Smt. Dharna Goyal @ Dharna Garg Vs Aryan Infratech Pvt. Ltd. (Delhi High Court)
Perusal of the complaint shows that the allegation of issuing the cheque is against accused No.1 from the account maintained by accused No. 1 and allegations of signing are against accused No. 2, as authorized signatory of accused No.1. The allegation against accused No. 5, who is the Petitioner herein, is that an assurance was given to the complainant that the cheque shall be honoured on presentation. Petitioner is stated to be the CEO of accused No.1 Company and the wife of accused No.2. It is averred that the cheque was issued with her consent and knowledge and she attended meetings with the official of the complainant and responsible for the business of the Company. What is significant is that in the entire complaint there is not even a whisper of the alleged transaction, pursuant to which the cheque was allegedly issued in favour of the complainant. All that is mentioned is ‘towards the discharge of part of legal debts/liability’ cheque was issued. There are no specific allegations or averments against the Petitioner regarding her alleged role either in the transaction or in the conduct of business of the Company. It is settled that mere designation of an officer in a Company is not enough to make the officer vicariously liable. The absence of an averment as to the transaction / specific role of the Petitioner, in my opinion, is fatal to the case of the complainant. The most important factor that goes in favour of the Petitioner is that she had resigned from the Company w.e.f. 15.06.2016, which was before the cheque in question was even issued. Form No.DIR-11 placed on record substantiates the stand of the Petitioner. The authenticity of the Form is undisputed as the Respondent has failed to contest the matter, despite service, besides the fact that this is a public document.
It is relevant to note at this stage that it is not the case of the complainant that even after resigning as a CEO of accused No. 1 the Petitioner continued to be associated with the Company or was occupying any such position which made her in-charge and responsible for the conduct of its business. Vicarious liability has been imputed to the Petitioner solely on account of her being the CEO of accused No. 1. It is also not the case of the complainant that the cheque in question was dishonoured or the notice of demand was not complied with due to connivance of or with the consent of the Petitioner. The complainant has also not averred that even after resigning as CEO the Petitioner was in a position to have given instructions to the officers of the Company who were in-charge of the affairs of the Company, to ensure that the cheque when presented for encashment should be honoured. Therefore, the Petitioner is not even covered under Sub-Section (2) of Section 141 of the NIA.
For all the aforesaid reasons the summoning order dated 28.11.2016 along with the complaint bearing CC No. 6573/2017 filed under Sections 138/141/142 of the NIA by the Respondent against the Petitioner pending before the Trial Court are quashed. Consequently, all proceedings emanating therefrom including the order dated 04.12.2019 passed by the Special Judge in Criminal Revision bearing CR No. 114/2019 are also quashed against the Petitioner.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. Present petition has been filed by the Petitioner for quashing the summoning order dated 28.11.2016 and the complaint bearing CC No. 6573/2017 filed by the Respondent against the Petitioner under Sections 138/141/142 of the Negotiable Instruments Act (hereinafter referred to as ‘NIA’) as well as all further proceedings emanating therefrom including the order dated 04.12.2019 passed by the Special Judge NDPS in Criminal Revision bearing CR No. 114/2019 titled as Dharna Goyal v. M/s Aryan Infratech Pvt. Ltd.
2. Brief facts shorn of unnecessary details are that a complaint was filed by the Respondent against M/s Ringing Bells Pvt. Ltd., Accused No. 1 and five other Accused persons including the Petitioner herein under Sections 138/141/142 of the NIA. It was alleged in the complaint that in discharge of legal liability, Accused No. 1 issued a cheque bearing No. 731759 dated 28.10.2016 for an amount of Rs. 2 crores, duly signed by Accused No.2, with the consent and knowledge of the other Co-accused including the Petitioner and that the same was dishonoured on presentation. A legal notice of demand dated 02.11.2016 was sent on 04.11.2016 by the complainant but despite the receipt of the notice the Accused persons failed to remit the alleged outstanding amount. On the filing of the complaint, the Trial Court summoned the Accused including the Petitioner. The Petitioner herein has been arrayed as Accused No.5 in the capacity of CEO of Accused No.1 Company.
3. As per the Petitioner, she received the summons for the first time on 10.01.2019 and immediately thereafter preferred a Criminal Revision bearing CR No.114/2019 on 28.02.2019, challenging the summoning order. On 25.03.2019 the Sessions Court issued notice to the Respondent and the Petitioner took repeated steps to effect service on the Respondent through his counsel before the Trial Court. However, none appeared on behalf of the Respondent. Vide order dated 04.12.2019 the Sessions Court dismissed the Revision petition and the Petitioner approached this Court.
4. It needs to be mentioned that vide order dated 08.06.2020 this Court after capturing the controversy involved issued notice to the Respondent, returnable on 06.07.2020. When the petition was listed on 06.07.2020 counsel for the Petitioner submitted that she had served the Respondent through the electronic mode and sought time to place on record an affidavit to that effect. Report of the Registry regarding service on the Respondent through other permissible modes was not on record and the Registry was directed to place the same on record. When the petition was listed on 16.07.2020, the Report of the Registry, placed on record, indicated that the Respondent had been served through e-mail. Counsel for the Petitioner also submitted that the notice sent at the registered e-mail address of the complainant, available in the records of the Ministry of Corporate Affairs, had not bounced back and was therefore deemed to have been received. Although no one appeared for the Respondent, no adverse orders were passed by the Court. Counsel for the Petitioner undertook to inform the counsel for the complainant appearing before the Trial Court, on the next date of hearing, fixed before the Trial Court as well as to send a letter of intimation, through speed post.
5. On the next date of hearing also there was no appearance on behalf of the Respondent, despite having been served, as evident from the affidavit of service. The matter was called twice and finally in the interest of justice the petition was again adjourned for 30.09.2020. Even on 30.09.2020 none appeared for the Respondent and the petition was finally adjourned for today. Once again, the matter was passed over for hearing at the end of the board, but none appeared to represent the Respondent, on both the calls.
6. The foremost issue that arises before the Court is whether the complaint and the summons can be quashed qua the Petitioner in the absence of the complainant. The said issue is settled and the law on this is no longer res integra. A similar situation had arisen in the case of Lafarge Aggregates & Concrete India P. Ltd. vs. Sukarsh Azad & Ors. (2014) 13 SCC 779 decided by the Supreme Court on 10.09.2013. In the said case the Respondents were the Directors in the Company at whose instance the High Court had quashed the complaint lodged by the Appellant under Section 138 of NIA. The High Court allowed the petition filed under Section 482 Cr.P.C. and quashed the proceedings, but the order was ex-parte. The Appellant filed an application for recall of the order but the same was dismissed on the ground that it did not meet the test laid down in N.K. Wahi vs. Shekhar Singh & Ors. 2007 (9) SCC 481. The Supreme Court in an Appeal filed by the Appellant upheld the order of the High Court and dismissed the Appeal.
7. Similarly, in Crl. Petition Nos. 8510 & 8511/2015 titled Renuka Ramnath & Ors. vs. Hasham Investment and Trading Company Pvt. Ltd. decided on 01.02.2019, High Court of Karnataka while dealing with petitions under Section 482 Cr.PC for quashing the proceedings initiated against the Petitioners on a complaint under Section 138 NIA proceeded ex-parte against the complainant, when the complainant chose to be unrepresented, despite being duly served.
8. Following these judgements, it is clear that in case the complainant chooses not to appear and contest the petition, despite being served, Court can proceed ex-parte and hear the Accused in a petition filed under Section 482 Cr.P.C. for quashing.
9. Record indicates that Respondent has been duly served, and has due intimation of the listing of the petition, but has chosen not to contest the petition, despite ample opportunities to defend. In the circumstances the Respondent is proceeded ex-parte and the petition is heard on merits.
10. Learned counsel for the Petitioner contends that the Petitioner had resigned from Accused No. 1 Company with effect from 15.06.2016, whereas the cheque in question was issued on 28.10.2016 and was dis-honoured on presentation on 29.10.2016. The legal notice of demand was sent by the Respondent allegedly on 02.11.2016. In support of the resignation of the Petitioner, counsel has drawn the attention of the Court to Form No. DIR-11 issued under Proviso to Section 168(1) of the Companies Act, 2013 and Rule 18 of the Companies (Appointment and Qualifications of Directors) Rules 2014. Thus, the Petitioner, it is contended, undisputedly was in no manner responsible for or associated with the affairs of the Company in any manner on the date the alleged offence was committed by the Company. For any alleged acts of omission and/or commission by the Company, after the resignation of the Petitioner, she cannot be made responsible. Learned counsel submits that this legal proposition stands settled by the judgement of the Supreme Court in Harshendra Kumar D. vs. Rebatilata Koley & Ors. (2011) 3 SCC 351 which was followed by this Court in Kamal Goyal vs. United Phosphorus Ltd., M.L. Gupta & Ors. vs. DCM Financial Services Ltd. 167 (2010) DLT 428 and a recent judgement of this Court in Crl.M.C. 1602/2020 titled Alibaba Nabibasha vs. Small Farmers Agri-Business Consortium & Ors. decided on 23.09.2020.
11. The next contention of Ms. Sahiba Singh learned counsel for the Petitioner is that the said cheque was neither signed nor issued by the Petitioner and no consent to issue the same was or could have been given by the Petitioner to the co-accused, as she had resigned on 15.06.2016. She submits that an ex-official/ex-director cannot be held liable for the alleged acts of the Company, after the resignation, merely because of the past position or association with the Accused Company. In DCM Financial Services Ltd. vs. J.N. Sareen & Ors. AIR 2008 SC 2255, Supreme Court has clearly enunciated this law and has also observed that only those officials of the Accused Company can be held liable under Section 141 of NIA who are associated with or responsible for the affairs of the Company, at the relevant time.
12. The third contention of the learned counsel is that there are no specific/unambiguous/clear allegations qua the role of the Petitioner in the complaint and most significantly the complainant has not even made a whisper as to the transaction pursuant to which the cheque was issued, which is a mandatory requirement under Section 141 of NIA. A bare perusal of the complaint indicates that it does not mention anywhere that the Petitioner was responsible for managing the affairs of the Company at the relevant time and the complaint is completely vague. In this regard reliance is placed on the judgement of this Court in Shivom Minerals Limited & Ors. vs. State & Ors. 2019 SCC OnLine Del 9329.
13. To elaborate the argument, it is submitted that the Courts have repeatedly affirmed that mere fact of being a Director is not enough and there must be specific allegations to make out a case against the Accused under Sections 138 and 141 of NIA. This according to the counsel has been so observed in the judgements in S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla & Ors. (2005) 8 SCC 89 and Sudeep Jain vs. M/s. ECE Industries Ltd. 2013 SCC OnLine Del 1804.
14. Last but not the least learned counsel also argues that the complainant is a Company and a separate legal entity from its Directors. Ms. Sahiba points out to a Notification dated 08.08.2018 issued by the Office of Registrar of Companies published under Section 248(5) of the Companies Act, 2013 wherein a list of Companies has been published, which have been struck off from the Register of the Companies, as they stand dissolved. She draws the attention of the Court to seriatim 2033 where the name of the Respondent figures. The argument is that once the complainant Company has been dissolved, further prosecution cannot be continued as the complainant is no longer in existence.
15. I have heard the learned counsel for the Petitioner and examined her contentions.
16. There is force in the contention of counsel for the Petitioner that since the Petitioner had resigned on 15.06.2016 and was no longer responsible for the conduct of business of Accused No. 1 Company, on the date of the commission of the alleged offence, she cannot be arrayed as an Accused in the proceedings emanating out of the complaint referred to above. Form No. DIR-11 clearly evidences the resignation of the Petitioner on 15.06.2016 and the cheque in question is admittedly issued on 28.10.2016, which is post her resignation. It cannot therefore be said that the Petitioner was in-charge of and responsible for the conduct of day to day business/affairs of the Company, as contemplated in Section 141 of the NIA for being proceeded against.
17. There is also merit in the contention of the Petitioner that the provisions of Section 141 require that there must be specific and necessary averments in the complaint regarding the nature of transactions between the parties and a complaint cannot be maintained on mere sketchy averments/allegations.
18. At this stage it is necessary to refer to Sections 138 and 141 of the NIA which are as follows:-
“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 extend 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, 69[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 or 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.”
19. The provisions of these Sections were examined in the past in several judgements and therefore to avoid prolixity, I may usefully refer to some of them. In S.M.S. Pharmaceuticals Ltd. (supra) while dealing with the manner in which the averments must be specifically made against the Accused in a complaint under Section 138 read with Section 141 NIA, the Court observed as under:-
“19. In view of the above discussion, our answers to the questions posed in the reference are as under:
(a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.
(b) The answer to the question posed in sub-para(b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141 is that 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.
(c) The answer to Question (c) has to be in the affirmative. The question notes that the managing director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141.”
20. The same view was reiterated by the Supreme Court in National Small Industries Corp. Ltd. v. Harmeet Singh Paintal, 2010 (2) SCALE 372, wherein it was observed that :
“24. …if the accused is not one of the persons who falls under the category of “persons who are responsible to the company for the conduct of the business of the company” then merely by stating that “he was in-charge of the business of the company” or by stating that “he was in-charge of the day-to-day management of the company” or by stating that “he was in-charge of, and was responsible to the company for the conduct of the business of the company ”, he cannot be made vicariously liable under Section 141(1) of the Act. To put it clear that for making a person liable under Section 141(2), the mechanical repetition of the requirements under Section 141(1) will be of no assistance, but there should be necessary averments in the complaint as to how and in what manner the accused was guilty of consent and connivance or negligence and therefore, responsible under Sub-section (2) of Section 141 of the Act.”
21. The Supreme Court summarised and culled out the following principles shedding light on the legal position:-
“(i) The primary responsibility is on the complainant to make 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 accused therein vicariously liable for offence committed by company along with averments in the petition containing that 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 accused is Managing Director or 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 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 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.”
22. In this context relevant it would be to quote a few passages from the judgement of this Court in Sudeep Jain (supra) as under:-
“9. The prime objective of this Court is to remind all the Metropolitan Magistrates in Delhi to carefully scrutinize all the complaint cases being filed under Section 138 r/w 141 of the Negotiable Instruments Act, 1881 against the accused companies at the pre-summoning stage and make sure that notice be directed only to those directors or employees of the company who satisfy the principles laid down in the aforesaid judgments. Summons must be issued only after giving due consideration to the allegations and the materials placed on record by the complainant. Undeniably, as per the aforesaid legal pronouncements, Managing Director and the Joint Managing Director are deemed to be vicariously liable for the offence committed by the company because of the position they hold in the company. Problem arises in cases where all the persons holding office in the company are sought to be prosecuted by the complainant, irrespective of whether they played any specific role in the incriminating act. It is surprising to see that in plethora of cases, the complaint contains allegations even against those persons who might have been Directors at any point in time in the accused company, but had resigned from such company much prior to the period when the alleged offence was committed. Issuing summons to all persons named in the complaint mechanically, without ascertaining whether they played any actual role in the transaction, not only pesters the innocent directors/employees named in the complaint, but also upsurges the load on the High Courts as the Magistrates once issuing the summoning orders against the accused, are precluded from reviewing their summoning orders in view of the decision of the Apex Court in Adalat Prasad v. Rooplal Jindal, (2004) 7 SCC 338. One can also not lose sight of the fact that once such innocent persons are summoned, they have no choice but to seek bail and face the ordeal of trial. Many of such persons also approach the High Court under Section 482 Cr.P.C. to seek quashing of the summoning order and the complaint filed against them and this further increases the burden on the already overburdened Courts.
10. With a view to ensure that the Metropolitan Magistrates dealing with the complaint cases filed under Section 138 r/w Section 141 of the Negotiable Instruments Act have a clear and complete picture of the persons arrayed by the complainant so as to hold them vicariously liable for the commission of the offence by the accused company, I am inclined to direct that the Magistrates must seek copies of Form-32 from the complainant to prima facie satisfy the Court as to who were the directors of the accused company at the time of commission of the alleged offence and on the date of filing of the complaint case. In addition to the above, the Magistrates must also seek information as given in the following table which is to be annexed by the Complainant on a separate sheet accompanying the complaint:-
a. Name of the accused Company;
b. Particulars of the dishonoured cheque/cheques;
