STANDARD CHARTERED BANKversusSTATE OF MAHARASHTRA AND OTHERS ETC.

                            [2016] 4 S.C.R. 288



A                  STANDARD CHARTERED BANK
                                    v.
           STATE OF MAHARASHTRA AND OTHERS ETC.
                  (Criminal Appeal Nos. 271-273of2016)
B                            APRIL 06, 2016
           [DIPAK MISRA AND SHIVA KIRTI SINGH, JJ.]
           Negotiable Instruments Act, 1881 - ss. 138 and 141 -
    Complaint under - Against a company and its executive Director
    and Directors - Summons issued - Quashed by High Court in exercise
c   of its power u/s 482 Cr.P.C. - Held: s.141 creates a constructive
    liability on the person responsible for the conduct of the business
    of the accused-Company - In the present case, in view of the
    assertion in the complaint that the appellants-accused were in-
    charge of day to day affairs of the Company, the summons issued
D   were wrongly set aside by High Court - Magistrate directed to
    proceed with the complaint - Code of Criminal Procedure, 1973 -
    s.482.
         Allowing the appeals, the Court
          HELD: On a perusal of s. 141 of Negotiable Instruments
E   Act, 1881, it is clear that if the person who commits an offence u/
    s. 138 of the Act is a company, the company as well as other
    person in charge of or responsible to the company for the conduct
    of the business of the company at the time of commission of the
    offence is deemed to be guilty of the offence. Thus, it creates a
F   constructive liability on the persons responsible for the conduct
    of the business of the company. In the present case, the accused
    Nos.4 and 5 were whole-time Directors of accused-Company, and
    the assertion in the complaint is that they were in charge of day
    to day business of the Company and all the accused had with
    active connivance, mischievously and intentionally issued the
G   cheques in question. Thus, considering the totality of assertions
    made in the complaint and also taking note of the averments put
    forth relating to accused Nos. 4 and 5 that they are whole-time
    Director and Executive Director and they were in charge of day
    to day affairs of the Company, the High Court has fallen into grave
H
                                 288
        STANDARD CHARTERED BANK v. STATE OF                      289
                  MAHARASHTRA

error by coming to the conclusion that there arc no specific     A
averments in the complaint for issuance of summons against the
said accused persons. [Paras 12, 33 and 34) [295-B; 305-G-H;
306-A-B)
      Gunma/a Sales Pvt. Ltd. v. Ami Mehta and Ors. (2015)
      1 SCC 103: 2014 (Hi) SCR 1117 - relied on.                  B
     S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and
     another (2005) 8 SCC 89: 2005 (3) Suppl. SCR 371;
     National Small Industries Corpn. Ltd. v. Harmeet Singh
     Paintal & Am: (2010) 3 SCC 330: 2010 (2) SCR 805;
     Tamil Nadu News Print & Papers Ltd. v. D. Karunakar
     & Ors. (2015) 8 SCALE 733; A.K. Singhania v. Gujarat
                                                                  c
     State Fertilizer Company Ltd. & Am: (2013) 16 SCC
     630: 2013 (9) SCR 1069; Aneeta Hada v. Godfather
     Travels and Tours Private Limited (2012) 5 SCC
     661:2012 (5) SCR 503; Secunderabad Health Care Ltd.
     v. Secunderabad Hospitals (P) Ltd. (1999) 96 Comp            D
     Cas 106 (AP); V. Sudheer Reddy v. State of A.P. (2000)
     107 Comp Cas 107 (AP); R. Kanan v. Kotak Mahindra
     Finance Ltd. (2003) 115 Comp Cas 321 (Mad); Lok
     Housing ad Constructions Ltd. v. Raghupali Leasing
     and Finance Ltd. (2003) 115 Comp Cas 957 (Del); Sunil
                                                                  E
     Kumar Chhaparia v. Dakka Eshwaraiah (2002) 108
     Comp Cas 687 (AP); Stale of Hmyana v. Brij Lal Mittal
     (1998) 5 sec 343: 1998 (3) SCR 104; K.P.G Nair v.
     Jindal Menthol India Ltd. (2001) 10 SCC 218; Kaua
     Sujatha v. Fertilizers & Chemicals Travancore Ltd.
     (2002) 7 SCC 655; S.M.S. Pharmaceuticals Ltd. v.             F
     Nee/a Bhalla and another (2007) 4 SCC 70: 2007 (2)
     SCR 862;       Sabitha    Ra111a111urthy v.      R.B.S.
     Channabasavaradhya (2006) 10 SCC 581: 2006 (6)
     Suppl. SCR 126; Saro} Ku111ar Poddar v. State (NCT of
     Delhi) and another (2007) 3 SCC 693: 2007 (1)
                                                                  G
       SCR 907; Everest Advertising (P) Ltd. v. State. Govt.
     of NCT of Delhi and others (2007) 5 SCC 54: 2007
      (4) SCR 1055; K.K. Ahuja i~ V.K. Vora and Anr (2009)
      10 SCC 48; Ta111il Nadu News Print & Papers Ltd. v. D.
      Karunakar and Others (2015) 8 SCALE 733 - referred
      to.                                                         H
290           SUPREME COURT REPORTS                      [2016] 4 S.C.R.


A                           Case Law Reference
      2005 (3) Suppl. SCR371               referred to       Paras
      2014 (10) SCR 1117                   relied on         Paras
      2010 (2) SCR S05                     referred to       Paras
      (2015) S SCALE 733                   referred to       Paras
B
      2013 (9) SCR 1069                    referred to        Paras
      2012 (5) SCR 503                     referred to       Para 13
      (1999) 96 Comp Cas 106 (AP)   referred to              Para 17
      (2000) 107 Comp Cas 107 (AP)  referred to              Para 17
c     (2003) 115 Comp Cas 321 (Mad) referred to              Para 17
      (2003) 115 Comp Cas 957 (Del) referred to               Para 17
      (2002) lOS Comp Cas 6S7 (AP)         referred to        Para 17
      199S (3) SCR 104                     referred to        Para 17
      (2001) 10 sec 21s                    referred to        Para 17
D
      (2002) 7 sec 655                     referred to        Para 17
      2007 (2) SCR S62                     referred to        Para 19
      2006 (6) Suppl. SCR 126              referred to        Para 19
      2007 (1) SCR 907                     referred to        Para 20
 E    2007 (4) SCR 1055                    referred to        Para 22
      (2009) 10 sec 4S                     referred to        Para 24
      (2015) S SCALE 733                   referred to        Para30

            CRIMINAL APPELLATE JURISDICTION : Criminal Appeal
      Nos. 271-273 of2016.
 F
            From the Judgment and Order dated 13.10.2015 of the High Court
      of Judicature at Bombay in Criminal Writ Petition Nos. 1482, 1483 &
      1484of2015.

            Shyam Divan, Sr. Adv.,Ateev Mathur,Amol Sharma, Gagan Gupta,
G     Ad vs. for the Appellant.

           Ms. Jndu Malhotra, Sr. Adv., Raj iv Tyagi, Nishant Ramakantrao
      Katneshwarkar, Advs. for the Respondents.

           The Judgment of the Court was delivered by
H
         STANDARD CHARTERED BANK v. STATE OF                                 291
                   MAHARASHTRA

      DIPAK MISRA, J. 1. Leave granted.                                       A
      2. The present appeals, by special leave, are directed against the
order dated I J'h October, 2015, passed by the High Court of Judicature
at Bombay in Criminal Writ Petition Nos. 1482-1484 of2015 whereby
the learned single Judge by the common impugned order has quashed
the orders of issuance of summons against the respondent Nos. 2 and 3         B
herein (original accused Nos. 5 and 4) by the Metropolitan Magistrate,
23rd Court at Esplanade, Mumbai, under Section 138 of the Negotiable
Instruments Act, 1881 (for short, 'the Act'). Be it noted that the High
Court has declined to quash the order of the Magistrate issuing summons
against the respondent No. 4 (original accused No. 2), but the said
accused has not approached this Court.                                        c
       3. The facts, briefly stated, are that Mis ABG Shipyard Ltd. is a
company registered under the Companies Act, 1956. On being approached
by the authorities of the company, a short term loan facility for a sum of
Rs. 200 crores was granted by the appellant-bank to the company on
28.04.2012. As averred in the complaint, the company executed an              D
indemnity in favour of the appellant-bank and agreed to repay the amount
in three instalments; one on 15.12.2012, the second on 15.01.2013 and
the fast on 15.02.2013. The company issued three cheques, one dated
15.12.2012 for Rs.66,67,00,000/-, and the two others dated 15.01.2013
and 15.02.2013 for Rs.66,67,00,000/- and Rs.66,66,00,000/- respectively
towards the repayment of the liability. As per the dates mentioned in the     E
cheques, they were presented before the bank but due to "insufficient
funds" and "account blocked" the cheques were dishonoured. The
appellant-bank issued requisite statutory notice for each cheque. As no
response was given by the respondents, the appellant filed three
complaints, being C.C. No. 451/SS of2013, C.C. No. 843/SS of2013              F
and C.C. No. 1145/SS of2013 under Section 138 of the Act before the
Metropolitan Magistrate, 23rd Court at Esplanade, Mumbai who took
cognizance and issued summons against all the accused persons.
       4. The respondent nos. 2 to 4 herein, being grieved by the orders
issuing summons, preferred three revision petitions, that is, Revision
Application Nos. 1123 to 1125 of2014 before the City Civil & Sessions         G
Court, Mumbai, and the revisional court after due deliberation did not
perceive any merit in the said challenge and dismissed the revision
petitions.
      5. The dismissal order constrained the respondents t-0 prefer
criminal writ petitions, bearing Criminal Writ Petition Nos. 1482 to 1484     H
292             SUPREME COURT REPORTS                         . (2016] 4 S.C.R.


A     of2015, before the High Court of Judicature at Bombay and the learned
      single Judge by the order impugned allowed the writ petitions preferred
      by accused nos. 4 and 5 holding that the complainant had averred the
      said respondent to be responsible without making any specific assertion
      in the complaint about their role. As mentioned earlier, the High Court
      dismissed the writ petition preferred by the respondent no.4.
B
             6. On a perusal of the impugned order, it transpires that the learned
      Single Judge of the High Court has quashed the summons singularly on
      the ground that there are no allegations against the successful writ
      petitioners connecting them with the affairs of the Company.
c            7. Criticizing the aforesaid order passed by the High Court, it is
      submitted by Mr. Divan, learned senior counsel appearing for the
      appellant-bank that the High Court has failed to properly scrutinize the
      assertions made in the complaint, for the complaint has clearly stated
      about the role of the accused persons in the complaint. Learned counsel
      would submit that it is a case where the respondents had availed loan of
D     Rs.200 crores and the cheques that had been issued were dishonoured
      on due presentation, the High Court should not have exercised the inherent
      jurisdiction under Section 482 CrPC to set aside the order issuing summons
      against the Executive Director and the whole-time Director who are
      really the persons responsible and in charge of day to day affairs of the
 E    company.
             8. Resisting the aforesaid submissions put forth by Mr. Divan,
      Ms. In du Malhotra, learned senior counsel appearing for the respondents
      would contend that the learned Magistrate had taken cognizance in a
      mechanical manner without perusing the avennents made in the complaint
 F    petition and, therefore, the exercise ofjurisdiction by the High Court in
      setting aside the order issuing summons cannot be faulted. She has
      commended us to the decisions in S.M.S. Plwrnwceutica/s Ltd. v.
      Neet" Bhal/{l and {lnother 1 (hereinafter referred to {1s 'SMS Plwrma
      /'), Gunma/a Sales Pvt. Ltd. v. Anu Mehta and Ors. 2 , National Small
      Industries Corpn. Ltd. v. Harmeet Singh Paintal & Anr. 3, Tamil
G     Nadu News Print & Papers Ltd. v. D. K"runakar & Ors.", A.K.
      Singlwnia v. Gujarat State Fertilizer Company Ltd. & A11r. 5 •
      1
        (2005) s sec 89
      2
        (2015) 1sec103
      '(2010) 3 sec 330
      '(2015) 8 SCALE 733
H     '(2013) 16 sec 630
         STANDARD CHARTERED BANKv. STATE OF                                    293
            MAHARASHTRA [DIPAK MISRA, J.]

      9. To appreciate the controversy in proper perspective, it is            A
appropriate to refer to Sections 138 and 141 of the Act. Section 138
reads as follows:-:-
      "138. Dishonour of cheque for insufficiency, etc., offunds in
      the account.-Where any cheque drawn by a person on an
      account maintained by him with a banker for payment of any               B
      amount of money to another person from out of that account for
      the discharge, in whole or in part, of any debt or other liability, is
      returned by the bank unpaid, either because of the amount of
      money standing to the credit of that account is insufficientto honour
      the cheque or that it exceeds the amount arranged to be paid
      from that account by an agreement made with that bank, such
                                                                                c
      person shall be deemed to have committed an offence and shall,
      without prejudice to any other provision of this Act, be punished
      with imprisonment for a term which may be extended to two years,
      or with fine which may extend to twice the amount of the cheque,
      or with both:                                  ·                          D
      Provided that nothing contained in this section shall apply unless-
      (a) the cheque has been presented to the bank within a period of
      six months from the date on which it is drawn or within the period
      of its validity, whichever is earlier;
                                                                                E
      (b) the payee or the holder in due course of the cheque, as the
      case may be, makes a demand for the payment of the said amount
      of money by giving a notice in writing, to the drawerofthe 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."
      I 0. On a studied scrutiny of the aforesaid provision, it is quite
limpid that to constitute the criminal liability the complainant is required
to show that a cheque was issued; that it was presented in the bank in
question; that on due presentation, it was dishonoured; that, as enshrined
                                                                                H
294             SUPREME COURT REPORTS                           [2016] 4 S.C.R.



A     in the provision, requisite notice was served on the person who was
      soughtto be made liable for criminal liability; and that in spite of service
      of notice, the person who has been arraigned as an accused did not
      comply with the notice by making payment or fulfilling other obligations
      within the prescribed period, that is, 15 days from the date of receipt of
      notice.
B
            11. Section 141 of the Act deals with offences by companies. It
      reads as follows:-
            "141. Offences by comp"nies.-{ I) If the person committing
            an offence under Section 13 8 is a company, every person who, at
c           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:

D           Provided that nothing contained in this sub-section shall render
            any person liable to punishment if he proves that the offence was
            committed without his knowledge, or that he had exercised all
            due diligence to prevent the commission of such offence:
            Provided further that where a person is nominated as a Director
E           of a company by virtue ofhis 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 (I), where
 F
             any offence under this Act has been committed by a company
             and it is proved that the offence has been committed with the
             consent or connivance of, or is attributable to, any neglect on the
             part of, any Director, Manager, Secretary or other officer of the
             company, such Director, Manager, Secretary or other officer shail
G            also be deemed to be guilty of that offence and shall be liable to
             be proceeded against and punished accordingly.
             Explanation.-For the purposes of this sectioi1-
             (a) 'company' means any body corporate and includes a firm or
             other association of individuals; and
H
          STANDARD CHARTERED BANK v. STATE OF                                   295
             MAHARASHTRA [DIPAK MISRA, J.]

       (b) 'director', in relation to a firm, means a partner in the            A
       firm."
       12. On a perusal of the. aforesaid provision, it is clear as crystal
that ifthe person who commits an offence under Section 138 of the Act
is a company, the company as well as other person in charge of or
responsible to the company for the conduct of the business of the company        B
at the time of commission of the offence is deemed to be guilty of the
offence. Thus, it creates a constructive liability on the persons responsible
for the conduct of the business of the company.
       13. At one point of time, an issue had arisen before this Court,
whether a complaint could be held to be maintainable without making              c
the company a party. The said controversy has been put to rest by a
three-Judge Bench decision in Aneetll Hlltllt v. God/Miier Trltvels mu/
Tours Private Limitetf' wherein it has been held that when the company
can be prosecuted, 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. It has been further held therein that there          D
cannot be any vicarious liability unless there is a prosecution against the
company. In the case at hand, the company has been arrayed as the
accused No. I along with the Chairman and other Directors.
      14. Now, we must go back in time to appreciate what has been
stated in S.M.S. Plwrnw I (supra), wherein a three-Judge Bench                   E
answered a reference on three issues. The answers on two issues
which are relevant for the present purpose are as follows:-
       "(a) ........ .
       (b) Whether a director of a company would be deemed to be in
       charge of, and responsible to, the company for conduct of the             F
       business of the company and, therefore, deemed to be guilty of
       the offence unless he proves to the contrary.
       (c) Even ifit 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       G
       would be in charge of the company and responsible to the company
       for conduct of its business could be proceeded against."
      15. The three-Judge Bench referred to Section 138 and 141 of the
Act, Sections 203 and 204 ofCrPC and observed that a complaint must
'(2012) s sec 661                                                                H
296            SUPREME COURT REPORTS                            [2016] 4 S.C.R.       •



A     contain material to enable the Magistrate to make up his mind for issuing
      process and if this were not the requirement, consequences would be
      far-reaching. If a Magistrate has 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 has to be issued would be
      tremendous. It has been observed therein that Section 204 of the CrPC
B
      commences with the words "if in the opinion of the Magistrate taking
      cognizance of an offence there is sufficient ground for proceeding" and
      that apart, the words "sufficient ground for proceeding" again suggest
      that ground should be made out in the complaint for proceeding against
      the respondent. The three-Judge Bench has ruled that it is settled law
c     that at the time of issuing of the process, the Magistrate is required to
      see only the allegations in the complaint and where the allegations in the
      complaint or the chargesheet do not constitute an offence against a
      person, the complaint is liable to be dismissed.
             16.After so stating, the Court adverted to the complaint filed under
D     Section 138 of the Act and opined that the complaint should make out a
      case for issue of process. As far as the officers responsible for
      conducting the affairs of the company are concerned, the Court referred
      to various provisions of the Companies Act, 1956 and analysed Section
      141 of the Act to lay down as follows:-
             "What is required is that the persons who are sought to be made
E
             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
 F           responsible for the 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
G
             and responsible for the 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
H·           being in charge of and responsible for the conduct of business of
              STANDARD CHARTERED BANK v. STATE OF                                   297
                 MAHARASHTRA [DIPAK MISRA, J.]

          a company at the relevant time. Liability depends on the role one          A
          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
                                                                                     B
          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".
           I 7. After so stating, the Court placed reliance on sub-Section 2 of      c
    Section I 41 of the Act for getting support of the aforesaid reasoning as
    the said sub-Section envisages direct involvement of any Director,
    Manager, Secretary or other officer of a company in the commission of
    an offence. The Court proceeded to observe that the said provision
    operates when in a trial it is proved that the offence has been committed        D
    with the consent or connivance or is attributable to neglect on the part of
    any of the holders of the offices in a company. It has also been observed
    that provision has been made for directors, managers, secretaries and
    other officers of a company to cover them in cases of their proved
    involvement. It is because a person who is in charge of and responsible
    for conduct of business of a company would naturally know why a cheque           E
    in question was issued and why it got dishonoured and simultaneously it
    means no other person connected with a company is made liable under
    Section I 4 I of the Act. The liability arises, as the three-Judge Bench
    opined, on account of conduct, act or omission on the part of an officer
    and not merely on account of holding office or position in a company             F
    and, therefore, in order to bring a case within Section I 4 I of the Act, the
    complaint must disclose the necessary facts which makes a person liable.
    In the said case, the Court has referred to the decisions in Secu11dert1had
    Healtlt Care Ltd. v. Secunderahad Hospitals (P) Ltd.', V. Sud/teer
    Reddy v. State ofA.P. 8, R. Kamm v. Kotak Mahi11dra Fina11ce Ltd. 9,
    Lok Housing ad Constructio11s Ltd. v. Raglrnpati Leasi11g a11d                   G
    Finance Ltd. 10 , Sunil Kumar Clthaparia v. Dakka Es/lwaraialz 11 ,
    7
•       (1999) 96 Comp Cas 106 (AP)
    ' ('2000) 107 Comp Cas 107 (AP)
    9
        (2003) 115 Comp Cas 321 (Mad)
     1
      " (2003) 115 Comp Cas 957 (Del)
     11
         (2002) 108 Comp Cas 687 (AP)                                                H
298             SUPREME COURT REPORTS                          [2016) 4 S.C.R.


A     State of Haryana v. Brij Lal Mitta/I\ K.P.G Nair v. Jindal Menthol
      India Ltd. 13 , Katia Sujat//{/ v. Fertilizers & Chemicals Trttvancore
      Ltd. 14 and eventually expressed thus:-
             "A liability under Section 141 of the Act is sought to be fastened
             vicariously on a person connected with a company, the principal
B            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 Iiable under the said provision. That the respondent falls
             within the parameters of Section 141 has to be spelled out. A
c            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 avennents 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
D            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".
            18. On the basis of the aforesaid analysis, the Court in this regard
E
      concluded that:-
             "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
 F
             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".
            19. After the three-Judge Bench answered the reference, the
      matter was placed before a two-Judge Bench. The two-Judge Bench,
G
      hearing S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla a11d another1;
      (hereinafter referred to as 'SMS Pharma II'), reproduced a passage
      12 (1998) s sec 343
      1' (2001) lo sec 218
       • (2002) 1 sec 655
      1

H      ' (2007) 4 sec 10
      1
            STANDARD CHARTERED BANK v. STATE OF                                   299
               MAHARASHTRA [DIPAK MISRA, J.]

from Sabitlw Ramamurtlly v. R.B.S. Clwnnabasavaradliya 16 which                   A
reads as follows:-
         "?. A bare perusal of the complaint petitions demonstrates that
         the statutory requirements contained in Section 141 of the
         Negotiable Instruments Act had not been complied with. It may
         be true that it is not necessary for the complainant to specifically      B
         reproduce the wordings of the section but what is required is a
         clear statement of fact so as to enable the court to arrive at a
         prima facie opinion that the accused are vicariously liable. Section
          141 raises a legal fiction. By reason of the said provision, a person
         although is not personally liable for commission of such an offence
         would be vicariously liable therefor. Such vicarious liability can be
                                                                                   c
         inferred so far as a company registered or incorporated under the
         Companies Act, 1956 is concerned only ifthe requisite 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             D
         vicariously liable, strict compliance with the statutory requirements
         would be insisted."
    20. Thereafter the Court referred to the authority in Saroj Kumar
Poddar v. State (NCT of De/Iii) and a11otller 17 and noted the
observations which we think it apt to reproduce:-                                  E
         "14. Apart from the Company and the appellant, as noticed
         herein before, the Managing Director and al I other Directors were
         also made accused. The appellant did not issue any cheque. He,
         as noticed hereinbefore, had re~igned from the directorship of the
         Company. It may be true that as to exactly on what date the said          F
         resignation was accepted by the Company is not known, but, even
         otherwise, there is no averment in the complaint petitions as to
         how and in what manner the appellant was responsible for the
         conduct of the business of the Company or otherwise responsible
         to it in regard to its functioning. He had not issued any cheque.
         How he is responsible for dishonour of the cheque has not been            G
         stated. The allegations made in para 3, thus, in our opinion do not
         satisfy the requirements of Section 141 of the Act."

"(2006) 10 sec ss1
11
     (2007) 3 sec 693                                                              H
300            SUPREME COURT REPORTS                           [2016] 4 S.C.R.



A           21. The said observations were clarified by stating that:-
            "26. A faint suggestion was made that this Court in Saro} Kumar
            Poddar (supra) has laid down the law that the complaint petition
            not only must contain averments satisfying the requirements of
            Section 141 of the Act but must also show as to how and in what
B           manner the appellant was responsible for the conduct of the
            business of the company or otherwise responsible to it in regard
            to its functioning. A plain reading of the said judgment would show
            that no such general law was laid down therein. The observations
            were made in the context of the said case as it was dealing with
            a contention that although no direct averment was made as against
c           the appellant of the said case fulfilling the requirements of Section
            14 J of the Act but there were other avennents which would show
            that the appellant therein was liable therefor."
            22. The said clarification was reiterated in Everest Advertising
      (P) Ltd. v. State, Govt. of NCT of Delhi mu/ others18 •
D
            23. In the said case, taking note of the assertions in the complaint
      which were really vague, the Court declined to interfere with the order
      passed by the High Court which had opined that the complainant did not
      disclose commission of offence against the accused persons.

 E            24. Be it noted, the observations made in Saroj Kumar Potldar
      (supra) and clarification given in SMS Pharma l/(supra) and Everest
      Advertising (P) Ltd. (supra) were taken note of in K.K. Ahuja v. V.K.
       f!Ora andAnr'". In the said case, the Court explaining the position under
      Section 141 of the Act has stated thus:-
            "The position under Section 141 of the Act can be summarised
 F
            thus:    ·
            (i) If the accused is the Managing Directoc or a Joint Managing
            Director, it is not necessary to make an averment in the complaint
            that he is in charge of, and is responsible to the company, for the
            conduct of the business of the company. It is sufficient if an
 G
            averment is made that the accused was the Managing Director
            or Joint Managing Director at the relevant time. This is because
            the prefix "Managing" to the word "Director" makes it clear that
            they were in charge of and are responsible to the company, for
      "(2007J s sec 54
 H    "' (2009) 1o sec 48
         STANDARD CHARTERED BANK v. STATE OF                                301
            MAHARASHTRA [D!PAK MISRA, J.]

      the conduct of the business of the company.                            A
      (ii) In the case of a Director or an officer of the company who
      signed the cheque on behalf of the company, there is no need to
      make a specific averment that he was in charge of and was
      responsible to the company, for the conduct of the business of the
      company or make any specific allegation about consent,                 B
      connivance or negligence. The very fact that the dishonoured
      cheque was signed by him on behalfofthe company, would give
      rise to responsibility under sub-section (2) of Section 141.
      (iii) In the case ofa Director, secretary or manager [as defined in
      Section 2(24) of the Companies Act] or a person referred to in         c
      clauses (e) and (f) of Section 5 of the Companies Act, an averment
      in the complaint that he was in charge of, and was responsible to
      the company, for the conduct of the business of the company is
      necessary to bring the case under Section 141 (I) of the Act. No
      further averment would be necessary in the complaint, though
      some particulars will be desirable. They can also be made liable       D
      under Section 141(2) by making necessary averments relating to
      consent and connivance or negligence, in the complaint, to bring
      the matter under that sub-section.
      (iv) Other officers of a company cannot be made liable under
      sub-section (I) of Section 141. Other officers of a company can        E
      be made liable only under sub-section (2) of Section 141, by
      averring in the complaint their position and duties in the company
      and their role in regard to the issue and dishonour of the cheque,
      disclosing consent, connivance or negligence."
       25. In Harmeet Singh Paintftl (supra), a two-Judge Bench did          F
not agree with the stand of the appellant, emphasized on the averments
and found that in the complaint petition there were no specific averments
and, accordingly, dismissed the appeal filed by the appellant-Corporation
therein. The Court in paragraphs 17 and 18 of the judgment reproduced
the part of the complaint. We have carefully perused the said averments      G
in the claim petition and we are of the opinion that there cannot be any
shadow of doubt that the assertions made therein did not meet the
requirements of Section 141 of the Act.
     26. In A.K. Singlumia (supra), after referring to the previous
judgments, the Court found that it was difficult to infer that there was
                                                                             H
302            SUPREME COURT REPORTS                          [2016] 4 S.C.R.



A     any averment that the two accused persons who had come to this Court,
      were in charge and responsible for the conduct of the business of the
      Company at the time the offence was committed. The allegation in the
      complaints in sum and substance was that business and financial affairs
      of the Company used to be decided, organized and administered by
      accused persons along with other Directors.
B
             27. In Gunma/a Sales Pvt. Ltd. (supra) the Court was concerned
      with Directors who issued the cheques. This authority, as we notice,
      has to be appositely understood. The two-Judge Bench referred to SMS
      Pharma I and other earlier decisions, and came to hold that:-

c           "30. When a petition is filed for quashing the process, in a given
            case, on an overall reading of the complaint, the High Court mav
            find that the basic averment is sufficient, that it makes out a case
            against the Director: that there is nothing to suggest that the
            substratum of the allegation against the Director is destroyed
            rendering the basic averment insufficient and that since offence
D           is made out against him, his fm1her role can be brought out in the
            trial. In another case, the High Court may quash the complaint
            despite the basic averment. It may come across some
            unimpeachable evidence or acceptable circumstances which may
            in its opinion lead to a conclusion that the Director could never
 E          have been in charge of and responsible for the conduct of the
            business of the company at the relevant time and therefore making
            him stand the trial would be an abuse of process of court as no
            offence is made out against him.
            31. When in view of the basic averment process is issued the
 F          complaint must proceed against the Directors. But. if any Director
            wants the process to be quashed by filing a petition under Section
            482 of the Code on the ground that only a bald averment is made
            in the complaint and that he is really not concerned with the
            issuance of the cheque, he must in order to persuade the High
            Court to quash the process either furnish some sterling
 G          incontrovertible material or acceptable circumstances to
            substantiate his contention. He must make out a case that making
            him stand the trial would be an abuse of process of comi. He
            cannot get the com[llaint quashed merely on the ground that apart
            from the basic averment no particulars are given in the complaint
H           about his role, because ordinarily the basic averment would be
            STANDARD CHARTERED BANK v. STATE OF                                     303
               MAHARASHTRA [DIPAK MISRA, J.]

         sufficient to send him to trial and it could be argued that his further    A
         role could be brought out in the trial. Quashing of a complaint is a
         serious matter. Complaint cannot be quashed for the asking. For
         quashing of a complaint it must be shown that no offence is made
         out at all against the Director."
                                                          [Emphasis supplied]        B
      28. After so stating, the Court proceeded to summarise its
conclusions, appreciated the averments made in the complaint petition
and opined thus:-
         " ... Pertinently, in the application filed by the respondents, no clear
         case was made out that at the material time, the Directors were             c
         not in charge of and were not responsible for the conduct of the
         business of the Company by referring to or producing any
         incontrovertible or unimpeachable evidence which is beyond
         suspicion or doubt or any totally acceptable circumstances. It is
         merely stated that Sidharth Mehta had resigned from the                     D
         directorship of the Company on 30-9-20 I 0 but no incontrovertible
         or unimpeachable evidence was produced before the High Court
         as was done in Anita MalhotraJ 0 to show that he had, in fact,
         resigned long before the cheques in question were issued. Similar
         is the case with Kanhaiya Lal Mehta and Anu Mehta. Nothing
         was produced to substantiate the contention that they were not in           E
         charge of and not responsible for the conduct of the business of
         the Company at the relevant time. In the circumstances, we are
         of the opinion that the matter deserves to be remitted to the High
         Court for fresh hearing. However, we are inclined to confinn the
         order passed by the High Court quashing the process as against              F
         Shobha Mehta. Shobha Mehta is stated to be an old lady who is
         over 70 years of age. Considering this fact and on an overall
         reading of the complaint in the peculiar facts and circumstances
         of the case, we feel that making her stand the trial would be an
         abuse of process of court. It is however, necessary for the High
         Court to consider the cases of other Directors in light of the              G
         decisions considered by us and the conclusions drawn by us in
         this judgment."
      29. We have referred to the aforesaid decision in extenso, as we are
20
     (2012) 1 sec s20
                                                                                     H
304            SUPREME COURT REPORTS                            [2016] 4 S.C.R.


A     of the convinced opinion that the analysis made therein would squarely
      apply to the case at hand and it shall be clear when we reproduce certain
      passages from the complaint.
            30. Prior to that, we may profitably refer to a two-Judge Bench
      decision in Tamil Nadu News Print & Papers Ltd. v. D. Karwrakar
B     and Others21 • In the said case, the Court has referred to the decision
      rendered in S.M.S. Plutrnw I (supra) and, thereafter, taken note of the
      averments made in the complaint. Be it noted, in the said case it had
      been averred in the complaint petition that the accused Nos. 2 to 9 were
      Directors and were in day to day management of the accused company
      and in that context the Court has opined as follows:-
c
            " Upon perusal of the complaint, we find that an averment has
            been made to the effect that Accused Nos.3 to l 0 were in fact,
            in-charge of the day-to-day business of Accused No. ]-company."
            31. We have referred to these decisions as they explicitly state
D     the development of law and also lay down the duty of the High Court
      while exercising the power of quashing regard being had to the averments
      made in the complaint petition to attract the vicarious liability of the
      persons responsible under Section 141 of the Act.
             32. Now, is the time to scan the complaint. Mr. Divan, learned
 E    senior counsel appearing for the appellant-bank, has drawn our attention
      to paragraphs 2, 4 and I0 of the coinplaint petition. They read as follows:-
             "2. I further say that I know the accused above named. The
             accused No. l is a Company incorporated under the Companies
             Act, 1956 having its registered address as mentioned in the cause
 F           title. The accused Nos.2 to 7 are the Chairman, Managing Director,
             Executive Director and whole time Director and authorized
             signatories of accused No. l respectively. As such being the
             Chairman, Managing Director, Executive Director and Whole Time
             Director were and are the persons responsible and in charge of
             day to day business of the accused No. l viz. When the offence
 G           was committed. The accused Nos.6 and 7 being signatories of
             the cheque are aware of the transaction and therefore the accused
             Nos.2 to 7 are liable to be prosecuted jointly or severally for having
             consented and/or connived in the commission of present office in
             their capacity as the Chairman, Managing Director, Executive
 H    " (2015) 8 SCALE 733
         STANDARD CHARTERED BANK v. STATE OF                                  305
            MAHARASHTRA [DIPAK MISRA, J.]

      Director, Whole Time Director and authorized signatories of             A
      accused No. I, further the offence is attributable to accused Nos.2
      to 7 on account of their neglect to ensure and make adequate
      arrangements to Honour the cheque issued by accused No. I and
      further on account of the neglect of accused Nos. I to 7 to comply
      with the requisition made in the Demand Notice issue under the
                                                                               B
      provisions of Section 138(c) of the Negotiable Instruments Act
      within the stipulated period. The accused are therefore liable to
      be proceeded.
                xxx.xx                                 x.xxxx
      4. I say that the Accused No. I through Accused Nos. 2 and 3
      approached the Complainant Bank at its Branch situated at
                                                                               c
      Mumbai for a Short Term Loan facility for a sum of Rs. 200
      Crore to meet the expenditure of Four ORV vessels being built at
      ABG Shipyard. After verifying the documents submitted the
      Complainant Bank vide its sanction letter dated 28 1h April 2012
      sanctioned the said Facility for the purpose mentioned therein.          D
      The said terms and conditions mentioned in the sanction letter
      dated 281h April 2012 were duly accepted by the Accused No. I
      by signing the same. Accused No. I also agreed to pay interest
      at the negotiated rate by the Complainant bank. Hereto annexed
      the marked as Exhibit 'B' is a copy of the said sanction letter
      dated 28'h April 2012.                                                   E
                                                       xxx.xx
      I 0. I say that the accused Nos. I to 7 were aware that the aforesaid
      cheque would be dishonoured for being "Account Blocked"' and
      all the accused, in active connivance mischievously and
      intentionally issued the aforesaid cheques in favour of the              F
      complainant Bank."
       33. The aforesaid averments, as we find, clearly meet the requisite
test. It is apt to mention here that there are seven accused persons.
Accused No. I is the Company, accused Nos.2 and 3 are the Chairman
and Managing Director respectively and accused Nos.6 and 7 were                G
signatory to the cheques. As far as the accused Nos.4 and 5 were
concerned, they were whole-time Directors and the assertion is that
they were in charge of day to day business of the Company and all of
them had with active connivance, mischievously and intentionally issued
the cheques in question.                                                       H
306             SUPREME COURT REPORTS                           [2016] 4 S.C.R.



A           34. Thus, considering the totality of assertions made in the complaint
      and also taking note of the averments put forth relating to the respondent
      Nos. 2 and 3 herein that they are whole-time Director and Executive
      Director and they were in charge of day to day affairs of the Company,
      we are of the considered opinion that the High Court has fallen into
      grave error by coming to the conclusion that there are no specific
B
      averments in the complaint for issuance of summons against the said
      accused persons. We unhesitatingly hold so as the asseverations made
      in the complaint meet the test laid down in Gunnwia Sales Pvt. Ltd.
      (supra).
            35. Resultantly, the appeals are allowed and the order passed by
c     the High Court is set aside. The learned Magistrate is directed to proceed
      with the complaint cases in accordance with law.
      Kalpana K. Tripathy                                         Appeals allowed.