Ravi Dhingra v. State & Anr.

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.”

11. The Hon’ble Apex Court in National Small Industries Corp. Ltd. v. Harmeet Singh Paintal (2010) 3 SCC 330 had carved out the following principles with respect to Section 141 of NI Act: "39. From the above discussion, the following principles emerge:

(i) The primary responsibility is on the complainant to make

CRL.M.C. 24/2020 along with connected matters specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.

(ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.

(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.

(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred.

(v) If the accused is a Managing Director or a Joint Managing

Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.

(vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint.

(vii) The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases..."

12. In S.P. Mani & Mohan Dairy v. Dr. Snehalatha Elangovan 2022 SCC OnLine SC 1238, the Hon’ble Apex Court had explained the provision of Section 141 of NI Act in the following manner:

13. In the present case, the complainant/respondent no. 2 in his complaints filed under Section 138 and 141 of NI Act had made the following averments against the present petitioner: i. the petitioner and co-accused, representing the accused company, had approached the complainant company in March, 2015 with request to advance loan/financial assistance to meet the working capital requirements to cater to the purchase order received by the accused company; ii. the petitioner and co-accused, for and on behalf of accused company, had negotiated the terms and conditions with assurance that the loan amount would be repaid on due date and the same was secured through purchase orders; iii. thepetitioner and co-accused had induced the complainant company to enhance the limit of credit facility; iv. the petitioner and co-accused had exchanged various emails related CRL.M.C. 24/2020 along with connected matters to the transaction in question; v. the cheques in dispute were handed over by the petitioner and coaccused, representing the accused company, to the complainant company and the complainant company had accepted the same on the representation and assurances of the accused who assured that the account contained sufficient balance and the cheques had been issued towards the discharge of their liability for availing the financial assistance by the complainant company.

14. The respondent no. 2 has also relied upon certain documents including several emails exchanged between the parties during the period April-May, 2016, to show that the petitioner had been looking after the affairs of the accused company,including the transactions in question, even before being appointed as a director on 01.06.2016.

15. Though the primary contention raised on behalf of petitioner is that he had resigned prior to the dishonoring of cheques, even the case set out by the petitioner is also that he was the Director of the accused company when the cheques had been issued on 22.08.2022 and he had tendered his resignation on the very same day in the evening and some of the cheques in question had got dishonored on 23.08.2022. The respondent no. 2 contends, on the basis of records of the Registrar of Companies, that the resignation was communicated to the ROC on 23.08.2022, only after the cheques had got dishonored. Be that as it may, this Court also takes note of the fact that except Form DIR-11, nothing has been placed on record to show that after the resignation was forwarded to the accused company by the petitioner, any Board Meeting had taken place or any Board Resolution was passed to accept CRL.M.C. 24/2020 along with connected matters his resignation. As regards the reliance placed on behalf of petitioner on decision of Hon’ble Apex Court in Harshendra Kumar D. v. Rebatilata Koley & Ors. (2011) 3 SCC 351, this Court notes that the same is distinguishable on the facts and circumstances as in that case, the petitioner therein had resigned two months prior to the issuance of cheque and the petitioner had placed on record several documents such as his letter of resignation sent to the company, the board resolution of the company accepting the resignation letter and the information sent by the company to the ROC in prescribed form (Form 32) and such documents had not been disputed by the complainants. Similarly, as regards reliance placed upondecision in DCM Financial Services Ltd. v. J.N. Sareen (2008) 8 SCC 1, the concerned Director in this case had resigned from the accused company in May, 1996 and intimation about his resignation had also been given to the complainant, whereas the cheque in question had got dishonored in June, 1998 i.e. more than two years after the resignation of the Director concerned, which is also clearly distinguishable from the facts of present case.

16. In the case at hand, considering the proximity of time in alleged resignation of the petitioner and issuance of cheque in question and its dishonor, absence of other details and material such as appointment of any new director in place of present petitioner, any board resolution to strengthen the case of petitioner and in view of other reasons mentioned in preceding paragraphs, this Court, at this stage, cannot come to a conclusion, with utmost certainty, as to when had the petitioner actually resigned from the office of Director of accused company and as to whether or not he was involved in dishonoring of the cheques in CRL.M.C. 24/2020 along with connected matters question, amounting to Rs.11.75 crores, especially when there are specific averments to the effect that he was involved in the process of obtaining loans from the complainant and issuing the cheques in question.

17. In this background, this Court also takes note of the observations of the Hon’ble Apex Court in case of S.P. Mani & Mohan Dairy (supra), which read as under:

18. In this Court’s opinion, the material placed on record by the petitioner is not sterling incontrovertible material or unimpeachable material to show that petitioner was not involved either in day-to-day activities of the company or had no role in issuance of cheque in question or its dishonoring.

19. Accordingly, the present petitions, alongwith pending applications if any, are dismissed.

20. However, all the contentions raised before this Court regarding date of resignation of the petitioner and as to whether or not he had any role in commission of offence can be raised before the learned Trial Court at an appropriate stage and the same shall be dealt with as per law by the Court concerned.

21. It is also clarified that the observations made hereinabove are for the sole purpose of the deciding the present petitions and the same shall not be construed as expression of opinion of this Court on merits of the case.

22. The judgment be uploaded on the website forthwith.

SWARANA KANTA SHARMA, J AUGUST 21, 2023