Necessary to aver in complaint filed under Sec. 138 r/w Sec.141 of NI Act that at relevant time when offence was committed, Directors were in charge of & were responsible for conduct of business of company:SC

Read Judgment: Ashutosh Ashok Parasrampuriya & Anr. vs. M/s. Gharrkul Industries Pvt. Ltd. & Ors

Pankaj Bajpai

New Delhi, October 11, 2021: The Supreme Court has recently opined that it may not be proper to split while reading the complaint so as to come to a conclusion that the allegations as a whole are not sufficient to fulfill the requirement of Section 141 of the Negotiable Instruments Act, 1881. 

A Division Bench of Justice Ajay Rastogi & Justice Abhay S. Oka observed that merely being the Director of the company that has issued the bounced cheque is not sufficient to make director liable as it is important to see that at relevant time when offence is committed, whether Directors are in charge of and are responsible for conduct of business of company. 

The observation came in reference to an appeal challenging the judgment and order of the High Court pursuant to which appellants were summoned to answer to a charge of Section 138 of NI Act that came to be dismissed by the High Court. 

The background of the case was that the first and second appellants were Directors of company. It was the case of the first respondent (complainant) that appellants approached the first respondent with a request to provide them financial assistance. The first respondent accordingly provided financial assistance and on negotiations, Memorandum of Understanding was executed which was signed by second appellant Dilip Shrikrishna Andhare with consent of all the appellants in the presence of two attesting witnesses. 

The appellants then issued a letter admitting the outstanding balance of first respondent, complainant, as on March 31, 2012 to the extent of Rs.1,49,94,831. 

Later, first appellant issued a cheque on June 2, 2012 in favour of first respondent towards part payment of the amount. However, the same was dishonoured due to “funds insufficient”. 

The first respondent then filed a complaint against the appellants u/s 138 of NI Act. The Trial Court taking cognizance of the complaint, issued summons to the appellants directing them to appear before the Court and the appellants were granted bail on furnishing security.

The order passed by the Trial Judge summoning the present appellants came to be challenged in two separate criminal petitions filed u/s 482 CrPC seeking quashing/setting aside of the criminal complaints/Summary criminal case registered against them as well as the summons. 

The Apex Court highlighted that in the light of the ratio in S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla and Another , what is to be looked into is whether in the complaint, in addition to asserting that the appellants are the Directors of the Company and they are in-charge of and responsible to the Company for the conduct of the business of the Company. 

If statutory compliance of Section 141 of the NI Act has been made, it may not open for the High Court to interfere u/s 482 CrPC unless it comes across some unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of process of Court, added the Court. 

Speaking for the Bench, Justice Rastogi found that in case of S.M.S. Pharmaceuticals, this Court had observed that the (supra) question of requirement of averments in a complaint has to be considered on the basis of provisions contained in Sections 138 and 141 of the NI Act read in the light of the powers of a Magistrate referred to in Sections 200 to 204 CrPC which recognize the Magistrate’s discretion to take action in accordance with law. 

In the case on hand, reading the complaint as a whole, the Apex Court observed that it is clear that the allegations in the complaint are that at the time at which the cheques were issued by the Company and dishonoured by the Bank, the appellants were the Directors of the Company and were responsible for its business and all the appellants were involved in the business of the Company and were responsible for all the affairs of the Company. 

The complaint specifically refers to the point of time when the cheques were issued, their presentment, dishonour and failure to pay in spite of notice of dishonor, added the Court. 

The Division Bench went on to observe that undisputedly, on the presentation of the cheque of Rs.10,00,000 the cheque was dishonoured due to “funds insufficient” in the account and after making due compliance, complaint was filed and after recording the statement of the complainant, proceedings were initiated by the Magistrate. 

Therefore, the Apex Court stated that no error had been committed by the High Court in dismissing the petition filed u/s 482 CrPC.