Punjab-Haryana High Court
Dharam Pal Singhal vs Idbi Bank Ltd on 28 July, 2026
Author: Jasjit Singh Bedi
Bench: Jasjit Singh Bedi
CRM-M-10340-2014 (O & M)
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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
(148) CRM-M-10340-2014 (O & M)
Reserved on: 23.07.2026
Date of Pronouncement:28.07.2026
Date of Uploading : 28.07.2026
Dharam Pal Singhal ...... Petitioner(s)
V/s
IDBI Bank Ltd. ...Respondent(s)
CORAM: HON'BLE MR. JUSTICE JASJIT SINGH BEDI
Present: Ms. Ojaswini Gagneja, Avocate,
for the petitioner(s).
Mr. Deepinder Singh, Sr. Advocate with
Mr. Dharamvir Singh, Advocate and
Mr. Meyank Sarpul, Advocate,
for the respondent.
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JASJIT SINGH BEDI, J. (Oral)
The prayer in the present petition under Section 482 of the
Code of Criminal Procedure is for quashing of criminal complaint No.
17486/2012 dated 22.10.2012 (Annexure P-1), summoning order dated
23.10.2012 (Annexure P-2), passed by the Court of the Judicial Magistrate
Ist Class, Chandigarh in a complaint filed under Sections 138 and 141 of the
Negotiable Instruments Act, 1881 and all the consequential proceedings
arising therefrom qua the petitioner.
2. The brief allegations levelled in the complaint are that in
discharge of its legal liability, 09 cheques were issued by the accused-
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Company between March 2012 and May 2012, all of which were
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dishonoured, leading to the filing of the complaint under Section 138 read
with Section 141 of Negotiable Instruments Act, 1881 (Annexure P-1) and
the consequential summoning order dated 23.10.2012 under Section 138
read with Sections 141/142 of Negotiable Instruments Act, 1881 (Annexure
P-2), which are challenged in the present petition.
3. The learned counsel for the petitioner contends that the
petitioner was appointed as Additional Director (Independent) on 12.11.2011
and resigned on 15.06.2013. The petitioner was not an active Director. He
had no authorization to represent the company for negotiating a loan from
the Bank. There are no documents accompanying the complaint (Annexure
P-1) showing the involvement of the petitioner in the day-to-day running of
the affairs of the company and only vague allegations have been levelled in
the complaint (Annexure P-1) of him alongwith the co-accused being
incharge of and responsible for the day-to-day affairs of the company. He is
also not a signatory to the cheques. He, therefore, prays that the impugned
summoning order (Annexure P-2) be quashed.
4. The learned Senior counsel for the respondent-Bank, on the
other hand, contends that there are clear and categoric averments against all
the accused including the petitioner who is an accused No.6 in the complaint
(Annexure P-1). Not only are there categoric averments in terms of the
Section 141 of the Negotiable Instruments Act but there is an averment to
the effect that the accused No.2 to 6 including the petitioner came to
negotiate with the respondent-Bank for the purpose of availing a loan. Once
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petitioner have been made in the complaint, then, whether or not he was
incharge of or responsible for the affairs of the company shall be a matter of
his defence which shall be adjudicated upon during the course of the Trial.
He, therefore, prays that the present petition is liable to be dismissed.
5. I have heard the learned counsel for the parties.
6. Section 141 of the Negotiable Instruments Act, 1881 reads as
under:-
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:
6[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
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and shall be liable to be proceeded against and punished
accordingly.
7. The Hon’ble Supreme Court in the case of ‘S.M.S.
Pharmaceuticals Ltd. vs. Neeta Bhalla and anr‘ 2005(4) RCR (Criminal)
141, bearing Criminal Appeal No.664 of 2002 decided on 20.09.2005, it has
been categorically held that the designation of a person of a company is not
relevant, but the nature of the job that he performs in the company is. Every
Director/officer of the company is not liable if he is not stated to be in
charge of and responsible for running the business of the company.
Conversely, if a person is stated to be in charge of and responsible for
running the business of the company but does not hold any post, he can still
be liable. The relevant extract of the judgment in S.M.S. Pharmaceuticals
Ltd. (supra) is as under:-
“13. 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 sought to be made criminally
liable under Section 141 should be at the time the offence
was committed, in charge of and responsible to the
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company for the conduct of the business of the company.
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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 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 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 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.
14. A reference to sub-section (2) of Section 141
fortifies the above reasoning because sub- section (2)
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envisages direct involvement of any Director, Manager,
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Secretary or other officer of a company in commission of
an offence. This section operates when in a trial it is
proved that the offence has been committed with the
consent or connivance or is attributable to neglect on the
part of any of the holders of these offices in a company.
In such a case, such persons are to be held liable.
Provision has been made for Directors, Managers,
Secretaries and other officers of a company to cover
them in cases of their proved involvement.
15. The conclusion is inevitable that the liability arises
on account of conduct, act or omission on the part of a
person and not merely on account of holding an office or
a position in a company. Therefore, in order to bring a
case within Section 141 of the Act the complaint must
disclose the necessary facts which make a person liable.
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20. To sum up, there is almost unanimous judicial
opinion that necessary averments ought to be contained
in a complaint before a persons 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 respondent falls within parameters
of Section 141 has to be spelled out. A complaint has to
be examined by the Magistrate in the first instance on the
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basis of averments contained therein. If the Magistrate is
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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.
21. 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 question posed in sub-para (b)
has to be in 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 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.
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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 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 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.
8. The Hon’ble Supreme Court in the case of ‘N.Rangachari
versus Bharat Sanchar Nigam Ltd. 2007(2) RCR (Criminal) 875′, has held
that if the complaint contains necessary averments against the
Director/Manager/Officer of the company in terms of Section 141 of the
Negotiable Instruments Act, then, it is lawful to summon the said
Director/Manager/Officer as an accused. The defence of the said accused
that he was not in charge of and responsible for the affairs of the company is
a matter of Trial and cannot be gone into in summary proceedings under
Section 482 Cr.P.C. The relevant extract of the said judgment is as under:-
5. The appellant herein moved the High Court under
Section 482 of the Code of Criminal Procedure seeking
the quashing of the complaint insofar as it related to him.
The appellant pleaded that he was nominated as
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Honorary Chairman without any remuneration, sitting
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fee etc. by the investors and promoters of the Company of
Data Access (India) Limited on 24.7.2004 and he was
designated as Chairman of the Company. Being a
nominated Chairman and holding an Honorary post in
the Company, he was never assigned with any of the
Company’s financial or other business activities. He was
the Chairman for name sake and was never entrusted
with any job or business or constituted a signing
authority. He had resigned effectively on 26.8.2004 when
problems between the promoters and investors of Data
Access (India) Limited started developing. The two
cheques that were the subject matter of the complaint,
were dated 31.8.2004, after the appellant had effectively
resigned. He had not signed those cheques. He was not
liable. According to him, the Data Access (India) Limited
had two Managing Directors at the relevant time and
they were the ones who were invested with substantial
powers of management of the Company and as such the
Managing directors were involved in the day to day
affairs of the Company and not himself, who had only
acted for a short period as Honorary Chairman. The
complaint did not contain adequate averments to justify
initiation of a criminal proceeding against him and hence
the complaint was liable to be quashed.
6. On behalf of B.S.N.L., it was contended that the
Petition under Section 482 of the Code of Criminal
Procedure was not maintainable and that the questions
sought to be raised by the appellant were questions that
had to be decided at the trial. The complaint disclosed
sufficient materials justifying the commencement of the
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proceedings against Data Access (India) Limited and the
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other two accused including the appellant. The appellant
who was the Chairman of the Data Access (India)
Limited was incharge of and responsible to the Company
for the conduct of its business, and no occasion had
arisen for quashing the complaint. The question whether
a person is incharge of and responsible for the conduct of
the business of the Company, is to be adjudged during the
trial on the basis of the materials to be placed on record
by the parties. That could not be decided at the stage of a
motion under Section 482 of the Code of Criminal
Procedure.
7. The High Court, on going through the complaint in the
context of Sections 138 and 141 of the Negotiable
Instruments Act, came to the conclusion that the court
could not decide the pleas put forward by the appellant in
dealing with a petition filed under Section 482 of the
Code of Criminal Procedure and that the defences sought
to be put forward by the accused had to be established at
the trial. Taking the view that the complaint disclosed
adequate material for proceeding against the appellant
in terms of Section 138 read with Section 141 of the
Negotiable Instruments Act, the High Court refused to
accede to the prayer of the appellant and dismissed the
application filed under Section 482 of the Code of
Criminal Procedure. Challenging the said order of the
High Court, this appeal is filed by the appellant.
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13. A Company, though a legal entity, cannot act by itself
but can only act through its directors. Normally, the
Board of Directors act for and on behalf of the company.
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This is clear from Section 291 of the Companies Act
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which provides that subject to the provisions of that Act,
the Board of Directors of a Company shall be entitled to
exercise all such powers and to do all such acts and
things as the Company is authorised to exercise and do.
Palmer described the position thus :
“A company can only act by agents, and usually
the persons by whom it acts and by whom the
business of the company is carried on or
superintended are termed directors… … …”
It is further stated in Palmer that :
“Directors are, in the eye of the law, agents of the
company for which they act, and the general
principles of the law of principal and agent
regulate in most respects the relationship of the
company and its directors.”
The above two passages were quoted with approval in
R.K. Dalmia & ors. v. The Delhi Administration [(1963)1
SCR 253 at page 300]. In Guide to the Companies Act by
A. Ramaiya (Sixteenth Edition) this position is summed
up thus :
“All the powers of management of the affairs of
the company are vested in the Board of Directors.
The Board thus becomes the working organ of the
company. In their domain of power, there can be
no interference, not even by shareholders. The
directors as a board are exclusively empowered to
manage and are exclusively responsible for that
management.”
Therefore, a person in the commercial world having a
transaction with a company is entitled to presume that
the directors of the company are incharge of the affairs of
the company. If any restrictions on their powers are
placed by the memorandum or articles of the company, it
is for the directors to establish it at the trial. It is in that
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context that Section 141 of the Negotiable Instruments
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Act provides that when the offender is a company, every
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person, who at the time when the offence was committed
was incharge of and was responsible to the company for
the conduct of the business of the company, shall also be
deemed to be guilty of the offence along with the
company. It appears to us that an allegation in the
complaint that the named accused are directors of the
company itself would usher in the element of their acting
for and on behalf of the company and of their being
incharge of the company. In Gower and Davies’
Principles of Modern Company Law (Seventh Edition),
the theory behind the idea of identification is traced as
follows :
“It is possible to find in the cases varying
formulations of the under-lying principle, and the
most recent definitions suggest that the courts are
prepared today to give the rule of attribution based
on identification a somewhat broader scope. In the
original formulation in the Lennard’s Carrying
Company case Lord Haldane based identification
on a person “who is really the directing mind and
will of the corporation, the very ego and centre of
the personality of the corporation”. Recently,
however, such an approach has been castigated by
the Privy Council through Lord Hoffmann in the
Meridian Global case as a misleading “general
metaphysic of companies”. The true question in
each case was who as a matter of construction of
the statute in question, or presumably other rule of
law, is to be regarded as the controller of the
company for the purpose of the identification rule.”
But as has already been noticed, the decision in S.M.S.
Pharmaceuticals Ltd. (supra) binding on us, has
postulated that a director in a company cannot be
deemed to be incharge of and responsible to the company
for the conduct of his business in the context of Section
141 of the Act. Bound as we are by that decision, no
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further discussion on this aspect appears to be
warranted.
14. A person normally having business or commercial
dealings with a company, would satisfy himself about its
creditworthiness and reliability by looking at its
promoters and Board of Directors and the nature and
extent of its business and its Memorandum or Articles of
Association. Other than that, he may not be aware of the
arrangements within the company in regard to its
management, daily routine, etc. Therefore, when a
cheque issued to him by the company is dishonoured, he
is expected only to be aware generally of who are
incharge of the affairs of the company. It is not
reasonable to expect him to know whether the person
who signed the cheque was instructed to do so or
whether he has been deprived of his authority to do so
when he actually signed the cheque. Those are matters
peculiarly within the knowledge of the company and
those in charge of it. So, all that a payee of a cheque that
is dishonoured can be expected to allege is that the
persons named in the complaint are in charge of its
affairs. The Directors are prima facie in that position.
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19. We think that, in the circumstances, the High Court
has rightly come to the conclusion that it is not a fit case
for exercise of jurisdiction under Section 482 of the Code
of Criminal Procedure for quashing the complaint. In
fact, an advertence to Sections 138 and 141 of the
Negotiable Instruments Act shows that on the other
elements of an offence under Section 138 being satisfied,
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incharge of the affairs of the company to show that they
are not liable to be convicted. Any restriction on their
power or existence of any special circumstance that
makes them not liable is something that is peculiarly
within their knowledge and it is for them to establish at
the trial such a restriction or to show that at the relevant
time they were not incharge of the affairs of the company.
Reading the complaint as a whole, we are satisfied that it
is a case where the contentions sought to be raised by the
appellant can only be dealt with after the conclusion of
the trial.
9. The Hon’ble Supreme Court in the case of ‘National Small
Industries Corp. Ltd. versus Harmeet Singh Paintal & Anr. 2010(2) RCR
(Criminal) 122′, has held that no specific averments qua a Managing
Director or Joint Managing Director are required regarding the role played
by them in running the affairs of the company as they are deemed to be
liable. However, qua other officers, there must be specific averments more
than reiteration of the mere language of Section 141 of the Negotiable
Instruments Act. The relevant extract of the said judgment is as under:-
4. The appellant – National Small Industries Corporation
Ltd. had filed 12 criminal complaints under Section 138
read with Sections 141 and 142 of the Act against M/s
Jay Rapid Roller Limited, a Company incorporated
under the Companies Act, its Managing Director – Shri
Sukhbir Singh Paintal, and its Director – Shri Harmeet
Singh Paintal. It is the claim of the appellant that so as to
make the Managing Director and Director of the
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the Act, they had specifically averred in the complaint
that all the accused persons approached it for financing
of bill integrated market support programme. It was also
stated that the accused persons had issued cheques which
were dishonoured on presentation against which the
appellant had filed criminal complaints under the
provisions of the Act against all the respondents herein. It
is their further case that all the accused persons accepted
their liability and delivered various cheques, which are
the subject matter of the present appeals.
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6. In this factual matrix, the issue which arises for
determination before this Court is whether the order of
the High Court quashing the summoning orders insofar
as the respondents are concerned is sustainable and what
should be the averments in the complaint under Section
138 read with Section 141 of the Act against the Director
of a Company before he can be subjected to criminal
proceedings.
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9. Section 141 is a penal provision creating vicarious
liability, and which, as per settled law, must be strictly
construed. It is therefore, not sufficient to make a bald
cursory statement in a complaint that the Director
(arrayed as an accused) is in charge of and responsible
to the company for the conduct of the business of the
company without anything more as to the role of the
Director. But the complaint should spell out as to how
and in what manner Respondent No. 1 was in-charge of
or was responsible to the accused company for the
conduct of its business. This is in consonance with strict
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statutes create vicarious liability. A company may have a
number of Directors and to make any or all the Directors
as accused in a complaint merely on the basis of a
statement that they are in-charge of and responsible for
the conduct of the business of the company without
anything more is not a sufficient or adequate fulfillment
of the requirements under Section 141.
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11. In the light of the above provision and the language
used therein, let us, at the foremost, examine the
complainta filed by National Small Industries
Corporation Limited and the DCM Financial Services
Ltd. In the case of National Small Industries Corpn. Ltd.,
the High Court has reproduced the entire complaint in
the impugned order and among other clauses, clause 8 is
relevant for our consideration which reads as under :
“8. That the accused No. 2 is the Managing
Director and accused No. 3 is the Director of the
accused company. The accused No. 2 and 3 are the
in-charge and responsible for the conduct of the
business of the company accused No. 1 and hence
are liable for the offences.”
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23. Section 291 of the Companies Act provides that
subject to the provisions of that Act, the Board of
Directors of a company shall be entitled to exercise all
such powers, and to do all such acts and things, as the
company is authorised to exercise and do. A company,
though a legal entity, can act only through its Board of
Directors. The settled position is that a Managing
Director is prima facie in-charge of and responsible for
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prosecuted for offences by the company. But insofar as
other Directors are concerned, they can be prosecuted
only if they were in-charge of and responsible for the
conduct of the business of the company. A combined
reading of Sections 5 and 291 of Companies Act, 1956
with the definitions in clauses 24, 26, 30, 31 and 45 of
Section 2 of that Act would show that the following
persons are considered to be the persons who are
responsible to the company for the conduct of the
business of the company :
(a) the Managing Director/s;
(b) the whole-time Director/s;
(c) the Manager;
(d) the Secretary;
(e) any person in accordance with whose directions
or instructions the Board of Directors of the
company is accustomed to act;
(f) any person charged by the Board of Directors
with the responsibility of complying with that
provision;
Provided that the person so charged has given his
consent in this behalf to the Board;
(g) where any company does not have any of the
officers specified in clauses (a) to (c), any director
or directors who may be specified by the Board in
this behalf or where no director is so specified, all
the directors :
Provided that where the Board exercises any power
under clause (f) or clause (g), it shall, within thirty
days of the exercise of such powers, file with the
Registrar a return in the prescribed form.
But 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
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of the business of the company” or by stating that “he
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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.
24. From the above discussion, the following principles
emerge :
(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
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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.
10. The Hon’ble Supreme Court in the case of ‘Ashutosh Ashok
Parasrampuriya & Anr. Versus M/s Gharrkul Industries Pvt. Ltd. & Ors.
2021(4) RCR (Criminal) 483′, has held as under:-
8. In the background of the above facts, respondent no. 1
filed a complaint against the appellants under
section 138 of NI Act in which a specific averment was
made that respondent no. 1 by considering the need of
the appellants for financial assistance and their relations,
provided such financial assistance to the appellants by
executing Memorandum of Understanding, which was
signed by Appellant no. 2-Dilip Shrikrishna Andhare. It
is specifically contended that appellant no. 2 signed the
said document with consent of all the remaining
appellants in the presence of two attesting witnesses. It is
the case of respondent no. 1-complainant as revealed
from the complaint that all the appellants agreed that the
amount provided by respondent no. 1 would be refunded
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within one or two years. The contents of the complaint
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further reveal that respondent no. 1 had demanded
balance-sheet of appellant no. 1 Company, which was
provided and the appellants also confirmed the balance
in their accounts by issuing letter dated 21st June, 2012.
The cheque involved in the criminal case initiated by
respondent no. 1 against the appellants is dated 2 nd
June, 2012. It is further averred in para 5 & 7 of the
complaint that all Directors of the appellant Company
are responsible for its business and all the appellants are
involved in the business of the Company and are
responsible for all the affairs of the Company.
XXXX XXXX XXXX
11. The learned trial Court taking cognizance of the
complaint by order dated 10th November, 2012 issued
summons to the appellants herein directing them to
appear before the Court on 23rd November, 2012 and the
appellants were granted bail on furnishing security of
Rs.2,000/- by an Order dated 23rd November, 2012 by
the Court of Chief Judicial Magistrate.
12. The order passed by the learned trial Judge
summoning the present appellants came to be challenged
in two separate criminal petitions filed under section 482
CrPC, 1973 seeking quashing/setting aside of the
criminal complaints/Summary criminal case registered
against them as well as the summons dated 10th
November, 2012. Both the petitions were tagged together
and came to be dismissed by the High Court under the
order impugned dated 18th July, 2014.
13. Ms. Arundhati Katju, learned counsel for the
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appellants submits that there is no specific averment
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made that they have committed the offence and are
responsible for conduct of business of the Company,
which is one of the essential ingredient/requirement and
in the absence of such averment, merely because the
appellants are the Directors of the Company, they are not
to be held vicariously liable and cannot be made accused
in the proceedings.
XXXX XXXX XXXX
15. Mr. Sidhartha Dave, learned senior counsel for the
appellants in Criminal Appeal @ SLP(Criminal) No.
7573 of 2014 further submits that they are the non-
executive Directors of the Company and were not
responsible for the conduct of the business of the
Company which is the mandatory requirement for
initiation of the proceedings under section 138 of NI Act
and submits that the precondition as referred to under
section 141 of NI Act not being complied with, the order
passed by the learned trial Judge in summoning the
present appellants is nothing but a clear abuse of process
of law and the finding which has been recorded by the
High Court in the impugned judgment is not legally
sustainable in law and in support of his submission has
placed reliance on the judgments of this Court in S.M.S.
Pharmaceuticals Ltd. v. Neeta Bhalla and Another
2005(8) SCC 89 and Pooja Ravinder Devidasani v. State
of Maharashtra and Another 2014(16) SCC 1.
16. Per contra, Mr. Pallav Shishodia, learned senior
counsel for the respondents, while supporting the order
passed by the High Court in the impugned proceedings,
submits that the appellants in Criminal Appeal @
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SLP(Criminal) No. 7573 of 2014 claimed themselves to
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be a non-executive Directors but the record indicates that
they are the Directors of the Company and in support
thereof, Form No. 32 which has been obtained from the
Registrar of Companies placed on record clearly
indicates that all are the Directors of the Company as on
1st April 2007 and responsible to the Company for the
conduct of business actively involved in the business of
the Company and responsible for the affairs of the
Company and there is nothing to indicate that they were
appointed as non-executive Directors and what is being
urged by the learned counsel for the appellants may be
their defence which is a matter of trial and is not open to
be examined at this stage and once the compliance of the
statute has been made as required by law, their petitions
have been rightly rejected by the High Court and needs
no further indulgence of this Court.
XXXX XXXX XXXX
20. In this regard, taking note of the three-Judge Bench
decision of this Court in S.M.S. Pharmaceuticals Ltd.
(supra) would be apposite. While dealing with an offence
under section 138 of the NI Act, the Court explaining the
duty of a Magistrate while issuing process and his power
to dismiss a complaint under Section 203 without even
issuing process observed thus:-
“5. … a complaint must contain material to enable
the Magistrate to make up his mind for issuing
process. If this were not the requirement,
consequences could be far-reaching. If a
Magistrate had to issue process in every case, the
burden of work before the Magistrate as well as the
harassment caused to the respondents to whom
process is issued would be tremendous. Even
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the opinion of the Magistrate taking cognizance of
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an offence there is sufficient ground for
proceeding’. The words `sufficient ground for
proceeding’ again suggest that ground should be
made out in the complaint for proceeding against
the respondent. It is settled law that at the time of
issuing of the process the Magistrate is required to
see only the allegations in the complaint and where
allegations in the complaint or the charge-sheet do
not constitute an offence against a person, the
complaint is liable to be dismissed.”
21. After so stating, the Court analysed section 141 of the
NI Act and after referring to certain other authorities
answered a reference which reads as follows:-
19(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
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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
subsection (2) of Section 141.”
XXXX XXXX XXXX
23. In the light of the ratio in S.M.S. Pharmaceuticals
Ltd. (supra) and later judgments of which a reference has
been made 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 incharge of
and responsible to the Company for the conduct of the
business of the Company and if statutory compliance of
section 141 of the NI Act has been made, it may not open
for the High Court to interfere under section 482 CrPC,
1973 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.
Despite the presence of basic averment, it may come to a
conclusion that no case is made out against the
particular Director for which there could be various
reasons.
24. The issue for determination before us is whether the
role of the appellants in the capacity of the Director of
the defaulter company makes them vicariously liable for
the activities of the defaulter Company as defined under
section 141 of the NI Act? In that perception, whether the
appellant had committed the offence chargeable under
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section 138 of the NI Act?
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25. We are concerned in this case with Directors who are
not signatories to the cheques. So far as Directors who
are not the signatories to the cheques or who are not
Managing Directors or Joint Managing Directors are
concerned, it is clear from the conclusions drawn in the
afore-stated judgment that it is necessary to aver in the
complaint filed under Section 138 read with
section 141 of the NI Act that at the relevant time when
the offence was committed, the Directors were in charge
of and were responsible for the conduct of the business of
the company.
26. This averment assumes importance because it is the
basic and essential averment which persuades the
Magistrate to issue process against the Director. That is
why this Court in S.M.S. Pharmaceuticals Ltd.(supra)
observed that the 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, 1973 which
recognise the Magistrate’s discretion to take action in
accordance with law. Thus, it is imperative that if this
basic averment is missing, the Magistrate is legally
justified in not issuing process.
27. In the case on hand, reading the complaint as a
whole, 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
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the business of the Company and were responsible for all
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the affairs of the Company. It may not be proper to split
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while reading the complaint so as to come to a
conclusion that the allegations as a whole are not
sufficient to fulfil the requirement of section 141 of the NI
Act. 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
dishonour. In the given circumstances, we have no
hesitation in overruling the argument made by the
learned counsel for the appellants.
XXXX XXXX XXXX
29. The submission of learned counsel for the appellants
that they are the non-executive Directors in the light of
the documentary evidence placed on record by Form No.
32 issued by the Registrar of Companies, both the
appellants are shown to be the Directors of the Company,
still open for the appellants to justify during course of the
trial.
30. In our considered view, the High Court has rightly
not interfered in exercise of its jurisdiction under section
482 CrPC, 1973 for quashing of the complaint.
11. In ‘Bharat Poonam Chand Shah versus Dominos Printech
India Pvt. Ltd. 2007(19) RCR (Criminal) 440′, the Delhi High Court has
held as under:-
2. The plea of the accused is that the accused was merely
a sleeping director of the company and no specific role
has been assigned by the complainant as to how the
accused was managing the affairs of the company and
only vague allegations have been made that the accused
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being a director, was responsible for management of the
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company. The other plea taken by the accused is that at
the time when instrument was executed, the accused had
already resigned from the directorship and he was not
liable for dishonour of the cheque and the instrument was
not signed by him.
3. When a cheque is issued by a company to a supplier or
to any person against liability, the person only knows
that the cheque was issued by the company. He may not
be knowing the directors of the company. A creditor or
supplier need not come in contact with directors of the
company. He may be dealing with lower level
management of the company. When a cheque is
dishonoured, he makes efforts to find out as to who were
the directors. This information he gets from the Articles
of Association of the company or from ROC Office. The
documents which are prepared by the companies for
public consumption, like Annual Reports, Articles of
Association and Returns filed with ROC Office do not
disclose as to who are the sleeping directors and who are
active directors. This information is within the special
knowledge of the company i.e. Board of Directors
managing the company as per law.
4. Section 106 of the Evidence Act provides that where a
fact is in the special knowledge of a person, the burden of
proving that fact lies on him. If any director of the
company claims that despite being the director and
legally responsible for management of the company in
terms of the Companies Act, he was not the person
looking after the affairs of the company, this fact has to
be proved by him by cogent evidence before the trial
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Court concerned. Management of a company is an
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internal affair of the company. A creditor or supplier is
not supposed to know neither can be presumed to know
as to who are the sleeping directors or actively involved
directors in the management of the company or who were
the directors only lending their names. Only a director
can prove all this before the trial Court.
XXXX XXXX XXXX
6. This Court under its inherent powers cannot
adjudicate the facts as to who was the sleeping director
or a non working director. It is undisputed that petitioner
was the director of the company and the complainant has
alleged him to be in charge of management. The
resignation of the petitioner from the company, is a
defense of the petitioner, which he can take before the
trial Court concerned and this Court cannot quash a
judicial order of summoning on the ground that the
petitioner had resigned. The petitioner shall be given an
opportunity before the Court concerned to prove that he
was not a director at the relevant time. If an offence is
committed by the company under 138 of Neotiable
Instruments Act, all those who were directors of the
company, except those excepted by law are responsible.
The accused/petitioner is not covered by exception laid
down by law.
12. In ‘P. Apparasamy versus Kalaimani 2008(51) RCR(Civil)
401′, the Madras High Court held as under:-
4. The petitioner, who is the third accused, would contend
in the petition seeking quashment that he was not the
signatory to the alleged cheques which gave rise to the
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criminal proceedings under Section 138 of the
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Negotiable Instruments Act. There was no averment that
he was in charge of and responsible for the conduct of
the business of the partnership firm. No materials are
also produced to show that he was responsible for the
day to day affairs of the firm. No notice was issued to the
petitioner individually prior to launching the complaint
under Section 138 of the Negotiable Instruments Act.
Therefore, the entire criminal proceedings initiated by the
respondent under Section 138 of the Negotiable
Instruments Act are liable to be quashed, it is contended.
5. The points that arise for determination are-
(i) whether there is necessary and sufficient
averment in the complaint under Section 138 of the
Negotiable Instruments Act laid by the respondent.
(ii) whether there shall be a necessary averment to
indicate as to how and in what manner, the partners
were responsible for the conduct of the business of
the partnership firm.
(iii) whether the complainant is bound to give
individual notice to each and every partner of the
partnership firm.
XXXX XXXX XXXX
8. The averment found in the complaint, of course, is not
the verbatim reproduction of the requirement under
Section 141 of the Negotiable Instruments Act. But, on
reading the entire averment found in the complaint as a
whole, one can easily come to a conclusion that there is
sufficient averment to the effect that the third accused
also was in charge of and responsible for the conduct of
the business of the fourth accused partnership firm.
Therefore, it is held that there is necessary averment in
the complaint in terms of Section 141 of the Negotiable
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Instruments Act.
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10. It is found from the above ratio that the Magistrate
has to consider the complaint before issuing the process
and he has the power to reject the complaint at the
threshold itself if necessary and sufficient averment
required under Section 141 of the Negotiable Instruments
Act have not been found in the complaint. But, at the
same time, the complaint cannot be read in isolation. The
complaint includes the documents annexed therewith. In
the instant case, the Managing Partner of the fourth
accused partnership firm has issued reply to the statutory
notice as follows:-
“That my client and his brother-in-law in the
normal course were in the habit of signing of the
cheque leaves in the entire cheque books without
being filled up in order to meet any emergent
situation as may require.”
The above averment found in the reply given by the
Managing Partner of the fourth accused partnership firm
would go to show that the third accused, who is none
other than the brother-in-law of the first accused, was in
charge of and responsible for the conduct of the business
of the partnership firm. The aforesaid reply notice given
by the first accused has been annexed along with the
complaint launched under Sections 138 and 141 of the
Negotiable Instruments Act by the respondent. The stand
taken by the first accused on behalf of the partnership
firm and the partners therein would go to show, prima
facie, that the third accused also has played a vital role
in the administration of the fourth accused partnership
firm.
11. In view of the ratio laid down by the Supreme Court
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counsel appearing for the petitioner that the complaint
should be separately scanned and analysed by the court
without any reference to the reply notice given by the first
accused is rejected outright. Further, the Managing
Partner has given the reply notice not in his individual
capacity but in his capacity as the Managing Partner of
the partnership firm. His stand in the reply notice shall
be construed as the stand of the other partners in the
partnership firm. An agent cannot take a different stand
from that of the partnership firm. Therefore, the further
submission made on the side of the petitioner that the
stand taken by the Managing Partner in the reply notice
is not the stand of the third accused does not merit
consideration.
XXXX XXXX XXXX
13. In the case on hand, there is a clear averment to
satisfy the requirement under Section 141 of the
Negotiable Instruments Act. Further, the reply notice
issued by the Managing Partner of the partnership firm
unambiguously reflects the major role played by the third
accused in the day to day administration of the
partnership firm. When the complaint read along with the
documents produced satisfies the necessary and sufficient
averment as contemplated under Section 141 of the
Negotiable Instruments Act, the lack of averment in the
sworn statement of the de facto complainant in this case
as to the specific role of the petitioner herein does not go
to the root of the case.
14. In N.K.Wahi v. Shekhar Singh, (2007) 2 MLJ (Cri)
241 (SC) : 2007 ALL MR (Cri) 1445 (S.C.), the Supreme
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Court has held in para 8 as follows:-
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“To launch a prosecution, therefore, against the
alleged Directors there must be a specific
allegation in the complaint as to the part played by
them in the transaction. There should be clear and
unambiguous allegation as to how the Directors are
in charge and responsible for the conduct of the
business of the company. The description should
be clear. It is true that precise words from the
provisions of the Act need not be reproduced and
the Court can always come to a conclusion in facts
of each case. But still in the absence of any
averment or specific evidence the net result would
be that complaint would not be entertain-able.”
“In the said judgment, it has been laid down that
there should be a clear and unambiguous allegation
as to how the Directors were in charge of and
responsible for the conduct of the business of the
company in the complaint laid under section 138
read with 141 of the Negotiable Instruments Act.
15. Relying on the aforesaid ratio laid down by the
Supreme Court, this court in Capt. D. Karunakar,
Etc. & Others v. Tamil Nadu News Print & Papers
Limited, 2007 2 LW (Crl.) 806 has held that a
complaint under Section 138 and 141 of the
Negotiable Instruments Act, without an allegation
in the complaint to indicate as to how and in what
manner a Director of the Company was responsible
for the conduct of the business of the Company, is
liable to be quashed.”
15. But, in the later judgment pronounced by the Supreme
Court, in Rangachari, N. v. Bharat Sanchar Nigam
Limited, 2007 (3) CTC 495 : 2007 ALL MR (Cri) 1437
(S.C.), it has been held in paragraphs 19, 24 and 25 as
follows:-
“19. A person normally having business or
commercial dealings with a company, would
satisfy himself about its creditworthiness and
reliability by looking at its promoters and Board of
Directors and the nature and extent of its business
and its Memorandum or Articles of Association.
Other than that, he may not be aware of the
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arrangements within the company in regard to its
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management, daily routine, etc. Therefore, when a
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cheque issued to him by the company is
dishonoured, he is expected only to be aware
generally of who are incharge of the affairs of the
company. It is not reasonable to expect him to
know whether the person who signed the cheque
was instructed to do so or whether he has been
deprived of his authority to do so when he actually
signed the cheque. Those are matters peculiarly
within the knowledge of the company and those in
charge of it. So, all that a payee of a cheque that is
dishonoured can be expected to allege is that the
persons named in the complaint are in charge of its
affairs. The Directors are prima facie in that
position.
…
24. In the case on hand, reading the complaint as a
whole, it is clear that the allegations in the
complaint are that at the time at which the two
dishonoured cheques were issued by the company,
the appellant and another were the Directors of the
company and were in-charge of the affairs of the
company. It is not proper to split hairs in reading
the complaint so as to come to a conclusion that
the allegations as a whole are not sufficient to
show that at the relevant point of time the appellant
and the other are not alleged to be persons in-
charge of the affairs of the company. Obviously,
the complaint refers to the point of time when the
two cheques were issued, their presentment,
dishonour and failure to pay in spite of notice of
dishonour. We have no hesitation in overruling the
argument in that behalf by the learned Senior
Counsel for the appellant.
25. We think that, in the circumstances, the High
Court has rightly come to the conclusion that it is
not a fit case for exercise of jurisdiction under
section 482 of the Code of Criminal Procedure for
quashing the complaint. In fact, an advertence to
Sections 138 and 141 of the Negotiable
Instruments Act shows that on the other elements
of an offence under Section 138 being satisfied, the
burden is on the Board of Directors or the Officers
in-charge of the affairs of the company to show
that they are not liable to be convicted. Any
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special circumstance that makes them not liable is
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something that is peculiarly within their knowledge
and it is for them to establish at the trial such a
restriction or to show that at the relevant time they
were not in-charge of the affairs of the company.
Reading the complaint as a whole, we are satisfied
that it is a case where the contentions sought to be
raised by the appellant can only be dealt with after
the conclusion of the trial.”
In the aforesaid subsequent authority pronounced by the
Supreme Court, it has been held that a complainant is
supposed to know only generally as to who were in
charge of the affairs of the company. The other
administrative matters would be within the special
knowledge of the Company and those who are in charge
of it. Therefore, the complainant is expected to allege that
the persons named in the complaint are in charge of the
the affairs of the company. The Supreme Court has gone
a step further and observed that it is only the Directors of
the Company who have special knowledge about the role
they had played in the company to show before the court
that at the relevant point of time they were not in charge
of the affairs of the company. In the said case, it has been
simply averred to that the Directors of the Company were
in charge of and responsible for the conduct of the
business of the company. The Supreme Court, in the
aforesaid judgment, has held that the said allegation is
sufficient averment as required under Sections 138 and
141 of the Negotiable Instruments Act.
16. In view of the clarification found in the aforesaid
authority reported in 2007 (3) CTC 495, the court holds
that if the complainant, who is the payee or holder in due
course, who may not be aware of the indoor
administration of a company or the partnership firm,
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lodges a complaint under Section 138 and 141 of the
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Negotiable Instruments Act with the averment that the
Director or the Partners concerned were in charge of and
responsible for the conduct of the business of the
partnership firm concerned, then it will have to be
construed that such an averment is a necessary and
sufficient one as contemplated under Section 141 of the
Negotiable Instruments Act. Then the burden is shifted to
the Partner or the Director of the Company, who has got
thorough knowledge about the indoor management of the
company or partnership firm, to prove that he was not in
charge of and responsible for the conduct of the business
of the company at the relevant point of time. Therefore, I
reject, without any hesitation, the submission made by the
learned Senior Counsel appearing for the petitioner that
the complaint which does not whisper any averment as to
how and in what manner, the Partners of the partnership
firm played a role is not maintainable. Even otherwise,
the reply notice issued by the Managing Partner which
forms part of the complaint, prima facie, shows that the
petitioner herein had actually played a role in the day to
day administration of the fourth accused partnership
firm. Therefore, the court has to hold that the
complainant has come out with a prima facie material to
convince the learned Judicial Magistrate that the third
accused was also in charge of and responsible for the
conduct of the business of the fourth accused partnership
firm.
13. Coming back to the facts of the present case, it would be
apposite to examine the relevant extract of the impugned complaint
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(Annexure P-1) enumerating the role of all the accused including the
petitioner. The same is reproduced as under:-
“4. The accused No.2 is the Managing Director and
accused No.3 to 6 are the active Directors of the accused
Company and they are fully responsible for conduct of
the business of the accused Company. The day to day
affairs of accused No.1 Company are managed by
accused No.2 to 6 and as such they are in control of the
affairs of the accused No.1 Company and liable for all
the Acts and deeds committed on behalf of accused No.1
Company. The accused NO.2 to 6 are holding very
important positions in the management of accused No.1
Company as indicated above and are incharge of and
responsible to the Company for conduct of the business
of the company. The accused No.2 to 6 have been
regularly approaching the complainant for negotiation
regarding the financial assistance granted to the
complainant Company and it was, inter alia, on their
assurances that the financial assistance was granted to the
accused No.1 Company by the complainant.
5. That the accused No.1 Company through accused No.2
to 6 approached the complainant for financial assistants
by way of working capital facility and the complainant
sanctioned/enhanced a limit of Rs.40 Crores vide its
Letter of Intent dated Febraury 11, 2012.”
14. A perusal of the averments above clearly establish that the
accused Nos.2 to 6, including the petitioner, who is accused No.6 were
stated to be incharge of and responsible for the conduct of the business of
the company. It has also been categorically mentioned that it was accused
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Nos.2 to 6 who approached the complainant for financial assistance on
behalf of the accused No.1-Company.
15. Thus, there is a clear and categoric averment in Para 4 and 5 of
the complaint (Annexure P-1) that accused No.2-Rajiv Goyal being the
Managing Director and accused No.3 to 6, namely, Alka Goyal, Shiv Kumar
Yadav, Bharat Bhushan Jain and Dharmpal Singhal (petitioner) who are
directors of the company, were fully responsible for the conduct and
business of the company and were incharge of its day-to-day affairs.
Additionally, there is a specific allegation that accused No.1-Surya
Pharmaceuticals Ltd.-company through accused Nos.2 to 6 approached the
complainant for financial assistance by way of working capital. Whether this
averment/allegation is correct or, on the other hand, the petitioner did not
have any role in obtaining financial assistance for the company shall be
adjudicated upon only during the course of the Trial. The internal workings
of the company and the exact designation of an officer of the company
cannot be known to a third person who deals with the company and its
officials on a day-to-day basis. Therefore, once necessary averments are
made in terms of Section 141 of the Negotiable Instruments Act and further,
specific allegations are also levelled against particular
Directors/Managers/Officers of the company, then, it would be a matter of
their defence which would be established during the course of the Trial that
they were not liable because they were not incharge of and responsible for
running of the day-to-day affairs of the company.
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16. Additionally, the co-accused of the petitioner, namely, Bharat
Bhushan Jain had approached this Court by way of a quashing petition
bearing No.CRM-M-54980-2018 which was dismissed vide order dated
21.07.2026 passed by this Court.
17. Keeping in view the aforementioned facts and circumstances, I
find no merit in the present petition and the same stands dismissed.
18. The pending application(s), if any, shall stand disposed of
accordingly.
July 28, 2026 ( JASJIT SINGH BEDI)
sukhpreet JUDGE
Whether speaking/reasoned : Yes/No
Whether reportable : Yes/No
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