PAWAN KUMAR GOELversusSTATE OF U. P. & ANOTHER

102                      [2022]REPORTS
               SUPREME COURT   10 S.C.R. 102              [2022] 10 S.C.R.


A                          PAWAN KUMAR GOEL
                                        v.
                        STATE OF U. P. & ANOTHER
                       (Criminal Appeal No. 1999 of 2022)
B                            NOVEMBER 17, 2022
           [KRISHNA MURARI AND BELA M. TRIVEDI, JJ.]
            Negotiable Instrument Act, 1881 – ss. 138, 141, 142 – Whether
      a director of a company would be liable for prosecution u/s. 138 of
      NI Act without the company being arraigned as an accused – Held:
C
      If the complainant fails to make specific averments against the
      company in the complaint for the commission of an offence u/s. 138
      of NI Act, the same cannot be rectified by taking recourse to general
      principles of criminal jurisprudence – The provisions of s.141 impose
      vicarious liability by deeming fiction which pre-supposes and
D     requires the commission of the offence by the company or firm –
      Therefore, unless the company or firm has committed the offence as
      a principal accused, the persons mentioned in sub-Section (1) and
      (2) would not be liable to be convicted on the basis of the principles
      of vicarious liablity.
E           Negotiable Instrument Act, 1881 – ss. 138, 141, 142 – Whether
      a complaint u/s. 138 of NI Act would be liable to be proceeded
      against the director of the company without their being any
      averments in the complaint that the director arrayed as an accused
      was in charge of and responsible for the conduct and business of
      the company – Held: It is settled that vicarious liability of a person
F
      for being prosecuted for an offence committed under the Act by a
      company arises if at the material time he was in charge of and was
      also responsible to the company for the conduct of its business –
      Simply because a person is a director of a company, it does not
      necessarily mean that he fulfils both the above requirements so as
G     to make him liable – In the instant case, perusal of the averments
      made in the complaint goes to show beyond a shadow of doubt that
      there are no averments that respondent no. 2 (director of the
      company), at the time when the offence was committed, was in charge
      of, and was responsible to the company for the conduct of the
      business of the company.
H
                                       102
    PAWAN KUMAR GOEL v. STATE OF U. P. & ANOTHER                        103


      Dismissing the appeals, the Court                                 A
       HELD: 1. The description of the respondent-accused
contained in the complaint is that though the respondent-accused
was described as a Director of ROL, but the company itself was
not arrayed as a party in the complaint. A perusal of the averments
made in the complaint also goes to show beyond a shadow of doubt        B
that there are no averments that respondent no. 2, at the time
when the offence was committed, was in charge of, and was
responsible to the company for the conduct of the business of the
company. This Court has been firm with the stand that if the
complainant fails to make specific averments against the company
in the complaint for the commission of an offence under Section         C
138 of NI Act, the same cannot be rectified by taking recourse to
general principles of criminal jurisprudence. Needless to say, the
provisions of Section 141 impose vicarious liability by deeming
fiction which pre-supposes and requires the commission of the
offence by the company or firm. Therefore, unless the company           D
or firm has committed the offence as a principal accused, the
persons mentioned in sub-Section (1) and(2) would not be liable
to be convicted on the basis of the principles of vicarious Liablity.
[Paras 18 & 19][115-C-H]
      2. Arguments advanced by counsel for the appellant that           E
an additional accused can be impleaded subsequent to the filing
of the complaint merits no consideration, once the limitation
prescribed for taking cognizance of the offence under Section
142 of NI Act has expired. More particularly, in view of the fact
that neither any effort was made by the petitioner at any stage of
the proceedings to arraign the company as an accused nor any            F
such circumstances or reason has been pointed out to enable the
Court to exercise the power conferred by proviso to Section 142,
to condone the delay for not making the complaint within the
prescribed period of limitation. [Para 23][119-E-G]
      3. The three-Judge Bench also took note of the earlier            G
pronouncements of this Court in the case of State of Haryana Vs.
Brij Lal Mittal & Ors., wherein it was held that vicarious liability
of a person for being prosecuted for an offence committed under
the Act by a company arises if at the material time he was in
                                                                        H
104            SUPREME COURT REPORTS                    [2022] 10 S.C.R.


A     charge of and was also responsible to the company for the conduct
      of its business. Simply because a person is a director of a company,
      it does not necessarily mean that he fulfils both the above
      requirements so as to make him liable. Conversely, without being
      a director a person can be in charge of and responsible to the
      company for the conduct of its business. The Bench also
B
      considered the dictum of this Court in the case of K.P.G. Nair Vs.
      Jindal Menthol India Ltd., which was also a case under the
      Negotiable Instruments Act. In the said case, it was found that
      the allegations in the complaint did not in express words or with
      reference to the allegations contained therein make out a case
C     that at the time of commission of the offence, the appellant was in
      charge of and was responsible to the company for the conduct of
      its business. It was held that requirement of Section 141 was not
      met and the complaint against the accused was quashed. [Paras
      28 and 29][123-H; 124-A-D]
D           Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd.
            (2012) 5 SCC 661 : [2012] 5 SCR 503; S.M.S
            Pharmaceuticals Ltd. v. Neeta Bhalla & Another (2005)
            8 SCC 89 : [2005] 3 Suppl. SCR 371; State of Haryana
            v. Brij Lal Mittal & Ors. (1998) 5 SCC 343 : [1998] 3
            SCR 104 – relied on.
E
            N.Harihara Krishnan v. J. Thomas (2018) 13 SCC 663
            : [2017] 9 SCR 324; Bilakchand Gyanchand Co. v. A.
            Chinnaswami (1999) 5 SCC 693 : 1999 (10) JT 236;
            Rajneesh Aggarwal v. Amit. J. Bhalla (2001) 1 SCC
            631 : [2001] 1 SCR 54; Himanshu v. B. Shivamurthy &
F           Another (2019) 3 SCC 797 : [2019] 1 SCR 991; K.K.
            Ahuja v. V.K. Vora & Anr. (2009) 10 SCC 48 : [2009] 9
            SCR 1144; K.P.G. Nair v. Jindal Menthol India Ltd.
            (2001) 10 SCC 218 : 2000 (1) Suppl. JT 519. - referred
            to.
G                           Case Law Reference
      [2012] 5 SCR 503                  relied on             Para 8
      [2005] 3 Suppl. SCR 371           relied on             Para 8
      [2017] 9 SCR 324                  referred to           Para 10.3
H
    PAWAN KUMAR GOEL v. STATE OF U. P. & ANOTHER                         105


[2001] 1 SCR 54                    referred to           Para 10.3       A
[2019] 1 SCR 991                   referred to            Para 11.2
[2009] 9 SCR 1144                  referred to            Para 16
[1998] 3 SCR 104                   relied on              Para 28
      CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.               B
1999 of 2022.
      From the Judgment and Order dated 19.11.2019 of the High Court
of Judicature at Allahabad in Criminal Miscellaneous Writ Petition No.
24632 of 2013.
                                                                         C
      With
      Criminal Appeal Nos. 2000, 2001, 2002 and 2003 of 2022.
      Anubhav Kumar, Abhishek Swarup, M/s. Manoj Swarup and Co.,
Advs. for the Appellant.
      Vishwa Pal Singh, Rahul Verma, Adesh Kumar Gill, Mohd. Alim        D
Khan, Vikas Gothwal, Shantanu Krishna, Advs. for the Respondents.
      The Judgment of the Court was delivered by
      KRISHNA MURARI, J.
      Leave granted.                                                     E
       2. The present appeals are directed against the final judgment
and order dated 19.11.2019 passed by the High Court of Judicature at
Allahabad (hereinafter referred to as “High Court”) in four Criminal
Miscellaneous Writ Petitions filed by the Respondents seeking quashing
of the summoning order dated 18.03.2013 passed by the Additional Chief   F
Judicial Magistrate-II, Muzaffarnagar (hereinafter referred to as
“Magistrate”) and order dated 02.12.2013 passed by the Additional
Sessions Judge, Muzaffarnagar (hereinafter referred to as “Sessions
Court”). The High Court allowed the Writ Petition and quashed the
entire proceedings including the summoning order dated 18.03.2013 as
                                                                         G
well as order dated 02.12.2013.
       3. As the present appeals are filed by the same Appellant
challenging the same impugned judgment, for the sake of brevity they
are being disposed of by this common Judgment. Criminal Appeal arising
out of Special Leave Petition (Crl.) No. 1697 of 2020 is taken up as a
                                                                         H
106            SUPREME COURT REPORTS                          [2022] 10 S.C.R.


A     lead case and the parties arrayed thereunder are to be taken in the same
      manner for the other cases as well.
            Factual background:
              4. The Appellant is engaged in the business of sales of machinery
      and spare parts under the name and style of ‘M/s Pawan Hardware
B     Store’. Respondent No. 2 herein is one of the Director of Ravi Organics
      Limited, a private limited company, engaged in the manufacturing and
      sales of various types of chemicals. Both of them were having business
      dealings and Ravi Organics Limited was having a running account with
      the appellant. Respondent No. 2 is alleged to have issued an account
C     payee cheque for a sum of Rs. 10 Lakhs payable at Union Bank of
      India, Muzaffarnagar, in favor of the Appellant towards discharge of its
      liability for supply of materials made by the appellant. When the appellant
      presented the cheque before the banker, it was dishonored on 24.12.2012.
      The Appellant, thereafter, sent a legal notice dated 01.01.2013 to
      Respondent No. 2 through registered post, which, though, was served,
D     however, there was no response from Respondent No.2.
            5. Despite service of notice, when neither there was any response
      from the accused nor payment was made, appellant filed four criminal
      complaints against Respondent no. 2 for the offence punishable under
      Section 138 Negotiable Instruments Act, 1881 (hereinafter referred to
E     as ‘NI Act’) on the allegations that the account payee cheque bearing
      no. 802276 of Union Bank of India, Muzaffarnagar, for a sum of Rs.10
      lakhs dated 20.11.2012 issued by the respondent no. 2 towards the
      outstanding bills when presented for clearance was dishonored on the
      ground that the cheque amount exceeds arrangement.
F            6. The Magistrate took cognizance of the said complaint and
      required the Appellant to get his statement recorded under Section 200
      of the Code of Criminal Procedure (hereinafter referred to as ‘Cr.P.C’).
      However, on 07.02.2013, the Appellant filed an affidavit to this effect
      seeking that it be read as a statement under Section 200 Cr.P.C. The
G     Magistrate passed an order dated 18.03.2013 summoning Respondent
      No. 2 for trial in Criminal Case No. 162 of 2013.
             7. Being aggrieved by the summoning order dated 18.03.2013,
      Respondent no. 2 filed Criminal Revision No. 212 of 2013 before the
      Sessions Court. Vide order dated 02.12.2013, the Sessions Court dismissed
      the criminal revision petition and held that the cheque was issued against
H
       PAWAN KUMAR GOEL v. STATE OF U. P. & ANOTHER                        107
                 [KRISHNA MURARI, J.]

outstanding payments arising out of commercial transactions between        A
Respondent No. 2 and Appellant.
      8. Respondent No. 2 aggrieved by the dismissal of the Criminal
Revision approached the High Court by way of Criminal Miscellaneous
Writ Petition No. 24632 of 2013 seeking quashing of the summoning
order dated 18.02.2013 passed by the Magistrate and also the order         B
dated 02.12.2013 passed by the Sessions Court. The High Court vide
impugned judgment and order dated 19.11.2019 allowed the Writ Petition
and quashed the entire proceedings including the summoning order dated
18.3.2013 passed by the Magistrate placing reliance on the
pronouncement of this Court in the case of Aneeta Hada Vs. Godfather
Travels & Tours Pvt. Ltd.1 and S.M.S Pharmaceuticals Ltd. Vs. Neeta        C
Bhalla & Another.2
      8.1 The operative portion of the impugned judgment reads as
under:-
         “Considering the facts and circumstance of the present case,      D
         according to the complaint itself, the cheque was issued for
         Pawan Hardware Store, Sandeep talkies, near Court Road,
         Civil Lines, Muzaffar Nagar by the Director, Devendra Kumar
         Garg- petitioner. It is not averred in the complaint that
         Devendra Kumar Garg was in charge of and responsible for
         the conduct of the business of the company at the time of         E
         commission of the offence and hence he will not be liable for
         criminal action. It may be noted that the firm named as Ravi
         Organics Ltd., Nai Mandi, Muzaffar Nagar, who was the
         principal accused, has not been made party in the complaint
         as stated above and side by side the necessary averment           F
         required to be made in the complaint satisfying the
         requirements of Section 141 of the Act are also lacking to
         maintain prosecution as held in the decisions cited above. In
         this view of the matter, complaint itself is bad in law and the
         entire proceedings in pursuance thereof, including the
         summoning order dated 18.3.2013 passed by Addl. Chief             G
         Judicial Magistrate, Court No.2, Muzaffar Nagar in Criminal
         Case No.162 of 2013, Pawan Kumar Goel Vs. Devendra
         Kumar Garg, under Section 138 N.I. Act, P.S. Civil Lines,
1
    (2012) 5 SCC 661
2
    (2005) 8 SCC 89                                                        H
108             SUPREME COURT REPORTS                           [2022] 10 S.C.R.


A            District Muzaffar Nagar as well as order dated 2.12.2013
             passed by Addl. Sessions Judge, Court No.7, Muzaffarnagar
             in Criminal Revision No. 212 of 2013, Devendra Kumar Garg
             Vs. Pawan Kumar Goel, is nothing but an abuse of process
             of the court and is liable to be quashed.”
B           9. We have heard Mr. Anubhav Kumar, learned counsel appearing
      on behalf of the Appellant and Mr. Vishwa Pal Singh, learned counsel
      appearing on behalf of the Respondents.
             10. Mr. Anubhav Kumar, learned counsel for the appellant
      submitted that the cheque issued by Respondent No. 2 towards payment
C     of outstanding dues of supply of material due to the Appellant was
      dishonoured and hence the respondent is guilty of committing offence
      under the Negotiable Instruments Act and was righly summoned by the
      Trial Court to face the trial. He further submitted that the Criminal Revision
      Petition challenging the summoning order was also rightly dismissed but
      the High Court committed a manifest error of law in causing interference
D     and quashing the summoning order as well as the proceedings.
             10.1 It was further submitted that the High Court erred in not
      appreciating that respondent no. 2 was arrayed by name discribing him
      as a director of the Ravi Organics Limited and on account of a
      typographical error, the company could not be arrayed as accused no. 2
E     in the complaint by name, though the details thereof is mentioned in the
      discription of accused no. 1.
            10.2. He further submitted that the complaint contained all
      necessary factual allegations constituting each of the ingredients of
      offence under Section 138 of NI Act and there is no provision either
F     under the NI Act or under the Criminal Procedure Code, which prohibits
      the amendment of a complaint or the impleadment of an additional accused
      subsequent to the filing of the complaint.
             10.3 Reliance to support the aforesaid contentions has been placed
      by the learned counsel for the appellant on the decisions of this Court in
G     N.Harihara Krishnan Vs. J. Thomas3, Bilakchand Gyanchand Co.
      Vs. A. Chinnaswami4, and Rajneesh Aggarwal Vs. Amit. J. Bhalla5.

      3
        (2018) 13 SCC 663
      4
        (1999) 5 SCC 693
      5
H       (2001) 1 SCC 631
       PAWAN KUMAR GOEL v. STATE OF U. P. & ANOTHER                             109
                 [KRISHNA MURARI, J.]

        11. In reply, learned counsel appearing on behalf of the Respondent     A
No. 2 submitted that the summoning order is erroneous as the proceedings
itself is not maintainable without the company having not been arrayed
as an accused in the complaint.
       11.1 It was also submitted that it is well settled by a catena of
decisions that if a complaint under Section 138 of NI Act is filed in           B
respect of dishonor of cheque issued from the account of the company,
it is incumbent on the part of the complainant to make necessary
averments in the complaint that at the time when the offence was
committed, the person accused was in charge of and responsible for the
conduct and business of the company. This averment is an essential
requirement of Section 141 of NI Act. He further submitted that the             C
infirmity in the complaint under Section 138 of NI Act for not impleading
the company or not making specific averments in respect of the
commission of offence by the company as required under the Act, cannot
be said to be curable.
      11.2 Reliance in support of the contention was placed by the learned      D
counsel for the respondent on the decisions of this Court in the case of
Aneeta Hada (Supra), SMS Pharmaceuticals Ltd. (Supra), and
Himanshu Vs. B. Shivamurthy & Another6.
         12. Two main issues which falls for our consideration in this appeal
are :-                                                                          E

         (1)    Whether a director of a company would be liable for
                prosecution under Section 138 of NI Act without the
                company being arraigned as an accused.
         (2)    Whether a complaint under Section 138 of NI Act would           F
                be liable to be proceeded against the director of the company
                without their being any averments in the complaint that the
                director arrayed as an accused was in charge of and
                responsible for the conduct and business of the company.
        13. Before delving into the merits of the contention raised, it is
                                                                                G
important to analyze the cardinal provision which establishes the criminal
liability upon the defaulter for dishonour of cheque i.e., Section 138 of
NI Act. Section 138 of the NI Act reads as under: -


6
    (2019) 3 SCC 797                                                            H
110            SUPREME COURT REPORTS                          [2022] 10 S.C.R.


A           “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
B           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
C           offence and shall, without prejudice to any other provisions
            of this Act, be punished with imprisonment for [a term which
            may be extended to two years], or with fine which may extend
            to twice the amount of the cheque, or with both:
            Provided that nothing contained in this section shall apply
D           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
E           the case may be, makes a demand for the payment of the said
            amount of money by giving a notice in writing, to the drawer
            of the cheque, [within thirty days] of the receipt of information
            by him from the bank regarding the return of the cheque as
            unpaid; and
F           (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
G           liability” means a legally enforceable debt or other liability.”
            14. Section 141 of NI Act deals with offences by companies while
      extending the liability to every individual; who when the offence was
      committed was responsible for the conduct of the business which also
      extends towards key managerial positions like that of the Director. Section
H     141 of the NI Act reads as under: -
    PAWAN KUMAR GOEL v. STATE OF U. P. & ANOTHER                               111
              [KRISHNA MURARI, J.]

      141. Offences by companies. —                                            A
      (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                 B
      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              C
      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                 D
      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                 E
      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                  F
      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
                                                                               G
      (b) ”director”, in relation to a firm, means a partner in the
      firm.
       15. A bare perusal of Section 138 and Section 141 of NI Act
indicates that Section 138 of the NI Act casts criminal liability punishable
with imprisonment for a term that may be extended to two years or with         H
112                SUPREME COURT REPORTS                     [2022] 10 S.C.R.


A     a fine that may extend to twice the amount of the cheque, or with both
      on a person who issues a cheque towards discharge of a debt or liability
      in whole or in part and the cheque is dishonoured by the bank on
      presentation. While Section 141 extends such criminal liability in case of
      a company to every person who at the time the offence was committed,
      was in charge of, and was responsible for the conduct of the business of
B
      the company.
            16. A two-Judge Bench of this Court in the case of K.K. Ahuja v.
      V.K. Vora & Anr.7 after analysing the provisions contained in Section
      141 of the Act, observed as under :-
C              “16. Having regard to section 141, when a cheque issued by
               a company (incorporated under the Companies Act, 1956) is
               dishonoured, in addition to the company, the following
               persons are deemed to be guilty of the offence and shall be
               liable to be proceeded against and punished :
D              (i) 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;
               (ii) any Director, Manager, Secretary or other officer of the
               company with whose consent and connivance, the offence
E              under section 138 has been committed; and
               (iii) any Director, Manager, Secretary or other officer of the
               company whose negligence resulted in the offence
               under section 138 of the Act, being committed by the company.
                  While liability of persons in the first category arises under
F              sub-section (1) of Section 141, the liability of persons
               mentioned in categories (ii) and (iii) arises under sub-section
               (2). The scheme of the Act, therefore is, that a person who is
               responsible to the company for the conduct of the business of
               the company and who is in charge of business of the company
               is vicariously liable by reason only of his fulfilling the
G
               requirements of sub- section (1). But if the person responsible
               to the company for the conduct of business of the company,
               was not in charge of the conduct of the business of the
               company, then he can be made liable only if the offence was

H     7
          (2009) 10 SCC 48
    PAWAN KUMAR GOEL v. STATE OF U. P. & ANOTHER                          113
              [KRISHNA MURARI, J.]

      committed with his consent or connivance or as a result of his      A
      negligence.
      17. The criminal liability for the offence by a company
      under section 138, is fastened vicariously on the persons
      referred to in sub-section (1) of section 141 by virtue of a
      legal fiction. Penal statutes are to be construed strictly. Penal   B
      statutes providing constructive vicarious liability should be
      construed much more strictly. When conditions are prescribed
      for extending such constructive criminal liability to others,
      courts will insist upon strict literal compliance. There is no
      question of inferential or implied compliance. Therefore, a
      specific averment complying with the requirements of section        C
      141 is imperative. As pointed out in K. Srikanth Singh vs.
      North East Securities Ltd - 2007 (12) SCC 788, the mere fact
      that at some point of time, an officer of a company had played
      some role in the financial affairs of the company, will not be
      sufficient to attract the constructive liability under section      D
      141 of the Act.
      18. Sub-section (2) of section 141 provides that a Director,
      Manager, Secretary or other officer, though not in charge of
      the conduct of the business of the company will be liable if
      the offence had been committed with his consent or                  E
      connivance or if the offence was a result of any negligence
      on his part. The liability of persons mentioned in sub-section
      (2) is not on account of any legal fiction but on account of
      the specific part played - consent and connivance or
      negligence. If a person is to be made liable under sub-section
      (2) of section 141, then it is necessary to aver consent and        F
      connivance, or negligence on his part.”
      17. The scope of Section 141 of NI Act was again exhaustively
considered by this Court in S.M.S Pharamaceuticals (Supra):
      “10. ….What is required is that the persons who are sought to       G
      be made criminally liable under Section 141 should be at the
      time the offence was committed, in charge of and responsible
      to the company for the conduct of the business of the company.
      Every person connected with the company shall not fall within
      the ambit of the provision. It is only those persons who were
      in charge of and responsible for conduct of business of the         H
114      SUPREME COURT REPORTS                         [2022] 10 S.C.R.


A     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
B
      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
C     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
D
      “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
E     of a crime at the relevant time have been subjected to actio…
      18. To sum up, there is almost unanimous judicial opinion
      that necessary averments ought to be contained in a complaint
      before a person can be subjected to criminal process. A liability
      under Section 141 of the Act is sought to be fastened
F     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
G     the said provision. That the respondent falls within the
      parameters of Section 141 has to be spelled out. A complaint
      has to be examined by the Magistrate in the first instance on
      the basis of averments contained therein. If the Magistrate is
      satisfied that there are averments which bring the case
H     within Section 141, he would issue the process. We have seen
    PAWAN KUMAR GOEL v. STATE OF U. P. & ANOTHER                              115
              [KRISHNA MURARI, J.]

      that merely being described as a director in a company is not           A
      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
                                                                              B
      meet the case at the trial.”
                                                   (emphasis supplied)
      18. Coming to the facts of the present case at hand, a perusal of
the complaint filed as Annexure P-1 clearly goes to establish two facts :-
      (i)    The description of the respondent-accused contained in the       C
             complaint is as under :-
                 “Mr. Devendra Kumar Garg, S/o Lala Jagdish
                 Prasad Garg, Director, Ravi Organics Limited, 19-
                 A, New Mandi, Police Station-New Mandi, District-
                 Muzaffarnagar.”                                              D
             From the aforesaid, it is clear that though the respondent-
             accused was described as a Director of Ravi Organics
             Limited, but the company itself was not arrayed as a party
             in the complaint.
                                                                              E
      (ii)   A perusal of the averments made in the complaint goes to
             show beyond a shadow of doubt that there are no averments
             that respondent no. 2, at the time when the offence was
             committed, was in charge of, and was responsible to the
             company for the conduct of the business of the company.
                                                                              F
        19. This Court has been firm with the stand that if the complainant
fails to make specific averments against the company in the complaint
for the commission of an offence under Section 138 of NI Act, the same
cannot be rectified by taking recourse to general principles of criminal
jurisprudence. Needless to say, the provisions of Section 141 impose
vicarious liability by deeming fiction which pre-supposes and requires        G
the commission of the offence by the company or firm. Therefore, unless
the company or firm has committed the offence as a principal accused,
the persons mentioned in sub-Section (1) and (2) would not be liable to
be convicted on the basis of the principles of vicarious liablity.
                                                                              H
116            SUPREME COURT REPORTS                        [2022] 10 S.C.R.


A           20. Reference in this connection may also be made to another
      judgment of the two-Judge Bench of this Court in Himanshu Vs.
      B. Shivamurthy and Another (Supra), the facts wherein have a stark
      similarity to the facts of the present case, considering the issue where
      the complaint was lodged only against the director without arraigning
      the company as an accused and whether the company could be
B
      subsequently arraigned as an accused, it was observed as under:-
            “11. In the present case, the record before the Court indicates
            that the cheque was drawn by the appellant for Lakshmi
            Cement and Ceramics Industries Ltd., as its Director. A notice
            of demand was served only on the appellant. The complaint
C           was lodged only against the appellant without arraigning the
            company as an accused.
            12. The provisions of Section 141 postulate that if the person
            committing an offence under Section 138 is a company, 4
            (2018) 13 SC 663 every person, who at the time when the
D           offence was committed was in charge of or 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.
E           13. In the absence of the company being arraigned as an
            accused, a complaint against the appellant was therefore not
            maintainable. The appellant had signed the cheque as a
            Director of the company and for and on its behalf. Moreover,
            in the absence of a notice of demand being served on the
F           company and without compliance with the proviso to Section
            138, the High Court was in error in holding that the company
            could now be arraigned as an accused.”
             21. This issue stands concluded by a decision of three-Judge Bench
      of this Court in the case of Aneeta Hada Vs. Godfather Travels &
G     Tours (P) Ltd.(Supra), wherein it has been held that for maintaining
      the prosecution under Section 141 of NI Act, arraigning of the company
      as an accused is imperative and non-impleadment of the company would
      be fatal for the complaint. It may be relevant to extract the following
      from the said judgment :-

H
    PAWAN KUMAR GOEL v. STATE OF U. P. & ANOTHER                            117
              [KRISHNA MURARI, J.]

      “58. Applying the doctrine of strict construction, we are of          A
      the considered opinion that commission of offence by the
      company is an express condition precedent to attract the
      vicarious liability of others. Thus, the words “as well as the
      company” appearing in the Section make it absolutely
      unmistakably clear that when the company can be prosecuted,
                                                                            B
      then only the persons mentioned in the other categories could
      be vicariously liable for the offence subject to the averments
      in the petition and proof thereof. One cannot be oblivious of
      the fact that the company is a juristic person and it has its
      own respectability. If a finding is recorded against it, it would
      create a concavity in its reputation. There can be situations         C
      when the corporate reputation is affected when a director is
      indicted.
      59. In view of our aforesaid analysis, we arrive at the
      irresistible conclusion that for maintaining the prosecution
      under Section 141 of the Act, arraigning of a company as an           D
      accused is imperative. The other categories of offenders can
      only be brought in the dragnet on the touchstone of vicarious
      liability as the same has been stipulated in the provision itself.”
       22. The observations made in the aforesaid judgment is also a
complete answer to the arguments advanced by learned counsel for the        E
appellant that in the absence of any prohibition under the NI Act, the
amendment in the complaint is permissible and the impleadment of an
additional accused subsequent to filing of the complaint, would not be
barred. At this juncture, we may also refer to the following observations
made in the case of N. Harihara Krishnan Vs. J. Thomas (Supra) :-
                                                                            F
      “26. The scheme of the prosecution in punishing under Section
      138 of the Act is different from the scheme of CrPC. Section
      138 creates an offence and prescribes punishment. No
      procedure for the investigation of the offence is contemplated.
      The prosecution is initiated on the basis of a written complaint
      made by the payee of a cheque. Obviously such complaints              G
      must contain the factual allegations constituting each of the
      ingredients of the offence under Section 138. Those
      ingredients are: (1) that a person drew a cheque on an account
      maintained by him with the banker; (2) that such cheque when
      presented to the bank is returned by the bank unpaid; (3)             H
118     SUPREME COURT REPORTS                        [2022] 10 S.C.R.


A     that such a cheque was presented to the bank within a period
      of six months from the date it was drawn or within the period
      of its validity whichever is earlier; (4) that the payee demanded
      in writing from the drawer of the cheque the payment of the
      amount of money due under the cheque to payee; and (5)
      such a notice of payment is made within a period of 30 days
B
      from the date of the receipt of the information by the payee
      from the bank regarding the return of the cheque as unpaid.
      It is obvious from the scheme of Section 138 that each one of
      the ingredients flows from a document which evidences the
      existence of such an ingredient. The only other ingredient
C     which is required to be proved to establish the commission of
      an offence under Section 138 is that in spite of the demand
      notice referred to above, the drawer of the cheque failed to
      make the payment within a period of 15 days from the date of
      the receipt of the demand. A fact which the complainant can
      only assert but not prove, the burden would essentially be on
D
      the drawer of the cheque to prove that he had in fact made
      the payment pursuant to the demand.
      27. By the nature of the offence under Section 138 of the Act,
      the first ingredient constituting the offence is the fact that a
      person drew a cheque. The identity of the drawer of the cheque
E     is necessarily required to be known to the complainant (payee)
      and needs investigation and would not normally be in dispute
      unless the person who is alleged to have drawn a cheque
      disputes that very fact. The other facts required to be proved
      for securing the punishment of the person who drew a cheque
F     that eventually got dishonoured is that the payee of the cheque
      did in fact comply with each one of the steps contemplated
      under Section 138 of the Act before initiating prosecution.
      Because it is already held by this Court that failure to comply
      with any one of the steps contemplated under Section 138
      would not provide “cause of action for prosecution”.
G     Therefore, in the context of a prosecution under Section 138,
      the concept of taking cognizance of the offence but not the
      offender is not appropriate. Unless the complaint contains
      all the necessary factual allegations constituting each of the
      ingredients of the offence under Section 138, the Court cannot
H     take cognizance of the offence. Disclosure of the name of the
    PAWAN KUMAR GOEL v. STATE OF U. P. & ANOTHER                              119
              [KRISHNA MURARI, J.]

      person drawing the cheque is one of the factual allegations             A
      which a complaint is required to contain. Otherwise in the
      absence of any authority of law to investigate the offence
      under Section 138, there would be no person against whom a
      court can proceed. There cannot be a prosecution without an
      accused. The offence under Section 138 is person specific.
                                                                              B
      Therefore, Parliament declared under Section 142 that the
      provisions dealing with taking cognizance contained in the
      CrPC should give way to the procedure prescribed under
      Section 142. Hence the opening of non obstante clause under
      Section 142. It must also be remembered that Section 142 does
      not either contemplate a report to the police or authorise the          C
      Court taking cognizance to direct the police to investigate
      into the complaint.
      28. The question whether the respondent had sufficient cause
      for not filing the complaint against Dakshin within the period
      prescribed under the Act is not examined by either of the courts        D
      below. As rightly pointed out, the application, which is the
      subject-matter of the instant appeal purportedly filed invoking
      Section 319 CrPC, is only a device by which the respondent
      seeks to initiate prosecution against Dakshin beyond the
      period of limitation stipulated under the Act.”
                                                                              E
        23. In view of the above, arguments advanced by learned counsel
for the appellant that an additional accused can be impleaded subsequent
to the filing of the complaint merits no consideration, once the limitation
prescribed for taking cognizance of the offence under Section 142 of NI
Act has expired. More particularly, in view of the fact that neither any
effort was made by the petitioner at any stage of the proceedings to          F
arraign the company as an accused nor any such circumstances or reason
has been pointed out to enable the Court to exercise the power conferred
by proviso to Section 142, to condone the delay for not making the
complaint within the prescribed period of limitation.
      24. Reliance placed by learned counsel for the appellant on the         G
decisions of this Court in the case of Aneeta Hada Vs. Godfather
Travels & Tours Pvt. Ltd. (Supra) is also totally mis-founded inasmuch
as the ratio decidendi of the said case runs contrary to the argument
advanced by learned counsel for the appellant. It may be relevant to
extract the following observations made in paragraph 59 of the reports :-     H
120            SUPREME COURT REPORTS                        [2022] 10 S.C.R.


A           “59. In view of our aforesaid analysis, we arrive at the
            irresistable conclusion that for maintaining the prosecution
            under Section 141 of the Act, arraigning of a company as an
            accused is imperative. The other categories of offenders can
            only be brought in the drag-net on the touchstone of vicarious
            liability as the same has been stipulated in the provision itself.
B
            We say so on the basis of the ratio laid down in C.V. Parekh
            which is a three-Judge Bench decision. Thus, the view
            expressed in sheoratan Agarwal does not correctly lay down
            the law and, accordingly, is hereby overruled. The decision
            in Anil Hada is overruled with the qualifier as stated in para
C           51. The decision in Modi Distillery has to be treated to be
            restricted to its own facts as has been explained by us
            hereinabove.”
            25. As already stated above, a perusal of the complaint goes to
      show that even though respondent no. 2 has been arrayed as a respondent,
D     but there are no averments that respondent no.2 at the time when the
      offence was committed was in charge of, and was responsible to the
      company for the conduct of its business. The averments made in the
      complaint are being reproduced hereunder :-
            “Complainant makes the following written submission:-
E           1. That the complainant has a firm which deals in all types of
            materials used int eh machineries of factories.
            2. Defendant’s firm M/s. Ravi Organics Limited is a chemical
            factory and the materials used in the machinery of defendant-
            firm are supplied by Complainant. Both the firms have old
F           trade relations and they do business with each other.
            3. Defendant gave an account payee cheque bearing no.
            802276 of Union Bank of India, Muzaffarnagar of
            Rs.1,00,000/- (Rupees ten lakhs) on 20.11.2012 to
            Complainant against outstanding bill and asked him to
G           produce the same in his bank for encashment after receiving
            his signal.
            4. After laying up claim many times by Complainant, defendant
            on 15.12.2012 asked the complainant to produce the said
            cheque in his bank for entrenchment after four-five days, it
H           will be cleared, complainant believed the defendant.
    PAWAN KUMAR GOEL v. STATE OF U. P. & ANOTHER                           121
              [KRISHNA MURARI, J.]

      5. On 21.12.2012, Complainant produced the said cheque in            A
      his bank State Bank of Patiala, Court Road, Muzaffarnagar
      for encashment in favour of his A/c No. 55042570994. On
      24.12.2012, he was informed by his bank that the cheque
      amount exceeds arrangement made on 22.12.2012 by
      defendant’s bank i.e., Union Bank of India and thus, the said
                                                                           B
      cheque was dishonoured.
      6. Upon dishonouring the cheque (with the remarks of
      Exceeds arrangement), complainant issued a registered notice
      through his advocate to the defendant at his above given
      address which was received by defendnat on 01.01.2013 but
      even after lapse of 15 days, defendant has not made the above        C
      payment to complainant so far.
      7. Defendant-accused deliberately gave the above cheque
      with intent to grab complainant’s money which has been
      dishonoured in the bank; thus, defendant-accused is guilty
      of committing offence under Negotiable Instruments Act.              D

      Therefore, you are requested to summon the accused and
      punish him with the directions to pay the complainant the
      double of the above cheque amount under provisions of N.I.
      Act. Complainant shall remain obliged to you.”
                                                                           E
       26. The question whether it is necessary to specifically state in
the complaint that the person accused was in charge of, or responsible
for the conduct of the business of the company, was subject matter of
reference by a two-Judge Bench of this Court along with other questions
to be adjudicated by a larger Bench. The following questions were
referred for consideration :-                                              F
      “(a) Whether for purposes of Section 141 of the Negotiable
      Instruments Act, 1881, it is sufficient if the substance of the
      allegation read as a whole fulfill the requirements of the said
      section and it is not necessary to specifically state in the
      complaint that the person accused was in charge of, or               G
      responsible for, the conduct of the business of the company.
      (b) Whether a director of a company would be deemed to be
      in charge of, and responsible to, the company for conduct of
      the business of the company and, therefore, deemed to be
      guilty of the offence unless he proved to the contrary.              H
122            SUPREME COURT REPORTS                         [2022] 10 S.C.R.


A           (c) Even if it is held that specific averments are necessary,
            whether in the absence of such averments the signatory of
            the cheque and or the managing directors or joint managing
            director who admittedly would be in charge of the company
            and responsible to the company for conduct of its business
            could be proceeded against.”
B
             27. A three-Judge Bench in the case of S.M.S. Pharmaceuticals
      Ltd. Vs. Neeta Bhalla (Supra), considering the aforesaid questions
      after analysing the provisions of Section 141 of the Act and specially 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
C     business of the company, as well as the company, shall be deemed
      to be guilty of the offence, etc.” used in the said Section, observed as
      under :-
            “While analysing Section 141 of the Act, it will be seen that it
            operates in cases where an offence under Section 138 is
D           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 :
E           “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
F           made criminally liable under Section 141 should be at the time
            the offence was committed, in charge of and responsible to
            the company for the conduct of the business of the company.
            Every person connected with the company shall not fall within
            the ambit of the provision. It is only those persons who were
G           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
H
    PAWAN KUMAR GOEL v. STATE OF U. P. & ANOTHER                             123
              [KRISHNA MURARI, J.]

      liability arises from being in charge of and responsible for           A
      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
                                                                             B
      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              C
      “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
                                                                             D
      of a crime at the relevant time have been subjected to action.
      11. A reference to sub-section (2) of Section 141 fortifies the
      above reasoning because sub-section (2) envisages direct
      involvement of any Director, Manager, 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        E
      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              F
      their proved involvement.
      12. 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                      G
      within Section 141 of the Act the complaint must disclose the
      necessary facts which make a person liable.”
     28. The three-Judge Bench also took note of the earlier
pronouncements of this Court in the case of State of Haryana Vs. Brij
                                                                             H
124               SUPREME COURT REPORTS                       [2022] 10 S.C.R.


A     Lal Mittal & Ors.8, wherein it was held that vicarious liability of a
      person for being prosecuted for an offence committed under the Act by
      a company arises if at the material time he was in charge of and was
      also responsible to the company for the conduct of its business. Simply
      because a person is a director of a company, it does not necessarily
      mean that he fulfils both the above requirements so as to make him
B
      liable. Conversely, without being a director a person can be in charge of
      and responsible to the company for the conduct of its business.
              29. The Bench also considered the dictum of this Court in the
      case of K.P.G. Nair Vs. Jindal Menthol India Ltd.9, which was also a
      case under the Negotiable Instruments Act. In the said case, it was
C     found that the allegations in the complaint did not in express words or
      with reference to the allegations contained therein make out a case that
      at the time of commission of the offence, the appellant was in charge of
      and was responsible to the company for the conduct of its business. It
      was held that requirement of Section 141 was not met and the complaint
D     against the accused was quashed.
            30. After analyzing the aforesaid and various other
      pronouncements, the three-Judge Bench in paragraph 18 of the reports,
      observed as under :-
               “18. To sum up, there is almost unanimous judicial opinion
E              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
F              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
G              the Magistrate in the first instance on the basis of averments
               contained therein. If the Magistrate is satisfied that there are
               averments which bring the case within Section 141 he would
               issue the process. We have seen that merely being described
      8
          (1998) 5 SCC 343
      9
H         (2001) 10 SCC 218
    PAWAN KUMAR GOEL v. STATE OF U. P. & ANOTHER                          125
              [KRISHNA MURARI, J.]

      as a director in a company is not sufficient to satisfy the         A
      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.”
                                                                          B
      31. The Bench answered the questions posed in the reference as
under :-
      “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        C
      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       D
      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       E
      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 affirmative. The
      question notes that the Managing Director or Joint Managing         F
      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,          G
      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.”                                                    H
126              SUPREME COURT REPORTS                      [2022] 10 S.C.R.


A            32. In view of the undisputed facts of the present case in
      juxtaposition to the judicial pronouncements of this Court referred to
      above, we have no hesitation in holding that no error has been committed
      by the High Court in allowing the Writ Petition filed by the respondent
      no. 2 and quashing the impugned order and the proceedings.
B            33. Thus, the impugned orders do not warrant any interference.
      As a result, the appeals fail and, accordingly, stand dismissed.

      Ankit Gyan                                              Appeals dismissed.
      (Assisted by : Rahul Rathi, LCRA)

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D




E




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G




H