that may have a vital bearing upon the question that falls for consideration.

11. The Supreme Court in Girdhari Lal Gupta v. D.N Mehta, (1971) 3 SCC 189 : AIR 1971 SC 2162, while interpreting section 23C(1) and (2) of the Foreign Exchange Regulation Act, 1947, which is in pari marteria with section 141 of the Negotiable Instruments Act, held that (page 2163):

…section 23C(1) is a highly penal section as it makes a person who was in charge and responsible to the company for the conduct of its business vicariously liable for an offence committed by the company. Therefore, in accordance with well-settled principles this section should be construed strictly. “While interpreting the expression “person in charge” the apex court observed”… in the context a person ‘in charge’ must mean that the person should be in overall control of the day-to-day business of the company or firm”.

12. It is further observed:

‘It mentions director, who may be a party to the policy being followed by a company and yet not be in charge of the business of the company. Further, it mentions manager, who usually is in charge of the business but not in over all charge. Similarly the other officers may be in charge of only some part of business.”

13. In Sham Sunder v. State of Haryana, (1989) 4 SCC 630 : AIR 1989 SC 1982 : [1990] 67 Comp Cas 1, while interpreting Section 10 of the Essential Commodities Act, 1955, which deals with the offences of a firm, which is again in pari materia with section 141 of the Act, the apex court observed that (page 4):

“… penal provisions must be strictly construed in the first place. There is no vicarious liability in criminal law unless the statute takes that also within its fold. Section 10 of the Essential Commodities Act does not provide for such liability as it does not make all the partners liable for the offences whether they do business or not.”

14. It is observed (page 4):

“It is, therefore, necessary to add an emphatic note of caution in this regard. More often it is common that some of the partners of a firm may not even be knowing of what is going on day-to-day in the firm. There may be partners, better known as sleeping partners who are not required to take any part in the business of the firm. There may be ladies and minors who were admitted only for the benefits of partnership. They may not know anything about the business of the firm. It would be a travesty of justice to prosecute all partners and ask them to prove under the proviso to sub-section (1) that the offence was committed without their knowledge. It is significant to note that the obligation of the accused to prove under the proviso that the offence took place without his knowledge or that he exercised all due diligence to prevent such offence arises only when the prosecution establishes that the requisite condition mentioned in sub-section (1) is established. The requisite condition is that the partner was responsible for carrying on the business and was during the relevant time in-charge of the business. In the absence of any such proof, no partner could be convicted. We, therefore, reject the contention urged by counsel for the State.”

15. The Supreme Court in K.P.G Nair v. Jindal Menthol India Ltd.., [2001] 104 Comp Cas 290 : [2001] 2 Supreme 311 while interpreting sections 138 and 141 of the Negotiable Instruments Act, held (page 292 of Comp Cas):

“… in a case where a company committed offence under section 138, then not only the company but also every person who at the time when the offence was committed, was in charge of and was responsible to the company for the conduct of the business of the company shall be deemed to be guilty of the offence and liable to be proceeded against and punished accordingly. It follows that a person other than the company can be proceeded against under those provisions only if that person was in charge of and was responsible to the company for the conduct of its business”.

(emphasis1 is mine.)

16. It is, however, observed by the Supreme Court that the words in section 141(1) of the Act need not be incorporated in a complaint as magic words. But, at the same time, the substance of the allegations read as a whole, should answer and fulfil the requirements of the ingredients of the said provision. The Supreme Court in K.P.G Nair's case, [2001] 104 Comp Cas 290 : [2001] 2 Supreme 311 referred to the averments in the complaint filed by the complainant on July 14, 1998, and the same are as follows (page 292):

“That accused No. 1 is the company, accused No. 2 is the whole-time chairman, accused No. 3 is one of the directors, who signed the share certificates on the date of issuance of the same and the three cheques which were issued to the complainant for the payment of the value of the preferential shares on the date of maturity. Accused Nos. 4 and 5 are the signatories of all the three cheques. All the accused persons hatched a conspiracy with a mala fide intention to deceive the complainant to the tune of Rs. 57.00 lakhs, thereby committing an offence of cheating and are liable to be punished under section 420/120B of the Indian Penal Code. All the accused persons are also responsible for the dishonourment of the cheques under the Negotiable Instruments Act and all are liable to be punished for the offences committed under section 138 of the Negotiable Instruments Act. All the accused persons have failed to make the payment of the dishonoured cheques despite the legal notice which was sent by registered post.”

17. After adverting to the said portion in the complaint, the Supreme Court observed (page 292):

“… nowhere it is stated that on the date when the offence is alleged to have been committed, the appellant was in charge of or was responsible to the accused company for the conduct of its business.”

18. In Municipal Corporation of Delhi v. Ram Kishan Rohtagi, (1983) 1 SCC 1 : AIR 1983 SC 67, the Supreme Court observed (page 70):

“… proceedings against an accused in the initial stages can be quashed only if on the face of the complaint or the papers accompanying the same, no offence is constituted. In other words, the test is that taking the allegations and the complaint as they are, without adding or subtracting anything, if no offence is made out then the High Court will be justified in quashing the proceedings in exercise of its powers under section 482.”

19. The facts in the said case before the Supreme Court may be noticed. A complaint was filed before the Metropolitan Magistrate, who summoned all the respondents for being tried for violation of the provisions of the Prevention of Food Adulteration Act. The complaint was filed by the Assistant Municipal Prosecutor in the Court of Metropolitan Magistrate, Delhi, against the accused for having committed offences under section 7/16 of the Prevention of Food Adulteration Act. Adverting to the question as to whether all the directors are vicariously liable for the offence, since vicarious liability being an incident of an offence under the Act, observed that (page 70):

“So far as the directors are concerned, there is not even a whisper nor a shred of evidence nor anything to show, apart from the presumption drawn by the complainant, that there is any act committed by the directors from which a reasonable inference can be drawn that they could also be vicariously liable. In these circumstances, therefore, we find ourselves in complete agreement with the argument of the High Court that no case against the directors has been made out ex facie on the allegations made in the complaint and the proceedings against them were rightly quashed.”

20. In Municipal Corporation of Delhi v. Purshotam Dass Jhunjunwala, (1983) 1 SCC 9 : AIR 1983 SC 158, the Supreme Court while dealing with the question as to the vicarious liability of the directors for the offence committed by the company under sections 16 and 17 of the Prevention of Food Adulteration Act held the complaint cannot be quashed if a clear allegation has been made regarding the active role played by the directors and the extent of their liability. The Supreme Court adverted to the relevant allegation made against the accused therein, found in paragraph 5 of the complaint, which is to the following effect:

(1) The accused Ramkishan is the chairman;

(2) The R.P Neyatia is the managing director;

(3) A-7 to 12 are the directors of the Hindustan Sugar Mills Ltd., and were in charge of and responsible to it for the conduct of its business at the time of the commission of offence.

21. The Supreme Court having adverted to that portion of the complaint held that the said allegation constitute dear averments revealing the active role played by the directors and extent of their liability. In that view of the matter it cannot be said that paragraph 5 of the complaint is vague and does not implicate the directors. As to what would be the evidence against the respondents is not a matter to be considered at this stage and would have to be proved at the trial. The Supreme Court observed that the purpose of quashing the proceedings, only the allegations set forth in the complaint have to be seen and nothing further.

A Division Bench of the Punjab and Haryana High Court in Haryana State Board for the Prevention and Control of Water Pollution v. Bharat Carpets Ltd. [1995] 84 Comp Cas 681, while considering the provisions of sections 43 and 44 of the Water (Prevention and Control of Pollution) Act, 1974, which is in pari materia to sections 138 and 141 of the Act held (page 685):

…the managing director and chairman of the company who were in overall control of the day-to-day business of the company, could have been held to be liable and not other directors, as they were neither in charge of the company nor acquainted with the day-to-day business of the company.”

22. In State of Haryana v. Brij Lai Mittal, [1998] 93 Comp Cas 329, the Supreme Court while interpreting section 34 of the Drugs and Cosmetics Act, 1940, which is analogous to section 141 of the Act, held (headnote):

“The vicarious liability of a person for being prosecuted for an offence committed under the Drugs and Cosmetics Act, 1940, by a company, arises if at the material time he was in charge of and was also responsible to the company for the conduct of its business. Simply because a person is director of the company it does not necessarily mean that he fulfils both the above requirements so as to make him liable. Conversely, without being a director a person can be in charge of and responsible to the company for the conduct of its business.”

23. The Supreme Court in the said judgment noticed that except a bald statement that the accused were directors of the manufacturing company, there was no other allegation to indicate that even at that time they were in charge of the company and also responsible to the company for the conduct of its business. In the circumstances, the prosecution against them was quashed.

24. In Avon Industries Ltd. v. Integrated Finance Co. Ltd., [2001] 105 Comp Cas 259, 272 : [2001] 1 ALD (Crl.) 461 (AP) upon which strong reliance has been placed by learned counsel for the respondent-complainant, this court observed:

“… the directors are primarily responsible in view of the position they occupy. So far others are concerned, in the said judgment, this court observed ‘petitioners Nos. 2 to 4 being the managing director, joint managing director and executive director of the first petitioner-company, it is discernible that they were in charge of and were responsible for the business of the first petitioner-company even in the absence of any specific averment in the complaint by virtue of their position.”

25. In my considered opinion, the contention of the respondent that every managing director, joint managing director and executive director are vicariously liable for the commission of the offence by the company under section 138 of the Act, is not correct The judgment in Avon Industries Ltd.'s case, [2001] 105 Comp Cas 259 : [2001] 1 ALD (Crl.) 461 (AP) is not an authority for any such proposition as is sought to be contended by learned counsel for the first respondent-complainant This court having perused the complaint in the said case came to the conclusion that the managing director, joint managing director and executive director of the accused-company therein were in charge of and responsible for the business of the accused-company and the same could be discernible from the averments made in the complaint, itself, though there were no specific averments in the petition against them. In the light of the averments made in the said complaint, the court observed that the managing director, joint managing director and executive director of the accused-company therein were responsible for the business of the company.

26. In Renewable Energy Systems Ltd. v. State, [2000] 2 ALD (Crl.) 701 (AP) : [2002] 111 Comp Cas 786 it is held by this court (page 790 and 792 of Comp Cas):

“… what is germane for consideration by the courts is whether there has been a foundation laid in the complaint so as to take cognizance against those persons other than the promisor of the cheque when the prime accused happens to be a juristic person… What is germane for consideration is whether there is such an accusation in the complaint which enables the court to take cognizance of the offence or not Such accusation can be articulated in the complaint, in an artistic manner, by employing the language used in the section of law. Such an accusation can manifest itself from the averments made in the complaint, albeit, the complaint has been drafted in an inartistic manner with inadvertent omissions. In such circumstances, it is not expedient to ignore the patent.”

27. In Rohinton Noria v. N.C.C Finance Ltd., [2000] 1 ALD (Crl.) 664 (AP) : [2001] 105 Comp Cas 227, this court observed that (page 229 of Comp Cas):

“… in complaints filed for offence under section 138 of the Negotiable Instruments Act, all the directors of the company are routinely being proceeded against by invoking the provision under section 141 of the Negotiable Instruments Act by glibly repeating the words in the section that certain director ‘was in charge of and responsible to the company for the conduct of business of the company’. It is necessary to emphasize that section 141 of the Negotiable Instruments Act where and offence under section 138 of the Negotiable Instruments Act has been committed by a company the complainant is required to give a serious thought and make enquiries and ascertain the fact as to whether a particular director was in charge of and responsible to the affairs and conduct of business of the company. Routinely roping in all the directors by merely repeating the words used in section 141 of the Negotiable Instruments Act without ascertaining the facts is a serious matter which has to be deprecated.”

28. This court having declared the law, however, held that it is a question which is necessarily to be decided during the trial. In a petition under section 482 of the Criminal Procedure Code, the matters cannot be decided on the basis of probabilities. When the complainant has made an assertion, it must be presumed that such an assertion has been made with full responsibility and if such an assertion is proved false, the complainant must be prepared to face the consequences.

29. In Jord Engineers India Ltd. v. Nagarjuna Finance Ltd., [2000] 100 Comp Cas 691 : [2000] 1 ALD (Crl.) 582, it is held by this court that (page 693 of Comp Cas):

“… that there must be a specific averment regarding the role played by each of the directors,… then only they are liable for prosecution under section 138 of the Negotiable Instruments Act.”

30. In Secunderabad Health Care v. Secunderabad Hospitals, [1998] 4 ALD 613 : [1999] 96 Comp Cas 106 (AP), this court while interpreting sections 138 and 141 of the Act held that (page 112 of Comp Cas):

“the requirement in law is that there must be clear, unambiguous and specific allegations against the persons who are impleaded as accused that they were in charge of and responsible to the company in the conduct of its business at the material time when the offence was committed by the company. It cannot be left to the wild imagination of the complainant. There must be specific accusation against each of the persons impleaded that such person was in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed by the company. True it is not necessary to disclose the evidence as to on what basis such an assertion is made by the complainant. It may be a matter of evidence and proof.”

31. In Smt. K. Janaki Manoharan v. Gayatri Sugar Complex Ltd., [2000] 2 ALT (Crl.) 278 (AP) : [2002] 108 Comp Cas 899 this court further elaborated the same principle and held (page 904):

“Mere fact that a person was a director at the time when the offence was committed by the company cannot be automatically roped in as an accused in a case filed against the company. Persons who are not actually in charge of and were responsible to the company for the conduct of its business when the offence was committed shall also be deemed to be guilty of that offence under section 138 of the Act, provided the offence has been committed with their consent or connivance or is attributable to any negligence on their part and such persons could be a director, manager, secretary or other officers of the company. It is thus obvious that only such of those directors and officers of the company, such as, secretary, manager shall be deemed to be guilty of the offence punishable under section 138 of the Act in the case of an offence by a company, provided they have played some part in the commission of an offence by a company. Every director is not liable for the offence committed by a company punishable under section 138 of the Act.”

32. An analysis of the judgments referred to hereinabove would in clear terms reveal the legal position that in order to fasten vicarious liability against a director of the company there must be clear, specific and unambiguous allegations made in the complaint. It is not as if every director of the accused-company can be roped in automatically and be proceeded against for the offence committed by the company under section 138 of the Act. The complainant can proceed against only such persons who at the time the offence was committed by the company were in charge of and were responsible to the company for the conduct of its business. Such persons could be directors, managers, secretary or the other officers of the company. Such persons “in charge” must mean that they were in overall control of the day-to-day business of the company or firm, as the case may be. A complaint based on wild imaginations is not a complaint at all in the eye of law. The accusation against each of the director/person/accused must be specific and unambiguous. The role played by each of the accused must be clearly stated in the complaint. The complaint if read as a whole must clearly disclose the role played by each of the directors of the company in the case of an offence committed by the company under section 138 of the Act. Any inartistic expression used in drafting the complaint cannot by itself be a ground for quashing the proceedings; but, at the same time, no complainant can be permitted to launch prosecution against all the directors of the company without there being a proper foundation in the complaint, itself, about the actual role played by them at the material point of time, when the offence is committed by the company. No prosecution would lie against a person or persons as the case may be on the simple accusation in the complaint that such person or persons were the director, executive director or an officer of the company at the material time when the offence was committed by the company. But at the same time it is equally well settled that this court in exercise of its power under section 482 of the Criminal Procedure Code would not normally undertake any roving enquiry to find out as to the truth or otherwise of the allegations and accusations made in the complaint. The court cannot undertake any further enquiry if clear specific and unambiguous allegations are made against each of the persons arrayed as accused in the complaint about the role played at the material time when the offence is committed by the company. Mere repetition of the words incorporated in section 141 of the Act would not meet the requirement in law to rope in any and every director, or other officer, manager, secretary of the company as the case may be. There must be something more clearly stated in the complaint. A bald allegation by merely repeating those magic words mentioned in section 141 of the Act would not be enough. But in case where the complaint discloses the factual foundation against the persons arrayed as accused, the High Court in exercise of its inherent jurisdiction cannot interdict the further enquiry and trial.

33. Let us now take the material allegations/accusations made in the complaint against the petitioner, who is arrayed as A-4 in the complaint. Paragraph 2 of the complaint contains the crux of the allegations/accusations against the accused, including the petitioner.

“Accused No. 1 is a duly incorporated company, having its registered office at the address mentioned above, represented by the director, A-2. Accused Nos. 3 and 4 are also the directors of accused No. 1-company and accused Nos. 2 to 4 are actively involved in the management of the affairs of accused No. 1-company.”

34. A fair reading of the allegations made in paragraph 2 of the complaint it is clear that there is nothing against the petitioner about the role played by her. It is merely stated that A-2 and A-4 are actively involved in the management of the A-1-company. The requirement in law is where an offence committed by the company, not only the company committing the offence, but every person who was in charge of and was responsible to the company for the conduct of the business of the company also shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished according to law. There is no clear accusation as against the petitioner that she was responsible to the company for the conduct of its business at the time when the company committed the offence. There is no accusation as such against the petitioner herein that she was in over all control of the day-to-day business of the company. The expression that “A-2 to 4 are actively involved in the management of A-1-company” is absolutely vague and indefinite. It does not satisfy the requirements in law.

35. However, learned counsel for the respondent-complainant contends that not only the complaint, but material made available along with the complaint also may have to be taken into consideration to find out as to whether any specific accusation as such is made against the persons arrayed as accused in the complaint. There is absolutely no difficulty whatsoever to agree with the said submission made by learned counsel for the respondent-complainant. But, is there any material available on record, revealing the role, if any, played by the petitioner herein? Is there any document made available by the respondent-complainant to make out a prima fade case against the petitioner also for the offence, if any, committed by A-1-company. Is there anything on record suggesting that the petitioner was in over all control of the business of the company?

36. Learned counsel for the first respondent-company would place strong reliance upon the certified true copy of the resolution passed at the meeting of the board of directors of the A-1-company held on February 15, 1995, which is to the following effect:

“Resolved that the company to avail an Inter Corporate Deposit of Rs. 2 crores (Rs. two crores only) for 15 days at 25 per cent, per annum from M/s. SMS Pharmaceuticals Ltd., 115/2, RT Second Floor, Sanjeeva Reddy Nagar, Hyderabad, and that Mr. Rajiv Anand, director be and is hereby authorised to sign and execute demand promissory note, post-dated cheques and other documents as may be required by M/s. SMS Pharma- ceuticals Ltd., on behalf of the company and deliver the same to M/s. SMS Pharmaceuticals Ltd.

Resolved further that Mr. Rajiv Anand, director of the company be and is hereby authorised to affix common seal of the company on such documents and papers as may be required in this connection pursuant to the articles of association of the company.”

37. Learned counsel would invite the court's attention that the said resolution is certified as true copy by no other than the petitioner, herself. May be so. The resolution is dated February 15, 1995. The resolution at the most discloses that the board of directors resolved to avail of intercorporate finance of Rs. 2.00 crores from the first respondent-company and authorized the A-2 to sign and execute the demand promissory note, the post-dated cheques and other documents as required by the first respondent-company. It may reflect the policy decision of the company to avail of intercorporate facility. The contents do not disclose the commission of any offence on that day.

38. In the complaint filed by the respondent/complainant there is no mention or whisper about the said resolution stated to have been certified by the petitioner herein. There is also no mention about any post-dated cheques. The whole cause of action for the complaint is based upon the cheques dated August 15, 1996, issued by A-1-company signed by A-2, on behalf of A-1-company. The cheques are dated August 15, 1996. They were returned by the bankers of the respondent/complainant along with a memo on September 9, 1996. The resolution dated February 15, 1995, which is one and half years prior to the date of cheques and their return by the banker dishonouring the same, would not even remotely suggest that the petitioner was overall in charge of day-to-day business of the company at the material time, when the company committed the offence, if any.

39. The crucial issue is as to whether the petitioner herein, at the material time, when the offence was committed by the company, was in charge of and responsible to the business of A-1-company. The document upon which reliance is sought to be placed would in no manner advance the case of the respondent/complainant. The same is not at all relevant to decide the question as to whether the petitioner herein was responsible at the material time for the offence committed by the A-1-company.

40. In the aforesaid circumstances, I do not find any difficulty whatsoever to accept the contentions advanced by learned counsel for the petitioner and reject the plea of the respondent. The complaint filed by the respondent/complainant is couched in vague and indefinite allegations and it does not disclose any case against the petitioner herein. The case against the petitioner is nothing but an abuse of the legal process. Any further proceedings would result in manifest injustice.

41. In view of the conclusion reached by this court, on this particular issue, it is not necessary to go into the other points urged by learned counsel for the petitioner viz., about the resignation tendered by the petitioner herein, as one of the directors of A-1-company. The court also need not go into the question as to the validity of the notice issued by the respondent/complainant on September 21, 1996.

42. For all the foregoing reasons, this petition is allowed. The proceedings in C.C No. 121 of 1997 pending on the file of the learned 10th Metropolitan Magistrate, Secunderabad, in so far they relate to the petitioner-A4 is concerned, are quashed. The learned magistrate shall proceed further in the matter in accordance with law as against the other accused uninfluenced by the observations, if any, made in this order.