RAMRAJSINGHversusSTATE OF M.P. & ANR.

                       [2009] 5 S.C.R. 1130


A                         RAMRAJSINGH
                                  II.
                      STATE OF M.P. & ANR.
                (Criminal Appeal No. 1103 of 2003)
                          APRIL 15, 2009
B
      [DR. ARIJIT PASAYAT, LOKESHWAR SINGH PANTA
                  AND P. SATHASIVAM, JJ.]

        Negotiable Instruments Act, 1881 - ss. 138 and 141 -
C Dishonour of cheque - Complaint against appellant working
 · as general manager of the company- Conviction of appellant
   u/s. 138 by courts below - Justification of - Held: Not justified .
   - There was no evidence that appellant was in charge and
   responsible for the conduct of the business of the Company
D - He was not given any notice nor specific role was attributed ,
   to him in the complaint petition - Hence, conviction not
   maintainable.
        S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla and Anr.
E 2007(4) SCC 70 and N.K. Wahi vs. Shekhar Singh and Ors.
  2007 (9) sec 481, relied on.

                         Case Law Reference:
        2007(4) sec 70)                 Relied on.   Paras 9, 11
F       2001 (9) sec 481                Relied on.   Paras 10, 11

        CRIMINAL APP ELLATE JURISDICTION : Criminal Appeal
    No. 1103 of 2003.

      From the Judgment & Order dated 18.10.2002 of the High
G Court of Madhya Pradesh, at Indore in Crt. Rev. No. 584/2002.

       Samir Ali Khan, Rashid, Gaurav Dhama and Prashant
    Chaudhary for the Appellants.

H                               1130
       RAMRAJSINGH v. STATE OF M.P. & ANR.                   1131

      Dr. Prabhat Kumar, Ajya Amitraj, Vibha Datta Makhija and       A
 Vijay K. Jain for .the Respondents.

      The Judgment of the Court was delivered by

       Dr. ARIJIT PASAYAT, J. 1. Challenge in this appeal is to
 the judgment of a learned Single Judge of the Madhya Pradesh        B
 High Court, Indore Bench, dismissing the revision application
 filed by the appellant questioning his conviction for an offence
 relating to Section 138 of the Negotiable Instruments Act., 1881
 (in short the 'Act').
                                                                     c
       2. Respondent No.2-complainant was dealing in the
  business of transportation. The appellant was the General
· Manager of J.K. Utility Division of J.K. Synthetics Ltd. whereas
  the absconding accused Anup Chaturvedi was the Finance
  Manager. Both were working under the Managing Direct.or            D
  Manoj Kumar Mathur. The non-applicant and the co-accused
  Anup Chaturvedi placed order No.U/QMR/Coal 96028 dated
  7.8.1996 with one Vinayak Coal Corporation. In pursuance of
  this order, the coal was transported by Maruti Road Carrier,
  Indore which is owned by the appellant. The transportation
  charges of Rs.9,45,000/- were paid through four cheques. All       E
 the four cheques were given to the appellant by the co-accused.

     3. As per the infonnation given by the co-accused to the
appellant, the appellant placed the cheques before the Bank
for encashment but the same were dishonored. All the cheques         F
were issued on Bank of Rajasthan Branch Jhalawad. The
cheques were returned dishonoured with the endorsement of
'Stop Payment'. On 28.11.1996, a registered notice was sent
to the Company which was served by "Registered
Acknowledgment Due" on 6.12.1996. Even thereafter payments           G
were not made. Therefore, the complaint was filed by
respondent No.2 against the appellant and co-accused Anup
Chaturvedi and Manoj Mathur and the case was proceeded
against the appellant and absconding accused Anup
Chaturvedi.                                                          H
    1132       SUPREME COURT REPORTS [2009) 5 S.C.R.


A      4. Respondent No.2 had stated in the complaint that
  appellant was working in the company. The order of
  transportation was placed by him, the material was received
  by him and the cheques were given to him by the appellant
  and co-accused Anup Chaturvedi. Out of four cheques, the
8 complaint in regard to the cheque amount of Rs.2,00,000/-
  dated 12.9.1996 was not pressed because a separate
  complaint was filed for dishonour of this cheque.

       5. The learned Judicial Magistrate, First Class, Indore,
  found the appellant guilty and the appeal was dismissed by
C learned Additional Sessions Judge, Indore. Both the courts
  found the appellant guilty. The appellant's stand was that he
  was not in charge and responsible for the conduct of the
  business of the company and, therefore, he should not have
  been held guilty. The cheques were not signed by him and a
D notice under Section 138 proviso (b) of the Act was not given
  in his name. The High Court did not accept the stand and
  dismissed the revision application.

        6. Learned counsel for the appellant submitted that there
E is no evidence that the appellant was in charge and responsible
  for the conduct of the business of the company. A notice was
  not given to him. There was no specific role attributed to him
  in the complaint petition. Therefore, the conviction as recorded
  cannot be maintained.

F       7. Learned counsel for respondent No.2-complainant
    supported the judgment of the High Court.

         8. It appears that the accused No.3 (Manoj Mathur) was
    discharged.
G
          9. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and
    Anr. (2007(4) SCC 70) it was inter-alia observed held as
    follows:
        "16. Section 141 of the Act does not say that a Director
H
      RAMRAJSINGH v. STATE OF M.P. & ANR.                   1133
            [DR. ARIJIT PASAYAT, J.]
    of a company shall automatically be vicariously liable for     A
    commission of an offence on behalf of the Company. What
    is necessary is that sufficient averments should be made
    to show that the person who is sought to be proceeded
    against on the premise of his being vicariously liable for
    commission of an offence by the Company must be in             B
    charge and shall also be responsible to the Company for
    the conduct of its business.

          xx                    xx                     xx
    20. The liability of a Director must be determined on the      C
    date on which the offence is committed. Only because
    Respondent 1 herein was a party to a purported resolution
    dated 15-2-1995 by itself does not lead to an inference
    that she was actively associated with the management of
    the affairs of the Company. This Court in this case has        D
    categorically held that there may be a large number of
    Directors but some of them may not associate themselves
    in the management of the day-to-day affairs of the
    Company and, thus, are not responsible for the conduct
    of the business of the Company. The averments must state       E
    that the person who is vicariously liable for commission of
    the offence of the Company both was in charge of and was
    responsible for the conduct of the business of the
    Company. Requirements laid down therein must be read
    conjointly and not disjunctively. When a legal fiction is      F
    raised, the ingredients therefor must be satisfied.

   10. In N.K. Wahi v. Shekhar Singh and Ors. (2007 (9)
sec 481) it was observed as follows:
    "6. Chapter XVII has been incorporated under the Act with G
    effect from 1.4.1989. In certain contingencies referred to
    under Section 138 of the Act on the cheques being
    dishonored a new offence as such had been created. But
    to take care of the offences purported to have been
    committed provisions of sub-section (1) to Section 141 of H
    1134      SUPREME COURT REPORTS [2009] 5 S.C.R.


A      the Act come into play. It reads as under:-

       " 141 - Offence 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
8
       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.
c      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."
D
       7.     This provision clearly shows that so far as the
       companies are concerned if any offence is committed by
       it then every person who is a Director or employee of the
       company is not liable. Only such person would be held
       liable if at the time when offence is committed he was in
E
       charge and was responsible to the company for the
       conduct of the business of the company as well as the
       company. Merely being a Director of the company in the
       absence of above factors will not make him liable.
F      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 incharge and responsible for the
G      conduct of the business of the company. The description
       should be clear. It is true th<l;t 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
H      evidence the net result would be that complaint would not
              RAMRAJSINGH v. STATE OF M.P. & ANR.                   1135
                    [DR. ARIJIT PASAYAT, J.)
            be entertainable.                                                A

             9.   Section 138 of the Act reads as under:-

            "138. Dishonour of cheque for insufficiency, etc., of funds
            in the account -
                                                                             B
                   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
                   persons from out of that account for the discharge,
                   in whole or in part, of any debt or other liability, is   c
                   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 arrangement made with that bank,             D
                  such person shall be deemed to have committed
                  an 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          E
                  the amount of the cheque, or with both."

'          10. In order to bring application of Section 138 the
    '
        complaint must show:

             1    That Cheque was issued;                                    F
             2.   The same was presented;

             3.   It was dishonored on presentation;

             4.   A notice in terms of the provisions was served on          G
                  the person sought to be made liable;

           5.    Despite service of notice, neither any payment was
           made nor other obligations, if any, were complied with
           within fifteen days from the date of receipt of the notice.
                                                                             H
    1136          SUPREME COURT REPORl::; [2UUl:l] 5 S.C.R.


A         11. Section 141 of the Act in terms postulates constructive
    liability of the Directors of the company or other persons
    responsible for its conduct or the business of the company.

             xx                  xx                xx
B       13. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and
        Another (2007 (4) SCC 70) it was, inter-alia, held as
        follows:-

         "18. To sum up, there is almost unanimous judicial opinion
c        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 vicariously on a person connected with a
         company, the principal accused being the company itself.
D        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 141of the Act contains the requirements for
         making a person liable under the said provision. That the
         respondent falls within the parameters of Section 141 has
E
         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 within Section 141,
         he would issue the process. We have seen that merely
F        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
G        know what is the case which is alleged against him. This
         will enable him to meet the case at the trial.

        19. In view of the above discussion, our answers to the
    questions posed in the reference are as under:
H
  RAMRAJSINGH v. STATE OF M.P. & ANR.                   1137
        [DR. ARIJIT PASAYAT, J.]
(a) It is necessary to specifically aver in a complaint under   A
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           B
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             C
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       D
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.   E
 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.        F
By virtue of the office they hold as managing director or
joint managing director, these persons are in charge of and
responsible for the conduct of business of the company.
Therefore, they get covered under Section 141. So far as
the signatory of a cheque which is dishonoured is               G
concerned, he is clearly responsible for the incriminating
act and will be covered under sub-section (2) of Section
141."

14.   The matter was again considered in Sabitha
                                                                H
    1138          SUPREME COURT REPORTS [2009] 5 S.C.R.


A          Ramamurthy and Anr. v. R.B.S. Channabasavaradhya
           and Anr. (2006 (9) SCALE 212) and Saroj Kumar Poddar
           v. State (NCT of Delhi) and Anr. (JT 2007 (2) SC 233). It
           was, inter -alia, held as follows:

           ".Section 141 raises a legal fiction. By reason of the said
B
           provision, a person although is not personally liable for
           commission of such an offence would be vicariously liable
           therefor. Such vicarious liability can be inferred so far as
           a company registered or incorporated under the
           Companies Act, 1956 is concerned only if the requisite
c          statements, which are required to be averred in the
           complaint petition, are made so as to make the accused
           therein vicariously liable for the offence committed by the
           company. Before a person can be made vicariously liable,
           strict compliance of the statutory requirements would be
D          insisted ..... ."
       11. When the factual background of the present case is
  considered in the light of the principles referred to in Neeta
  Bhalla and N.K. Wahi cases (supra), the inevitable conclusion
E is that the appeal is bound to succeed. The conviction as·
  recorded cannot be maintained. The appeal is allowed.

    N.J.                                             Appeal allowed.