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  • Section 138 read with Sections 141 and 142 of the Negotiable Instruments Act (the Act for short)
  • Section 482 of the Code of Criminal Procedure
  • sub-section (2) of Section 141
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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
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Acts
  • Section 138 read with Sections 141 and 142 of the Negotiable Instruments Act (the Act for short)
  • Section 482 of the Code of Criminal Procedure
  • sub-section (2) of Section 141
Smart Summary

Court Opinion Summary — H.K. Sandhu, J.

Factual and Procedural Background

This opinion disposes of two Criminal Miscellaneous petitions (No. 6647-M of 1993 and No. 6577-M of 1993) brought by the same petitioners against the same respondents because the same legal controversy arose in both matters.

The petitioners sought quashing under Section 482 of the Code of Criminal Procedure of: (a) complaints dated 2 January 1993 (Annexure P-1 in both cases) filed by the respondents under Section 138 read with Sections 141 and 142 of the Negotiable Instruments Act; and (b) the summoning orders (Annexure P-2).

The complaints alleged that cheques (Nos. 076548 and 076549 dated 1 December 1992) drawn by M/s Apollo Processors Private Ltd., signed by its Managing Director Jatinder Podar, for Rs. 1,00,000 each in favour of the complainant firm were dishonoured for insufficient funds. The complainants alleged the cheques were presented within six months and that notice demanding payment was given to the drawer within fifteen days of receipt of the bank memo regarding dishonour. When payment was not made, complaints were filed on 2 January 1993 against the company, its Managing Director and the petitioners, who were arraigned as accused on the ground that they were directors and "incharge of and responsible to the company for the conduct of the business."

The petitioners sought quashing on grounds including that they had not issued the cheques, that petitioner No. 1 (wife of the Managing Director) was a housewife with no control over the firm's affairs, and that petitioner No. 2 (a 21‑year‑old student) was not involved in the business. They also asserted that the statutory notice and the complaint were not issued/filed within the prescribed periods.

Legal Issues Presented

  1. Whether the complaints dated 2 January 1993 and the summoning orders under Section 138 read with Sections 141 and 142 of the Negotiable Instruments Act should be quashed under Section 482 CrPC.
  2. Whether the petitioners (alleged directors) can be held liable under Section 141(1) of the Negotiable Instruments Act as persons "incharge of and responsible to the company for the conduct of the business" at the time the offence was committed.
  3. Whether sub‑section (2) of Section 141 (liability where an offence is committed with the consent or connivance of, or attributable to neglect on the part of, a director/manager/secretary or other officer) applies to the petitioners.
  4. Whether statutory requirements relating to notice (within fifteen days of dishonour) and the period for filing the complaint were complied with such that the complaints fall within the period of limitation.

Arguments of the Parties

Petitioners' Arguments

  • The petitioners contended they were illegally implicated; petitioner No. 1 was a housewife with no control over the firm's day‑to‑day affairs, and petitioner No. 2 was a 21‑year‑old student not concerned with the business.
  • They denied issuing the cheques.
  • They asserted statutory notice (to be sent within 15 days of dishonour) was not given within that period and that the complaints were not filed within the statutory period (allegedly 30 days as pleaded by petitioners).
  • They argued there was no allegation in the complaint that the company committed the offence with the consent, connivance or neglect of the petitioners; reliance was placed on the case Harbhajan Singh Kalra v. State of Haryana (1992 (1) RCR 169) to support this contention.

Respondents' Arguments

  • The respondents denied the petitioners' allegations and asserted the petitioners were directors of the company and were in charge of and responsible for the conduct of the company's business.
  • They admitted the cheques were drawn by Jatinder Podar but maintained that directors on whose behalf the cheques were issued and which were dishonoured were liable under the Act.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Harbhajan Singh Kalra v. State of Haryana, 1992 (1) Recent Criminal Reports 169 Relied upon by petitioners to support the contention that, in the absence of specific averments that an offence was committed with the consent, connivance or neglect of a director/manager/other officer, such persons cannot be held liable. The court stated that this submission "does not hold good" in the present context; the court proceeded to interpret Section 141 and concluded that the complaints prima facie made out a case against the petitioners under sub‑section (1) and that sub‑section (2) need not be relied upon to fasten liability on persons who were in charge and responsible for the business.

Court's Reasoning and Analysis

The court examined the complaints and the summoning orders and distilled the following points from the averments:

  • The complaints alleged that the company owed a legally enforceable debt to the complainants and that two cheques issued by the Managing Director in discharge of that debt were dishonoured for insufficiency of funds.
  • The cheques were presented within six months and, according to the complaints, notices demanding payment were sent to the company and to all directors in charge of the conduct of the company's business within fifteen days of receipt of the bank memos regarding dishonour.
  • Payment was not made within fifteen days of the notice and the complaints were filed within the period of limitation, as pleaded by the respondents.

On the legal issue of directors' liability, the court referred to Section 141 of the Negotiable Instruments Act and quoted and analysed both sub‑sections (1) and (2). Its analysis, in the sequence it appears in the opinion, was:

  1. Under Section 141(1), if the person committing an offence under Section 138 is a company, then 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 shall be deemed guilty of the offence and liable to be proceeded against and punished accordingly. The provision contains a proviso as to persons proving lack of knowledge or exercise of due diligence.
  2. The court observed that the respondents had specifically alleged in the complaints that both petitioners were directors and were in charge of and responsible to the company for the conduct of its business. The court held that these averments were sufficient to make out the ingredients of the offence prima facie and that the complaints were not defective on that ground.
  3. The court stated that the factual question whether the petitioners were actually in charge and responsible for the conduct of the company's business is one to be determined on evidence at trial; it is not appropriate to resolve that factual dispute at the quashing stage where the complaint contains specific averments.
  4. Regarding Section 141(2), the court explained that it operates notwithstanding sub‑section (1) and is meant to extend liability even to those who may not have been in charge or responsible for the conduct of the business but whose consent, connivance or neglect made them liable. The court concluded that sub‑section (2) was not necessary to fasten liability on persons who fall squarely under sub‑section (1).
  5. Accordingly, the court found that the allegations in the complaint prima facie made out a case against the petitioners under Section 141(1) and that the trial court was right to summon them to stand trial.

Holding and Implications

Holding: The petition is dismissed. The court found no merit in the petitioners' application to quash the complaints and summoning orders and held that a prima facie case was made out against the petitioners such that they were rightly summoned by the trial court to stand trial.

Implications:

  • The direct effect is that the trial court's summoning orders stand and the complaints filed on 2 January 1993 proceed; the petitioners will be required to meet the allegations at trial.
  • The court indicated that the factual question of whether the petitioners were actually in charge of and responsible for the conduct of the company's business must be decided on evidence at trial rather than at the quashing stage.
  • The opinion does not announce any new legal precedent beyond application of Section 141 as interpreted in the judgment; it confines itself to assessing the sufficiency of the complaints and upholding the trial court's order to summon the petitioners.

This summary is based exclusively on the text of the provided opinion and does not introduce information not contained therein.

    Manju Podar v. Ashwani Kumar

    H.K Sandhu, J.:— This order will dispose of Criminal Misc. petition No. 6647-M of 1993 and Criminal Misc. No. 6577-M of 1993, as same legal controversy is involved in both the petitions between the same parties.

    2. The petitioners have filed these petitions under Section 482 of the Code of Criminal Procedure for quashing the complaint dated 2nd January, 1993 Annexure P-1 (in both the cases) filed by the respondents against them under Section 138 read with Sections 141 and 142 of the Negotiable Instruments Act (the ‘Act’ for short) and also for quashing of the summoning orders Annexure P-2. The allegations made in the complaints filed by the respondents were that M/s Apollo Processors Private Ltd., Old Jail Road, Amritsar drew cheque Nos. 076548 and 076549 dated 1st December, 1992, each for a sum of Rs. one lac payable to the complainant-firm M/s Ashwani Kumar Satish Kumar. These cheques were duly signed by its Director namely Jatinder Podar and were drawn at Vijay Bank, Amritsar. The cheques were processed to Vijay Bank by the complaint firm for receiving the payment in question in payees account through the New Bank of India. These cheques were dishonoured by Vijay Bank and as per memos dated 4th December, 1992 in one case and 12th December, 1992 in the other case. It was stated that the matter may be referred to Drawer. The cheques were returned unpaid because the amount of money standing to the credit of the petitioners was insufficient to honour the cheques. The cheques were presented within a period of six months from the date on which the same were drawn and the complainants made a demand for the payment of the amount by giving notice in writing to the drawer of the cheque i.e petitioners within fifteen days from the receipt of information from Vijay Bank regarding return of the cheques as unpaid. Notice of dishonour of cheques was sent by the complainants through registered acknowledgement and under certificate of posting but no payment was made, so complaints were filed on 2nd January, 1993 against the petitioners as well as Shri Jatinder Podar and firm M/s Apollo Processors Private Limited. The petitioners were arraigned as accused on the allegation that they were Directors of the firm and were incharge and were responsible to the company for the conduct of the business of the firm.

    3. The petitioners alleged that they had been illegally involved in the case and in fact petitioner No. 1 who was wife of Jatinder Podar, the Managing Director of the firm, was only a housewife and had no say or control over the everyday affairs of the firm. Petitioner No. 2, Rajan Podar son of Jatinder Podar was only 21 years old and was a student seeking admission in Post Graduate Course and was not concerned with the business of the concern. They had not issued the cheques. It was further alleged that statutory notice which was required to be issued within fifteen days of the dishonouring of the cheque was not issued within the said period nor the complaints were filed within the statutory period of thirty days from the date of cause of action arose to the complainants.

    4. In the reply filed by the complainant-respondents the allegations made in the petition were denied and it was asserted that the petitioners were Directors of the company and were incharge of affairs of the company for the conduct of its business. It was admitted that the cheques were drawn by Jatinder Podar but it was maintained that the Directors of the company on whose behalf the cheques were issued and which were dishonoured for want of funds, were also liable for the offence as they were incharge of and responsible to the company for the conduct of its business.

    5. I have heard Mr. Sudeep Mahajan, Advocate, the learned counsel for the petitioners and Mr. B.R Mahajan, advocate, the learned counsel for the respondent.

    6. A perusal of the complaints as well as the summoning orders in both the cases show that the averments made in the complaints were that M/s Apollo Processors Private Ltd. owed the amount in question to the complainants and the debt due was legally enforcible debt. In the discharge of the debt, two cheques were issued by Jatinder Podar, Managing Director of the firm. The cheques were dishonoured with a memo referred to drawer for lack of sufficient funds immediately thereafter notices were issued to the company as well as to all the Directors who were incharge of the conduct of the business of the company and demand for the payment was made within fifteen days of the receipt of the information from the Bank regarding the dishonour of the cheques. The petitioners and others failed to make the payment to the holder of the cheques within fifteen days of the receipt of the notice and thus complaint was filed within the period of limitation. The learned counsel for the petitioners considering this averment in the petition did not address any argument assailing the complaint and summoning order on this ground.

    7. The only contention of the learned counsel for the petitioners was that both Mrs. Manju Podar and Mr. Rajan Podar were not incharge of the conduct of the business of the company and they were implicated with the sole intention of settling scores with Jatinder Podar. Mrs. Manju Podar was a housewife and had no control over the everyday affairs of the firm and Mr. Rajan Podar who was a young boy and was a student, had no say in the everyday business of the firm. It was further submitted that there was no allegation in the complaint against the petitioners that the company committed the offence with the consent or connivance or neglect on the part of its Directors, Manager etc. In the absence of these averments, the petitioners could not be held liable for any offence. In support of his contention, the learned counsel placed reliance on the case of Harbhajan Singh Kalra v. State of Haryana, 1992 (1) Recent Criminal Reports 169. This submission of the learned counsel for the petitioners, however, does not hold good. In order to find out whether the case of the petitioners falls under Section 141(2) of the Act, a reference may be made to the relevant provisions. Section 141 of the Act reads as under:—

    “141(1) If the person committing an offence under Section 138 is a company, every person who at the time the offence was committed, was incharge 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 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 attributed 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 the firm, means a partner in the firm.”

    8. A perusal of sub-section (1) referred above leaves no doubt that if the person committing an offence is a company then every person who was incharge of and was responsible to the company for the conduct of the business of the company at the time the offence was committed, shall be deemed to be guilty of the offence and so also the company. The respondents have specifically alleged in the complaints that both the petitioners were directors of the Company and were also incharge of and were responsible to the company for the conduct of its business. The complaints cannot be considered to be defective as ingredients of the offence are very well made out from the allegations made therein. There are specific averments regarding the guilt of the petitioners as well. The question whether they were actually incharge of and were responsible to the company for the conduct of its business, will be determined after evidence was led to that effect by the parties.

    9. So far as sub-section (2) of Section 141 is concerned, I am of the view that it is not applicable to the case of the present petitioners. It is well-settled that a clause beginning with ‘notwithstanding anything contained’ is appended to a Section with a view to give the enacting part of the Section, in case of conflict an overriding effect over the provision mentioned in the non-obstante clause, that the provisions embraced in the non-obstante clause will not be an impediment for the operation of sub-section (1). Under sub-section (1), every person incharge of and responsible to the company for the conduct of the business of the company shall be deemed to be guilty of the offence under Section 138 of the Act. But sub-section (2) provides that besides the persons mentioned in sub-section (1) where any offence committed by a company is proved to have been committed with the consent or connivance or is attributable to any neglect on the part of any director, Manager, Secretary or other Officer of the company then said Director, Manager, Secretary or Officer shall also be deemed to be guilty of that offence.

    10. It would mean that even if such Director, Manager, Secretary etc. was not incharge and was not responsible to the company for the conduct of the business of the company, he will still be liable if the offence was committed with his consent, connivance or due to his negligence. No such averments are required to be made in the complaint against the persons who were incharge of the business of the company. The allegations as contained in the complaint prima facie made out a case against the petitioners and they were rightly summoned by the trial Court to stand trial.

    11. For the reasons recorded above, I find no merit in this petition and dismiss the same.

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    Comments

    Manju Podar v. Ashwani Kumar
    (Oct 13, 1993)