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Section 141(1) of the Negotiable Instruments Act,
Section 141(2) of the Negotiable Instruments Act
SECTION 138 NEGOTIABLE INSTRUMENTS ACT
Section 141(2) . 20. Section 141(2)
23. Section 141(2)

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Smart Summary

Structured Summary of the Opinion (M. Karpagavinayagam, J.)

Factual and Procedural Background

The opinion concerns multiple criminal original petitions for quashing (Crl. O. P. Nos. 16109–16111 of 1998; 18364–18366 of 1998; 4108 and 4109 of 1997) filed by persons who are accused in private complaints on the file of the XIVth Metropolitan Magistrate, Egmore, Chennai. The petitioners—J. K. Singh (chairman and authorised signatory of Mid East (India) Limited), Mrs. Rita Singh (managing director), Natasha Singh (director) and R. K. Gupta (general manager)—are accused in various criminal complaints alleging offences under Section 138 of the Negotiable Instruments Act. The petitions raise a common question and were heard together. The petitioners sought quashing of proceedings against them on the ground that the complaints do not contain specific averments that they were “in charge of and responsible for the conduct of the business” of the company as required under Section 141(1) of the Negotiable Instruments Act. The respondent is the company which filed the private complaints. The trial court proceedings challenged by the petitioners were not quashed by this court; ultimately, the petitions were dismissed and all connected criminal miscellaneous petitions were also dismissed.

Legal Issues Presented

Whether the absence of an express averment in the complaint that the accused were "in charge of and responsible for the conduct of the business" of the company (as required by Section 141(1) of the Negotiable Instruments Act) requires quashing of the proceedings against those accused.
Whether allegations that the accused were "responsible for the failure to make payment of the sums claimed under the notice" (i.e., failure to pay after service of statutory notice) are sufficient to attract liability under Section 141(2) of the Negotiable Instruments Act (consent, connivance or neglect), even if Section 141(1) averments are absent.
Whether, applying the test stated by the Supreme Court in Municipal Corporation of Delhi v. Ram Kishan Rohtagi, the proceedings can be quashed at the initial stage on the ground that, on the face of the complaint, no offence is made out.

Arguments of the Parties

Petitioners' Arguments

Learned counsel for J. K. Singh and Mrs. Rita Singh submitted that the complaints do not aver that those petitioners issued the cheques complained of in the specific matters before the court, nor do the complaints allege that they were in charge of and responsible for the conduct of the affairs of the company as required by Section 141(1) of the Negotiable Instruments Act; thus there is no allegation connecting them with the offence.
Learned counsel for Natasha Singh and R. K. Gupta made similar submissions that the complaint does not reveal any responsibility of those petitioners for the conduct of the company's business and hence the proceedings are not valid against them.
The petitioners relied upon earlier judicial decisions (including Agritech Hatcheries and Food Ltd. v. Valuable Steels India Pvt. Ltd.; B. Lakshmi v. Trishul Coal Services and Transporters; P. L. Lamba v. State of Rajasthan; Anita v. Anil K. Mehra) as authority for the proposition that where complaints lack allegations about the role played by the accused in the company's commission of the offence, proceedings should be quashed.

Respondent / Complainant's Arguments

The respondent's counsel submitted that the complaint contains allegations that the petitioners participated in the commission of the offence. Although the complaint does not expressly allege that the petitioners were “in charge of and responsible” under Section 141(1), it specifically alleges that the offence was committed by the company with the consent and connivance of the petitioners (chairman, managing director, director and general manager) as contemplated by Section 141(2) of the Negotiable Instruments Act.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Agritech Hatcheries and Food Ltd. v. Valuable Steels India Pvt. Ltd.; B. Lakshmi v. Trishul Coal Services and Transporters	These decisions were cited for the proposition that complaints lacking specific allegations about the role played by the accused in relation to the company's commission of the offence do not sustain proceedings against those persons.	The court noted that petitioners relied on these authorities but concluded that the factual allegations in the instant complaints differ because the complaints specifically allege responsibility for non-payment after notice (thus engaging Section 141(2)).
P. L. Lamba v. State of Rajasthan	Cited as authority supporting the petitioners' contention that mere positions in the company without role-specific averments are insufficient to sustain prosecution.	The court considered the citation but distinguished the present complaints on the ground that they contain allegations of responsibility for non-payment after statutory notice.
Anita v. Anil K. Mehra	Relied on by petitioners for the principle that absence of role-specific averments defeats prosecution of individual officers.	The court took the cited authority into account but found the present complaints to contain averments that satisfy Section 141(2).
T. G. Krishnamoorthy v. G. Rengasamy [1993] 1 MWN (Crl.) 33	Used by the court to fortify its view (the precise rule from this authority is not elaborated in the opinion beyond its supportive value).	The court stated that its view is fortified by this decision.
Municipal Corporation of Delhi v. Ram Kishan Rohtagi (Apex Court)	Explains the test for quashing criminal proceedings at the initial stage: quashing is appropriate only if, on the face of the complaint and accompanying papers, no offence is constituted; the High Court must take the allegations as they are without adding or subtracting anything.	The court applied this test and, taking the allegations in the complaints as they stand, concluded that an offence is made out and therefore declined to quash the proceedings.

Court's Reasoning and Analysis

The court conducted a step-by-step analysis confined to the material in the complaints and to the relevant statutory provisions:

The court observed that, although different complaints were filed, the allegations against the petitioners are identical in each complaint. It reproduced the material averment in the complaints which names the accused (the company and its officers) and states that they are "responsible for the failure to make payment of the sums claimed under the notice" and are guilty of an offence under Section 138 of the Negotiable Instruments Act.
The court reiterated the settled principle that a complaint must contain averments making out the alleged offence to enable the magistrate to take cognizance and issue process.
The court examined Section 141(1) and Section 141(2) of the Negotiable Instruments Act as the statutory framework for offences by companies. It noted that Section 141(1) deems persons who were in charge of and responsible for the conduct of the company's business to be guilty, and therefore the complainant must typically allege that those persons were in charge and responsible.
The court acknowledged that the specific averments required by Section 141(1) were absent in the instant complaints. It then considered whether the complaints nonetheless sustain prosecution under Section 141(2), which applies "notwithstanding anything contained in sub-section (1)" and makes officers liable if the offence is proved to have been committed with their consent or connivance or is attributable to their neglect.
The court explained the causal basis of prosecution under Section 138: mere issuance of cheques and their dishonour do not, by themselves, create the offence; the cause of action is the non-payment of the cheque amount despite service of a statutory notice. The court reasoned that allegations that the petitioners were "responsible for the failure to make payment of the sums claimed under the notice" thus directly engage Section 141(2) (consent/connivance/neglect) because they allege participation in the failure to pay after notice.
Distinguishing Section 141(1) from Section 141(2), the court noted that the presumption available under subsection (1) (by virtue of being in charge) is not available under subsection (2) merely by virtue of office. Nevertheless, the present complaints do more than merely state the petitioners' positions; they allege responsibility for non-payment after service of notice, which the court held to be an averment of consent or connivance sufficient to fall within Section 141(2).
The court observed that, in light of these averments, it could not be said that there was "no averment" that the offence was committed with the consent of the chairman, managing director, director and general manager respectively.
The court reinforced its conclusion by reference to its own earlier decision (T. G. Krishnamoorthy v. G. Rengasamy) and applied the quashing test from the Supreme Court in Municipal Corporation of Delhi v. Ram Kishan Rohtagi: taking the allegations as they stand, if an offence is made out then quashing is not appropriate. Applying that test, the court concluded that the complaints, on their face, disclose allegations sufficient to proceed under Section 141(2).

Holding and Implications

Holding: The petitions for quashing are DISMISSED. Consequently, all connected criminal miscellaneous petitions were also dismissed.

Implications:

As a direct consequence of the holding, the criminal complaints against the petitioners remain extant and the trial proceedings are not quashed: the prosecution may proceed on the basis of the allegations in the complaints.
The court's disposition rests on its conclusion that the complaints contain averments that, if accepted for the limited purpose of the quashing exercise, fall within Section 141(2) of the Negotiable Instruments Act (consent, connivance or neglect). The court applied the Supreme Court's face-of-the-complaint test for quashing and found that an offence is made out on the face of the complaints.
The opinion does not discuss or pronounce any broader, novel legal principle beyond applying existing statutory provisions and precedent to the facts; it confines itself to the direct effect on the petitions and connected applications.

This summary is strictly confined to the assertions, citations and reasoning contained in the provided opinion and does not add or infer information beyond that text.

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Natasha Singh and Ors. v. Klen and Marshalls Manufactures and Exporters Pvt.Ltd.

M. Karpagavinayagam, J.-

1. J. K. Singh, the petitioner in Crl. O. P. Nos. 16109 to 16111 of 1998, who is the chairman and authorised signatory of Mid East (India) Limited, MESCO Towers, New Delhi (A-1), is the second accused in C. C. Nos. 729 to 731 of 1997 on the file of the XIVth Metropolitan Magistrate, Egmore, Chennai.

2. Mrs. Rita Singh, the petitioner in Crl. 0. P. Nos. 18364 to 18366 of 1998, who is the managing director of M/s. Mid East (India) Limited, MESCO Towers, New Delhi (A-1), is the third accused in C. C. Nos. 7379, 7380 and 7378 of 1996 on the file of the XlVth Metropolitan Magistrate, Egmore, Chennai.

3. Natasha Singh and R. K. Gupta, the petitioners in Crl. 0. P. Nos. 4108 and 4109 of 1997, who are the director and general manager, respectively, of M/s. Mid East (India) Limited, MESCO Towers, New Delhi (A-1), are the fourth and fifth accused in C. C. Nos. 7379 and 7380 of 1996 on the file of the XlVth Metropolitan Magistrate, Egmore, Chennai.

4. Since a common question is raised in all these petitions, these could be disposed of by a common order.

5. All these petitioners including the company are all the accused in the private complaints given by the same company, who is the respondent herein. However, some persons alone have filed petitions for quashing the proceedings in some cases, on the ground that there are no specific averments as against the petitioners with reference to their role in the conduct of the affairs of the company on whose behalf the cheque was issued.

6. Mrs. Rita Singh, the petitioner in some of the applications and J. K. Singh, the petitioner in other applications, have not filed quashing applications in respect of those cases in which they issued cheques on behalf of the company (A-1). In other words, they have filed the applications for quashing only in the cases where the cheques were issued by somebody else on behalf of the company. Thus, it is clear that during the relevant period they have also issued some cheques on behalf of the company (A-1).

7. But, Mr. Sundaramoorthi, learned counsel appearing for the petitioners, J. K. Singh and Mrs. Rita Singh, would contend that in these cases, the petitioners have not issued cheques and there is no averment that the petitioners are in charge of and responsible for the conduct of the affairs and there is also no allegation against the petitioners connecting them with the alleged offence.

8. Mr. Raghupathi, counsel for the petitioners, Natasha Singh and R. K. Gupta (A-4 and A-5), also made similar submission stating that the complaint does not reveal that the petitioners (A-4 and A-5) are in any way responsible for the conduct of the business of the company and as such, the proceedings are not valid as against them.

9. In support of their contentions, both counsel for the petitioners would cite the decisions in Agritech Hatcheries and Food Ltd. v. Valuable Steels India Pvt. Ltd. ,, B. Lakshmi v. Trishul Coal Services and Transporters [1997] 4 Crimes 157 (AP) ; [1998] 96 Comp Cas 534, P. L. Lamba v. State of Rajasthan [1996] 1 Crimes 148 (Raj) and Anita v. Anil K. Mehra [1996] 1 Crimes 412 (P & H); [1998] 94 Comp Cas 584. In these decisions, it is held that there is no allegation with reference to the role played by the accused in relation to the commission of the offence by the company.

10. In reply to the above submissions, Mr. Ilias Ali, learned counsel appearing for the respondent/complainant, would submit that there are allegations in the complaint with reference to the participation of the petitioners in the commission of the offence. According to him, though it is not averred in the complaint that they were in charge of and responsible for the conduct of the affairs of the company as contemplated under Section 141(1) of the Negotiable Instruments Act, it is specifically mentioned that the offence was committed by the company with the consent and connivance of the petitioners, who are the chairman, managing director, director and general manager, as provided in Section 141(2) of the Act.

11. I have heard the submissions and carefully scrutinised the inherent merits of the rival contentions made on either side.

12. Before appreciating this ground, let me go into the allegations contained in the complaint.

13. Though different complaints have been filed, the allegations against the petitioners in each of the complaints are the same. The said allegations are as follows :

"The complainant states that the first accused as the company and the second accused as the chairman and authorised signatory of the first accused, the third accused as the managing director of the first accused, the fourth accused as the director of the first accused, the fifth accused as the general manager (finance) of the first accused-company, are responsible for the failure to make payment of the sums claimed under the notice and are guilty of the commission of an offence under Section 138 of the Negotiable Instruments Act and are liable to be punished therefor."

14. It is settled law that there must be averments in the complaint making accusation constituting the alleged offence to enable the magistrate to take cognizance of such offence and to issue process to such of the persons against whom the allegations have been made in the complaint.

15. In this context, it would be appropriate to quote the provisions under Section 141(1) 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 he 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."

16. The reading of Section 141(1) would make it clear that the company as well as the persons in charge of and responsible for the conduct of the business of the company at the time of the commission of offence can be proceeded with, as they shall be deemed to be guilty of the offence. Therefore, the complainant has to necessarily allege in the complaint that the persons who are the accused in the complaint were in charge of and responsible for the conduct of the business of the company.

17. Admittedly, this sort of allegations as contained in Section 141 are absent in the instant complaints, But, it has to be seen whether that would save the petitioners from the prosecution, especially when it is alleged in the complaint that they are responsible for the failure to make payment of the sums claimed under the statutory notice and as such, they are the parties to the offence.

18. Section 141(2) of the Negotiable Instruments Act would provide thus :

"(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."

19. As laid down by this court as well as the apex court, mere issuance of cheque and the dishonour would not create a cause of action warranting the prosecution. The non-payment of the cheque amount despite the receipt of statutory notice alone would give rise to the cause of action, which would be the subject-matter of the prosecution. Therefore, when it is alleged in the complaint that they are responsible for the failure to make payment of the sum despite the service of notice, those allegations would certainly cover Section 141(2) .

20. Section 141(2) starts with the non-obstante clause. Under sub-section (1), the persons in charge of and responsible to the company shall be deemed to be guilty of the offence. But, under sub-section (2), even persons who are not stated to be in charge of and responsible to the company can be prosecuted, if it is alleged and proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of any of those persons prosecuted.

21. No doubt, it is true that in a case of prosecution of persons under subsection (1), presumption of their guilt can be inferred, But, the said presumption cannot at all be available in Section 141(2) merely by virtue of their positions in the company. If it is merely mentioned in the complaint that they are director, manager, etc., then the case would have been different. But, in the instant case besides stating about the positions they hold it is specifically mentioned in the complaint that they were responsible for the non-payment of the cheque amount after receipt of notice within the statutory period, which alone would create the offence.

22. In the context of those allegations mentioned in the complaint, it cannot be stated that there is no averment that the offence was committed with the consent of the chairman, managing director, director and general manager, respectively.

23. Section 141(2) clearly provides that director, manager, secretary or other officer of the company shall also be deemed to be guilty of the offence provided there are averments to the effect that the offence was committed with their consent.

24. In the light of the said provision, it could be very well concluded that those averments covering sub-section (2) are very much available in the complaint.

25. This view of mine is fortified by the decision of this court in T. G. Krishnamoorthy v. G. Rengasamy [1993] 1 MWN (Crl.) 33.

26. In Municipal Corporation of Delhi v. Ram Kishan Rohtagi, ,, the apex court has held as follows :

"It is, therefore, manifestly clear that 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 of the present Code."

27. Therefore, in the light of the settled legal situation, I am not inclined to quash the proceedings, as, in my view, there are averments in the complaint as against the petitioners in relation to the commission of offence.

28. In the result, the petitions are dismissed. Consequently, all connected Crl. M. Ps. are also dismissed.

Natasha Singh and Ors. v. Klen and Marshalls Manufactures and Exporters Pvt.Ltd.

Structured Summary of the Opinion (M. Karpagavinayagam, J.)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioners' Arguments

Respondent / Complainant's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Natasha Singh and Ors. v. Klen and Marshalls Manufactures and Exporters Pvt.Ltd.

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