Full Text
HIGH COURT OF DELHI
Date of order: 17th December, 2024
SHRI ANIL KUMAR .....Petitioner
Through: Mr.Rajesh Yadav, Senior Advocate
Through: Ms. Richa Dhawan, APP for State Mr. Sunil Goyal, Ms. Shivani Tayal and Mr. Anuj Sharma, Advocates for
R-2.
CHANDRA DHARI SINGH, J (Oral)
ORDER
1. The instant petition has been filed under Section 482 of the Code of Criminal Procedure, 1973 (hereinafter “CrPC”) [now Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (hereinafter “BNSS”)] seeking quashing of the Criminal Complaint bearing CC No. 557/1/15 (New NO. 44814/2016) for offences under Sections 138 of the Negotiable Instruments Act, 1881 (hereinafter “NI Act”), and the consequential proceedings emanating therefrom, which is pending before the Court of the learned Presiding Officer, Special Court (NI Act), New Delhi, Rouse Avenue Courts, Delhi.
2. The brief facts of the case leading to the filing of the present petition are as follows: a) The respondent no. 2 is a manufacturer and distributor of various brands of beer. The respondent no. 3 is a private limited company engaged in retail liquor business. The petitioner was an Additional Director of the respondent no. 3 company. It is stated in the instant complaint that as per the books of account of the respondent no. 2, a sum of Rs. 4,79,327.44 was due and outstanding against the respondent no. 3. b) In order to clear the outstanding amount, the respondent no. 3 issued a cheque bearing No. 258208 dated 10th February, 2015 for a sum of Rs. 1,00,000/- in favour of respondent no. 2 and the said cheque was drawn on the Nainital Bank Ltd., Rohit Kunj Pitampura, New Delhi. However, the said cheque was returned unpaid vide memo dated 13th February, 2015 due to insufficiency of funds. c) A demand notice dated 5th March, 2015 was issued to the respondent no. 3 demanding the payment of the said amount and it is alleged that despite the receipt of such notice, the respondent no. 3 did not make the payment within the statutory timeline of 15 days after the issuance of the said notice, as provided for under Section 138 of the NI Act. d) Thereafter, notice was framed against the petitioner vide Order of the Learned Metropolitan Magistrate, Rouse Avenue Court Complex, New Delhi, dated 6th April, 2022. Hence, the present petition has been filed before this Court under Section 482 of the CrPC seeking quashing of the instant complaint and the subsequent proceedings emanating therefrom.
3. Learned Senior Counsel appearing for the petitioner submitted that the petitioner was neither the signatory of the cheque in question nor the managing director of the respondent no.3 company. It is further submitted that the petitioner was merely an additional director of the respondent no. 3 company and was never in control of the day-to-day affairs or performed any act as the additional director of the said company.
4. It is submitted that the petitioner was an additional director of the respondent no. 3 company for a brief period of 2 months and 15 days, from 1st May, 2014 to 16th July, 2014. It is further submitted that the petitioner had resigned from the directorship of the Respondent No. 3 company much before the date of drawing of the said cheque, i.e., 10th February, 2015 and the cheque in question was dishonored long after the date of the resignation of the petitioner, i.e., 16th July, 2014.
5. It is submitted that the instant complaint lacks material particulars regarding the role of the petitioner. It is further submitted that the complaint does not point towards any specific role of the petitioner at the relevant time in the day-to-day affairs of the respondent no.3 company and therefore, the same is not maintainable.
6. It is submitted that the requirements of Section 141 of the NI Act has not been satisfied in the present case by virtue of the petitioner merely being an additional director in the company as he was not in charge of the day-today affairs of the respondent no.3 company when the said offence took place. It is further submitted that there is no specific averment in the complaint that the petitioner was responsible for the conduct of business of the respondent no.3 company, which is an essential requirement for attracting liability under Section 141 of the NI Act.
7. In view of the foregoing submissions, it is prayed that the instant petition be allowed.
8. Per Contra, learned APP appearing on behalf of the State vehemently opposed the instant petition and submitted to the effect that the present petition may be dismissed for being devoid of any merit.
9. Learned Counsel appearing on behalf of respondent no. 2 opposed the present petition and submitted that the respondent no. 3 company had issued the said cheque in favour of respondent no. 2 to clear its outstanding dues, which was returned due to insufficiency of funds.
10. It is submitted that it is specifically averred in the complaint that the respondent no. 4 is the signatory of the cheque in question and respondents no. 4 to 6 along with the petitioner are the Directors of the company by virtue of which, they are in full control of the affairs of the company and therefore, the ingredients of the offence under Section 141 of the NI Act are met in the present case.
11. It is submitted that in light of the aforementioned submissions, the instant petition, being devoid of any merit, is liable to be dismissed.
12. Heard learned counsel for the parties and perused the material placed on record.
13. Before adverting to the merits of the case, it is important to discuss the settled law on the scope of the Court’s inherent powers under Section 482 of the CrPC.
14. In the case of State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, the Hon’ble Supreme Court had set out the broad categories of cases in which the inherent powers under Section 482 of the Cr.P.C. could be exercised. The relevant portion of the judgment is reproduced as under: “102. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating 6 to the exercise of the extraordinary power under Article 226 or the inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised. (1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused. (2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code. (3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused. (4) Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code. (5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. (6) Where there is an express legal bar engrafted in any of the provisions of the Code or the Act concerned (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the Act concerned, providing efficacious redress for the grievance of the aggrieved party. (7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.”
15. The inherent powers of the Courts under Section 482 of the CrPC must be exercised sparingly and with great caution. From the abovesaid judgment, it is clear that the Court may quash a complaint under Section 482 of the CrPC if it is satisfied that the allegations made against the accused in the complaint, even when they are taken at face value and accepted in their entirety, do not prima facie constitute any offence or make out a case against the accused. Further, the Court may also invoke its extraordinary powers to quash a complaint if the allegations made in the complaint are so absurd and improbable that no prudent person may reach a conclusion that there is sufficient ground for proceeding against the accused.
16. In the present petition, the petitioner’s case is that the instant complaint lacks any averment which points towards the involvement of the petitioner in the day-to-day affairs of the respondent no. 3-company and therefore, it is liable to be quashed.
17. The present case has arisen in the context of the prosecutions initiated against the officers of the respondent no. 3 company under Sections 138 and 141 of the NI Act. The said provisions are reproduced as under:
138. Dishonour of cheque for insufficiency, etc., of funds in the account.—Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for [a term which may be extended to two years’], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless— (a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice; in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation.—For the purposes of this section, “debt of other liability” means a legally enforceable debt or other liability.” * * * “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: [Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.] (2) Notwithstanding anything contained in 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.”
18. In the present case, this Court is concerned with the determination of criminal liability arising due to dishonour of cheques. As can be clearly established from the above quoted provisions that in case of a company, the vicarious liability as contemplated under Section 141 of the NI Act extends criminal liability under Section 138 of the NI Act to every person who at the time of the commission of the said offence was in charge of, or responsible for the conduct of the business of the said company.
19. In the case of S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89, the Hon’ble Supreme Court while deciding the scope of application Section 141 of the NI Act held as under: “10. While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. The key words which occur in the section are "every person". These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words: "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, etc.” What is required is that the persons who are sough to be made criminally liable under Section 141 should be, at the time the offence was committed, in charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for the conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a director of a company who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable under the provision. The liability arises from being in charge of and responsible for the conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Conversely, a person not holding any office or designation in a company may be liable if he satisfies the main requirement of being in charge of and responsible for the conduct of business of a company at the relevant time. Liability depends on the role one plays in the affairs of a company and not on designation or status. If being a director or manager or secretary was enough to cast criminal liability, the section would have said so. Instead of "every person" the section would have said "every director, manager or secretary in a company is liable"..., etc. The legislature is aware that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action.” * * * “18. To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of Section 141 has to be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within Section 141, he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of Section 141. Even a non-director can be liable under Section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial.”
20. In light of the above said judgment, it is well-established that in order to subject a person to criminal proceedings under Section 141 of the NI Act, a clear case should be spelled out against the accused with necessary averments in the complaint that the accused is involved in the commission of the said offence.
21. In the case of K. Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC 510, the Hon’ble Supreme Court held that all the essential elements of the offence under Section 138 must be satisfied for the commission of the offence. The relevant portion of the judgment is reproduced as under: “14. The offence under Section 138 of the Act can be completed only with the concatenation of a number of acts. The following are the acts which are components of the said offence: (1) drawing of the cheque, (2) presentation of the cheque to the bank, (3) returning the cheque unpaid by the drawee bank, (4) giving notice in writing to the drawer of the cheque demanding payment of the cheque amount, (5) failure of the drawer to make payment within 15 days of the receipt of the notice.”
22. From the above judgment, it is clear that the offence under Section 138 of the NI Act can only be said to be committed after all the ingredients of the offence under the said provision are satisfied, i.e., when the drawer fails to make the payment within 15 days of the receipt of the notice demanding payment of cheque amount following the return of the said cheque unpaid by the payee bank. By extension, the said parameters as provided for under Section 138 of the NI Act would be applicable to establish the commission of offence under Section 141 of the NI Act as well.
23. In the present case, it is undisputed that the respondent no.3 company issued the cheque in question on 10th February, 2015 in favour of respondent no. 2. The cheque was returned on 13th February, 2015 by the payee bank due to insufficiency of funds, and subsequently, a notice was issued was issued on 5th March, 2015 demanding the payment of the cheque amount, which was not paid even after the expiry of the statutory timeline of 15 days after the receipt of the notice of demand.
24. It is stated in the complaint that the petitioner was a director of the respondent no.3 company and was in full control of the affairs of the company at the time of the commission of the offence. Upon perusal of the record, this Court finds that the petitioner had ceased to be an additional director of the respondent no. 3-company with effect from 16th July, 2014 and that the petitioner is not a signatory of the cheque in question. The said cheque was issued after the resignation of the petitioner from his designation as an additional director of the respondent no.3 company. In the notice of resignation, the petitioner specifically mentioned that the reason for his resignation was that he was denied from being a part of the day-to-day management of the respondent no.3 company and that there were multiple instances where decisions were taken and board meetings were held without even intimating him of the same.
25. Therefore, this Court is of the considered view that the petitioner had ceased to be an additional director at the time of the commission of the said offence under Section 141 of the NI Act and there is nothing on record to show that he was in control of or managing the conduct of the business or day-to-day affairs of the respondent no. 3 company during the relevant timeline of the commission of the said offence. Therefore, no offence is prima facie made out against the petitioner under Section 141 of the NI Act from the uncontroverted allegations made against the petitioner in the instant complaint.
26. In view of the above, this Court finds it a fit case to exercise its extraordinary powers under Section 482 of the CrPC for quashing of the Criminal Complaint bearing CC No. 557/1/15 (New No. 44814/2016) and the consequential proceedings emanating therefrom, which is pending before the Court of the learned Presiding Officer, Special Court (NI Act), New Delhi, Rouse Avenue Courts, Delhi.
27. Accordingly, the instant petition along with pending applications, if any, is disposed of.
28. The order be uploaded on the website forthwith.