SUNITA PALITA & OTHERSversusM/S PANCHAMI STONE QUARRY

458                      [2022]REPORTS
               SUPREME COURT   14 S.C.R. 458             [2022] 14 S.C.R.


A                       SUNITA PALITA & OTHERS
                                       v.
                     M/S PANCHAMI STONE QUARRY
                       (Criminal Appeal No. 1105 of 2022)
B                              AUGUST 01, 2022
          [INDIRA BANERJEE AND J. K. MAHESHWARI, JJ.]
             Code of Criminal Procedure, 1973: s.482 – Quashing of
      proceedings – Dishonour of cheque – Account Payee Cheque signed
      by accused no. 2, who was M.D. of the Company in favour of
C
      respondent in discharge of liability – On dishonour of cheque,
      respondent filed complaint u/s.138 r/w s.141 of NI Act – In the
      complaint, appellants who were independent/non-executive director
      were impleaded as accused no. 3 to 5 – Appellants unsuccessfully
      filed application in High Court u/s.482 praying that the proceeding
D     be quashed – Hence instant appeal – Held: Jurisdiction u/s.482
      must be exercised if the interest of justice so requires – High Court
      failed to appreciate that none of these appellants were Managing
      Director or Joint Managing Director of the Accused Company –
      Nor were they signatories of the cheque which was dishonoured –
      A Director of a company who was not in charge or responsible for
E
      the conduct of the business of the company at the relevant time, will
      not be liable u/s.139 r/w. 141 of NI Act – The materials on record
      clearly show that these appellants were independent, non-executive
      Directors of the company – High Court adopted a hyper technical
      approach in rejecting the application u/s.482 – High Court erred
F     in law in not exercising its jurisdiction u/s.482 in the facts and
      circumstances of this case to grant relief to the appellants –
      Companies Act, 2013 – ss.2(47), 149 and 150 – Negotiable
      Instrument Act, 1881 – ss. 139,141.
            Allowing the appeal, the Court
G           HELD: 1. Section 482 of the Cr.P.C. protects the inherent
      power of the High Court to make such orders as may be necessary
      to give effect to any order under the Cr.P.C or to prevent abuse
      of the process of any Court or otherwise secure the ends of
      justice. While it is true that inherent jurisdiction under Section
H     482 should be exercised sparingly, carefully and with caution and
                                      458
    SUNITA PALITA & OTHERS v. M/S PANCHAMI STONE                         459
                      QUARRY

only when such exercise is justified by the tests specially laid         A
down in the Section, the Court is duty bound to exercise its
jurisdiction under Section 482 of the Cr.P.C. when the exercise
of such power is justified by the tests laid down in the said Section.
Jurisdiction under Section 482 of the Cr.P.C. must be exercised
if the interest of justice so requires. [Paras 34 and 35][473-G-H;
                                                                         B
747-A-B]
       2. The High Court failed to appreciate that none of these
Appellants were Managing Director or Joint Managing Director
of the Accused Company. Nor were they signatories of the cheque
which was dishonoured. As held by this Court in, inter alia, S.M.S.
Pharmaceuticals Ltd., the liability under Section 138/141 of the         C
NI Act arises from being in charge of and responsible for the
conduct of the 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. It would be a travesty of
justice to drag Directors, who may not even be connected with            D
the issuance of a cheque or dishonour thereof, such as Director
(Personnel), Director (Human Resources Development) etc. into
criminal proceedings under the NI Act, only because of their
designation. [Paras 38 and 42][474-E-F; 475-E-G]
      S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (2005) 8               E
      SCC 89 : [2005] 3 Suppl. SCR 371 – followed.
      3. Liability depends on the role one plays in the affairs of a
company and not on designation or status alone. The materials
on record clearly show that these Appellants were independent,
non-executive Directors of the company. A non-Executive                  F
Director is not involved in the day-to-day affairs of the company
or in the running of its business. Such Director is in no way
responsible for the day-to-day running of the Accused Company.
Moreover, when a complaint is filed against a Director of the
company, who is not the signatory of the dishonoured cheque,
specific averments have to be made in the pleadings to                   G
substantiate the contention in the complaint, that such Director
was in charge of and responsible for conduct of the business of
the Company or the Company, unless such Director is the
designated Managing Director or Joint Managing Director who
                                                                         H
460            SUPREME COURT REPORTS                       [2022] 14 S.C.R.


A     would obviously be responsible for the company and/or its
      business and affairs. [Para 43][475-G-H; 476-A-B]
            Pooja Ravinder Devidasani v. State of Maharashtra and
            Anr. (2014) 16 SCC 1 : [2014] 14 SCR 1468- relied
            on.
B           K.K. Ahuja v. V.K. Vora (2009) 10 SCC 48 : [2009]
            9 SCR 1144; National Small Industries Corporation
            Ltd. v. Harmeet Singh Paintal (2010) 3 SCC 330 : [2010]
            2 SCR 805; Pepsi Foods Ltd. v. Special Judicial
            Magistrate and Ors. (1998) 5 SCC 749 : [1997] 5 Suppl.
C           SCR 12 – referred to.
                             Case Law Reference
      [2005] 3 Suppl. SCR 371           followed                Para 23
      [2009] 9 SCR 1144                 referred to             Para 28
D     [2014] 14 SCR 1468                relied on               Para 29
      [2010] 2 SCR 805                  referred to             Para 46
      [1997] 5 Suppl. SCR 12            referred to             Para 47
            CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
E     1105 of 2022.
            From the Judgment and Order dated 11.09.2019 of the High Court
      of Calcutta in CRR No.2835 of 2018.
            Sidharth Luthra, Sr. Adv., Saraswat Mohapatra, Akshat Kumar,
      Ms. S. Janani, Advs. for the Appellants.
F
            Sanjay R. Hegde, Sr. Adv., Dibyadyuti Banerjee, Abhijit Sengupta,
      Advs. for the Respondent.
            The Judgment of the Court was delivered by
            INDIRA BANERJEE, J.
G              Leave granted.
            2. This appeal i s agai nst a j udgment and order dated 11th
      September 2019 passed by the Calcutta High Court dismissing the
      Criminal Revisional Application being C.R.R. No.2835 of 2018 filed by
      the Appellants being the 3rd, 4th and 5th Accused, under Section 482 of
H
    SUNITA PALITA & OTHERS v. M/S PANCHAMI STONE                                461
             QUARRY [INDIRA BANERJEE, J.]

the Code of Criminal Procedure, 1973, hereinafter referred to as “the           A
Cr.P.C.”, for quashing the proceedings in Case No. AC/121/2017, inter
alia, under Section 138/141 of the Negotiable Instruments Act, 1881,
hereinafter referred to as “the NI Act”, pending against the Appellants
in the Court of the Judicial Magistrate, 2nd Court, Suri, Birbhum, West
Bengal.
                                                                                B
       3. The Respondent M/s Panchami Stone Quarry, hereinafter
referred to as “PSQ” filed a petition of complaint, inter alia, against the
Appellants under Section 138/141 of the NI Act which was registered
as Case No. AC/121/2017.
       4. In the petition of complaint, PSQ impleaded M/s MBL                   C
Infrastructure Limited, a public limited company, within the meaning of
the Companies Act 2013 (hereinafter referred to as “the Accused
Company”), as Accused No.1. One Mr. Anjanee Kumar Lakhotia,
Managing Director of the Accused Company was impleaded as the
Accused No.2 and the Appellants were impleaded as Accused Nos. 3, 4
and 5. The Appellant No.1 was the fourth accused, Appellant No.2 was            D
the fifth accused and Appellant No.3 was the third accused.
      5. In the said petition of complaint, PSQ alleged “Accused Nos.2,
3, 4 and 5 are the Directors of Accused No.1. i.e., M/s MBL
Infrastructures Ltd. respectively [and] are responsible to conduct
the day-to-day business affairs of the Accused No.1.”                           E

      6. The Accused Company placed orders on PSQ on different
dates for purchase, inter alia, of Stone Dust and Stone Aggregate.
Purchase Orders dated 24.12.2015, 25.05.2016, 07.01.2016 and
09.04.2016 were issued by the Accused Company, specifying the
materials required to be supplied, along with the rates and quantity thereof.   F
      7. Pursuant to the aforesaid purchase orders, PSQ supplied
materials to the Accused Company, and raised bills totalling
Rs.2,31,60,674/- (Rupees Two Crore, Thirty One Lakhs, Sixty Thousand,
Six Hundred and Seventy Four only) on the Accused Company.
                                                                                G
      8. In discharge of its liability against the bills raised by PSQ on the
Accused Company, the Accused Company had issued an Account Payee
Cheque being No.001174 dated 15 th March 2017 for a sum of
Rs.1,71,08,512/- (Rupees One Crore, Seventy One Lakhs, Eight
Thousand, Five Hundred and Twelve only) drawn on the Park Street
Branch of Kotak Mahindra Bank at Kolkata, in favour of PSQ.                     H
462            SUPREME COURT REPORTS                          [2022] 14 S.C.R.


A            9. It is not in dispute that the Accused No.2-Anjanee Kumar
      Lakhotia is the Managing Director and authorised signatory of the Accused
      Company. The said Accused No.2, Anjanee Kumar Lakhotia signed the
      said cheque.
           10. In the Petition of Complaint there is a bald averment that the
B     Appellants being the Accused Nos. 3, 4 and 5 were Directors of the
      Accused Company and responsible for the day-to-day affairs of the
      Accused Company. This averment is devoid of any particulars.
             11. On 10th April 2017, PSQ deposited the cheque in its bank for
      encashment, but the cheque was dishonoured, with the endorsement
C     ‘account closed’. On 3rd May 2017, PSQ received intimation of dishonour
      of the cheque from its banker. Thereafter, PSQ sent a demand notice
      dated 29th May 2017 by speed post, calling upon the Accused to make
      payment of the amount of the dishonoured cheque, as per the provisions
      of Section 138 of the NI Act.

D            12. Alleging that the Accused Company had not paid the amount
      of the dishonoured cheque, that is, Rs.1,71,08,512/- (Rupees One Crore,
      Seventy One Lakhs, Eight Thousand, Five Hundred and Twelve only) to
      PSQ within the time stipulated, PSQ filed the aforesaid complaint under
      Section 138 read with Section 141 of the NI Act, through its proprietor.

E            13. By an order dated 13th July 2017, the Additional Chief Judicial
      Magistrate, 2nd Court, Suri, Birbhum registered the petition as a complaint
      case, and after taking cognizance, directed issuance of summons to the
      Accused, with liberty to the Accused to adopt plea bargaining. Case
      records were directed to be transferred to the file of the Judicial
      Magistrate, 2nd Court, Suri, Birbhum. On the same day, the Judicial
F     Magistrate, 2nd Court, Suri, Birbhum, West Bengal, received the case
      records for trial and disposal.
             14. On 26th March 2018, the Accused appeared through Advocates
      and filed petitions under Section 205 of the Cr.P.C. and under Section
      305 of the Cr.P.C. Sections 205 and 305 of the Cr.P.C. are set out
G     hereinbelow:-
            “Section 205. Magistrate may dispence with personal
            appearance of accused.- (1) Whenever a Magistrate issues a
            summons, he may, if he sees reason so to do, dispense with
            the personal attendance of the accused and permit him to
H           appear by his pleader.
SUNITA PALITA & OTHERS v. M/S PANCHAMI STONE                       463
         QUARRY [INDIRA BANERJEE, J.]

 (2) But the Magistrate inquiring into or trying the case may,     A
 in his discretion, at any stage of the proceedings, direct the
 personal attendance of the accused, and, if necessary, enforce
 such attendance in the manner hereinbefore provided.”
                              ***
 “Section 305. Procedure when corporation or registered society    B
 is an accused.- (1) In this section, “corporation” means an
 incorporated company or other body corporate, and includes
 a society registered under the Societies Registration Act, 1860
 (21 of 1860).
 (2) Where a corporation is the accused person or one of the       C
 accused persons in an inquiry or trial, it may appoint a
 representative for the purpose of the inquiry or trial and such
 appointment need not be under the seal of the corporation.
 (3) Where a representative of a corporation appears, any
 requirement of this Code that anything shall be done in the       D
 presence of the accused or shall be read or stated or explained
 to the accused, shall be construed as a requirement that thing
 shall be done in the presence of the representative or read or
 stated or explained to the representative, and any requirement
 that the accused shall be examined shall be construed as a        E
 requirement that the representative shall be examined.
 (4) Where a representative of a corporation does not appear,
 any such requirement as is referred to in subsection (3) shall
 not apply.
 (5) Where a statement in writing purporting to be signed by       F
 the Managing Director of the corporation or by any person
 (by whatever name called) having, or being one of the persons
 having the management of the affairs of the corporation to
 the effect that the person named in the statement has been
 appointed as the representative of the corporation for the
                                                                   G
 purposes of this section, is filed, the Court shall, unless the
 contrary is proved, presume that such person has been so
 appointed.
 (6) If a question arises as to whether any person, appearing
 as the representative of a corporation in an inquiry or trial
                                                                   H
464             SUPREME COURT REPORTS                         [2022] 14 S.C.R.


A           before a Court is or is not such representative, the question
            shall be determined by the Court.”
           15. By an order dated 9th July 2018, the Court of Judicial Magistrate,
       nd
      2 Court, Suri, Birbhum declined to dispense with the appearance of the
      Appellants and directed the accused to appear on 20 th August 2018.
B           16. On 26th March 2018, the matter was adjourned till 16th May
      2018 for appearance. The case was heard on diverse dates and ultimately
      adjourned till 9th July 2018 for Orders. By an Order dated 9th July 2018,
      the Judicial Magistrate, 2nd Court, Suri, Birbhum rejected the Petitions
      under Sections 305 and 205 of the Cr.P.C., in the absence of the accused
C     persons. The Court directed the accused persons to remain present in
      Court positively on next date, that is 20th August 2018 to face appropriate
      proceedings.
            17. The Appellants filed a Criminal Revisional Application in the
      High Court under Section 482 of the Cr.P.C., inter alia, praying that the
D     proceedings in Case No.AC.121/2017 under Section 138 read with
      Section 141 of the NI Act pending in the Court of the Judicial Magistrate,
      2nd Court, Suri be quashed and pending such order, all proceedings in the
      said case be stayed.
             18. In the High Court, it was contended that the Judicial Magistrate,
E     2nd Court, Suri, dealt with the application under Section 205 of the Cr.P.C.
      without considering whether any useful purpose would be served by
      requiring the personal attendance of the Accused or whether the progress
      of the trial was likely to be hampered on account of their absence.
             19. By the judgment and order impugned in this Appeal, a Single
F     Bench of the High Court rejected the application under Section 482 of
      the Cr.P.C. Being aggrieved, the Appellants have approached this Court.
      The Appellants claim that they are independent non-executive Directors
      of the Accused Company, who are in no way responsible for the day-to-
      day affairs of the Accused Company.
            20. Mr. Sidharth Luthra appearing on behalf of the Appellants
G
      submitted that Section 205 of the Cr.P.C. confers discretion on the Court
      to exempt personal appearance of an accused, till such time as his
      appearance may be considered necessary. In considering an application
      under Section 205 of the Cr.P.C., the Magistrate has to bear in mind the
      nature of the case, as also the conduct of the persons summoned. The
H     Magistrate may not exempt personal appearance, where any useful
       SUNITA PALITA & OTHERS v. M/S PANCHAMI STONE                            465
                QUARRY [INDIRA BANERJEE, J.]

purpose would be served by requiring the personal attendance of the            A
accused, or where the progress of the trial was likely to be hampered on
account of his absence.
      21. Mr. Luthra pointed out that Section 305 of the Cr.P.C. provides
how a body corporate, made accused in a criminal case, may be
represented. The Magistrate overlooked the fact that the Accused               B
Company was being represented by an authorized officer.
        22. Mr. Luthra further argued that Section 141 of the NI Act
being a penal provision creating vicarious liability, the same must be
strictly construed. Mere statement in the complaint that the Appellants
were in charge of and responsible to the Accused Company, for the              C
conduct of the business of the Accused Company without any specific
role attributed to the Appellants, was not sufficient for proceeding against
the Appellants under Section 141 of the said Act.
      23. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla 1 cited by
Mr. Luthra, this Court held:                                                   D
         “10. While analysing Section 141 of the Act, it will be seen
         that it operates in cases where an offence under Section 138
         is committed by a company. The key words which occur in the
         section are “every person”. These are general words and take
         every person connected with a company within their sweep.             E
         Therefore, these words have been rightly qualified by use of
         the words:
             “Who, at the time the offence was committed, was in charge
             of, and was responsible to the company for the conduct of
             the business of the company, as well as the company, shall        F
             be deemed to be guilty of the offence, etc.”
         What is required is that the persons who are sought to be
         made criminally liable under Section 141 should be, at the
         time the offence was committed, in charge of and responsible
         to the company for the conduct of the business of the company.
                                                                               G
         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 the conduct of business of
         the company at the time of commission of an offence, who
1
    (2005) 8 SCC 89                                                            H
466            SUPREME COURT REPORTS                        [2022] 14 S.C.R.


A           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
            the conduct of business of the company at the relevant time
B
            when the offence was committed and not on the basis of merely
            holding a designation or office in a company. Conversely, a
            person not holding any office or designation in a company
            may be liable if he satisfies the main requirement of being in
            charge of and responsible for the conduct of business of a
C           company at the relevant time. Liability depends on the role one
            plays in the affairs of a company and not on designation or
            status. If being a director or manager or secretary was enough
            to cast criminal liability, the section would have said so. Instead
            of “every person” the section would have said “every director,
            manager or secretary in a company is liable”…, etc. The
D
            legislature is aware that it is a case of criminal liability which
            means serious consequences so far as the person sought to be
            made liable is concerned. Therefore, only persons who can be
            said to be connected with the commission of a crime at the
            relevant time have been subjected to action.”
E           24. Mr. Luthra emphatically argued that the Appellants are
      independent, non-executive Directors of the Accused Company and in
      no way responsible for the day-to-day affairs of the Accused Company.
      Such Directors are inducted in the company for their expertise or special
      knowledge in any particular discipline. They are not in charge of the
F     management of the company.
            25. Mr. Luthra argued that the Appellants had relied on
      unimpeachable documents, particularly, Form No. DIR-12 of Appellant
      No.1 and Appellant No.3, and DRI Form No.32 of the Appellant No.2,
      which showed the status of the respective Appellants as Non-Executive
G     Independent Directors w.e.f. 01.04.2014.The Appellants being Non-
      Executive Independent Directors, are entitled to have the Complaint
      Case No. AC/121/2017 quashed as against them.
            26. Mr. Luthra referred to Section 2(47) and Section 149 of the
      Companies Act, 2013 dealing with independent Directors which are
H     extracted hereinbelow for convenience:-
SUNITA PALITA & OTHERS v. M/S PANCHAMI STONE                         467
         QUARRY [INDIRA BANERJEE, J.]

 “2. Definitions: …                                                  A
 (47) “independent director” means an independent director
 referred to in sub-section (5) of section 149;
 ***
 149. Company to have Board of Directors: …                          B
 (6) An independent director in relation to a company, means
 a director other than a managing director or a whole-time
 director or a nominee director,—
 (a) who, in the opinion of the Board, is a person of integrity
 and possesses relevant expertise and experience;                    C
 (b)(i) who is or was not a promoter of the company or its
 holding, subsidiary or associate company;
 (ii) who is not related to promoters or directors in the company,
 its holding, subsidiary or associate company;
                                                                     D
 (c) who has or had no pecuniary relationship, other than
 remuneration as such director or having transaction not
 exceeding ten per cent of his total income or such amount as
 may be prescribed, with the company, its holding, subsidiary
 or associate company, or their promoters, or directors, during
 the two immediately preceding financial years or during the         E
 current financial year;
 (d) none of whose relatives—
 (i) is holding any security of or interest in the company, its
 holding, subsidiary or associate company during the two             F
 immediately preceding financial years or during the current
 financial year:
 Provided that the relative may hold security or interest in the
 company of face value not exceeding fifty lakh rupees or two
 per cent. of the paid-up capital of the company, its holding,       G
 subsidiary or associate company or such higher sum as may
 be prescribed;
 (ii) is indebted to the company, its holding, subsidiary or
 associate company or their promoters, or directors, in excess
 of such amount as may be prescribed during the two
                                                                     H
468     SUPREME COURT REPORTS                       [2022] 14 S.C.R.


A     immediately preceding financial years or during the current
      financial year;
      (iii) has given a guarantee or provided any security in
      connection with the indebtedness of any third person to the
      company, its holding, subsidiary or associate company or their
B     promoters, or directors of such holding company, for such
      amount as may be prescribed during the two immediately
      preceding financial years or during the current financial year;
      or
      (iv) has any other pecuniary transaction or relationship with
C     the company, or its subsidiary, or its holding or associate
      company amounting to two per cent or more of its gross
      turnover or total income singly or in combination with the
      transactions referred to in sub-clause (i), (ii) or (iii);
      (e) who, neither himself nor any of his relatives—
D     (i) holds or has held the position of a key managerial
      personnel or is or has been employee of the company or its
      holding, subsidiary or associate company in any of the three
      financial years immediately preceding the financial year in
      which he is proposed to be appointed:
E      Provided that in case of a relative who is an employee, the
      restriction under this clause shall not apply for his employment
      during preceding three financial years.
      (ii) is or has been an employee or proprietor or a partner, in
      any of the three financial years immediately preceding the
F     financial year in which he is proposed to be appointed, of—
      (A) a firm of auditors or company secretaries in practice or
      cost auditors of the company or its holding, subsidiary or
      associate company; or
      (B) any legal or a consulting firm that has or had any
G     transaction with the company, its holding, subsidiary or
      associate company amounting to ten per cent or more of the
      gross turnover of such firm;
      (iii) holds together with his relatives two per cent or more of
      the total voting power of the company; or
H
    SUNITA PALITA & OTHERS v. M/S PANCHAMI STONE                         469
             QUARRY [INDIRA BANERJEE, J.]

      (iv) is a Chief Executive or director, by whatever name called,    A
      of any non-profit organisation that receives twenty-five per
      cent or more of its receipts from the company, any of its
      promoters, directors or its holding, subsidiary or associate
      company or that holds two per cent or more of the total voting
      power of the company; or
                                                                         B
      (f) who possesses such other qualifications as may be
      prescribed.”
      27. Mr. Luthra has also referred to Section 150 of the Companies
Act, 2013 which is set out hereinbelow:-
      150. Manner of selection of independent directors and              C
      maintenance of databank of independent directors.—(1)
      Subject to the provisions contained in sub-section (5) of
      Section 149, an independent director may be selected from a
      data bank containing names, addresses and qualifications
      of persons who are eligible and willing to act as independent
                                                                         D
      directors, maintained by any body, institute or association,
      as may by notified by the Central Government, having
      expertise in creation and maintenance of such data bank and
      put on their website for the use by the company making the
      appointment of such directors:
                                                                         E
      Provided that responsibility of exercising due diligence before
      selecting a person from the data bank referred to above, as
      an independent director shall lie with the company making
      such appointment.
      (2) The appointment of independent director shall be approved
      by the company in general meeting as provided in sub-section       F
      (2) of Section 152 and the explanatory statement annexed to
      the notice of the general meeting called to consider the said
      appointment shall indicate the justification for choosing the
      appointee for appointment as independent director.
      (3) The data bank referred to in sub-section (1), shall create     G
      and maintain data of persons willing to act as independent
      director in accordance with such rules as may be prescribed.
      (4) The Central Government may prescribe the manner and
      procedure of selection of independent directors who fulfil the
      qualifications and requirements specified under Section 149.       H
470               SUPREME COURT REPORTS                       [2022] 14 S.C.R.


A           28. In K.K. Ahuja v. V.K. Vora2 this Court discussed the principles
      of the vicarious liability of the officers of a company in respect of
      dishonour of a cheque and held: -
               “27. The position under Section 141 of the Act can be
               summarised thus:
B              (i) If the accused is the Managing Director 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 averment is made that the accused was the
C              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 the conduct of the business
               of the company.

D              (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, connivance or negligence. The very fact that the
E              dishonoured cheque was signed by him on behalf of the
               company, would give rise to responsibility under sub-section
               (2) of Section 141.
               (iii) In the case of a Director, secretary or manager [as defined
               in Section 2(24) of the Companies Act] or a person referred
F              to in 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(1) of the Act. No further averment would be necessary in
G              the complaint, though some particulars will be desirable. They
               can also be made liable 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.
      2
H         (2009) 10 SCC 48
       SUNITA PALITA & OTHERS v. M/S PANCHAMI STONE                            471
                QUARRY [INDIRA BANERJEE, J.]

         (iv) Other officers of a company cannot be made liable under          A
         sub-section (1) of Section 141. Other officers of a company
         can 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.”
                                                                               B
     29. In Pooja Ravinder Devidasani v. State of Maharashtra
and Anr.3 this Court held as under:-
         “17. ... Non-executive Director is no doubt a custodian of the
         governance of the company but is not involved in the day-to-
         day affairs of the running of its business and only monitors          C
         the executive activity. To fasten vicarious liability under Section
         141 of the Act on a person, at the material time that person
         shall have been at the helm of affairs of the company, one
         who actively looks after the day-to-day activities of the
         company and is particularly responsible for the conduct of
         its business. Simply because a person is a Director of a              D
         company, does not make him liable under the NI Act. Every
         person connected with the Company will not fall into the ambit
         of the provision. Time and again, it has been asserted by this
         Court that only those persons who were in charge of and
         responsible for the conduct of the business of the Company            E
         at the time of commission of an offence will be liable for
         criminal action. A Director, 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 for an offence
         under Section 141 of the NI Act. In National Small Industries
         Corpn. [National Small Industries Corpn. Ltd. v. Harmeet              F
         Singh Paintal, (2010) 3 SCC 330 : (2010) 1 SCC (Civ) 677 :
         (2010) 2 SCC (Cri) 1113] this Court observed: (SCC p. 336,
         paras 13-14)
             “13. Section 141 is a penal provision creating vicarious
             liability, and which, as per settled law, must be strictly        G
             construed. It is therefore, not sufficient to make a bald
             cursory statement in a complaint that the Director (arrayed
             as an accused) is in charge of and responsible to the

3
    (2014) 16 SCC 1                                                            H
472            SUPREME COURT REPORTS                      [2022] 14 S.C.R.


A              company for the conduct of the business of the
               company without anything more as to the role of the
               Director. But the complaint should spell out as to how and
               in what manner Respondent 1 was in charge of or was
               responsible to the accused Company for the conduct of its
               business. This is in consonance with strict interpretation of
B
               penal statutes, especially, where such statutes create
               vicarious liability.
               14. A company may have a number of Directors and to
               make any or all the Directors as accused in a complaint
               merely on the basis of a statement that they are in charge
C              of and responsible for the conduct of the business of the
               company without anything more is not a sufficient or
               adequate fulfilment of the requirements under Section
               141.”
                                          ***
D
            18. In Girdhari Lal Gupta v. D.H. Mehta [Girdhari Lal
            Gupta v. D.H. Mehta, (1971) 3 SCC 189 : 1971 SCC (Cri)
            279 : AIR 1971 SC 2162] , this Court observed that a person
            “in charge of a business” means that the person should be in
            overall control of the day-to-day business of the Company.
E
            19. A Director of a company is liable to be convicted for an
            offence committed by the company if he/she was in charge of
            and was responsible to the company for the conduct of its
            business or if it is proved that the offence was committed with
            the consent or connivance of, or was attributable to any
F           negligence on the part of the Director concerned (see State
            of Karnataka v. Pratap Chand [State of Karnataka v. Pratap
            Chand, (1981) 2 SCC 335 : 1981 SCC (Cri) 453] ).
            20. In other words, the law laid down by this Court is that for
            making a Director of a company liable for the offences
G           committed by the company under Section 141 of the NI
            Act, there must be specific averments against the Director
            showing as to how and in what manner the Director was
            responsible for the conduct of the business of the company.”
             30. As held in K.K. Ahuja v. V.K. Vora (supra) when the accused
H     is the Managing Director or a Joint Managing Director of a company, it
    SUNITA PALITA & OTHERS v. M/S PANCHAMI STONE                                473
             QUARRY [INDIRA BANERJEE, J.]

is not necessary to make an averment in the complaint that he is in             A
charge of, and is responsible to the company for the conduct of the
business of the company. This is because the prefix “Managing” to the
word “Director” makes it clear that the Director was in charge of and
responsible to the company, for the conduct of the business of the
company. A Director or an Officer of the company who signed the cheque
                                                                                B
renders himself liable in case of dishonour. Other officers of a company
can be made liable only under sub-section (2) of Section 141 of the NI
Act 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.
      31. In course of the hearing Mr. Luthra emphasized on the                 C
proceedings initiated against the Accused Company under Section 7 of
the Insolvency and Bankruptcy Code 2016, hereinafter referred to as
the “IBC”.
      32. By an order dated 30th March 2017, the Calcutta Bench of
the National Company Law Tribunal, hereinafter referred to as the               D
“NCLT”, admitted the application of a Financial Creditor of the Accused
Company for appointment of an Interim Resolution Professional (IRP)
to administer the Accused Company, as a result of which the Appellants
were suspended by operation of law. When statutory notice of dishonour
was sent to the Appellants, the management of the Accused Company               E
had been taken over by the IRP.
       33. It is stated that PSQ had availed the remedy under the IBC
and filed its claim before the IRP, which now forms part of an Approved
Resolution Plan of the Accused Company. PSQ would, therefore, be
paid in terms of the Approved Resolution Plan. Mr. Luthra submitted             F
that the Resolution Plan of the Accused Company had been upheld by
the National Company Law Appellate Tribunal (NCLAT). All appeals
against the Resolution Plan had been dismissed by the NCLAT.
      34. Section 482 of the Cr.P.C. protects the inherent power of the
High Court to make such orders as may be necessary to give effect to            G
any order under the Cr.P.C or to prevent abuse of the process of any
Court or otherwise secure the ends of justice.
      35. While it is true that inherent jurisdiction under Section 482
should be exercised sparingly, carefully and with caution and only when
such exercise is justified by the tests specially laid down in the Section,
                                                                                H
474             SUPREME COURT REPORTS                            [2022] 14 S.C.R.


A     the Court is duty bound to exercise its jurisdiction under Section 482 of
      the Cr.P.C. when the exercise of such power is justified by the tests laid
      down in the said Section. Jurisdiction under Section 482 of the Cr.P.C.
      must be exercised if the interest of justice so requires.
             36. The High Court rightly held that when a complaint was filed
B     against the Director of a company, a specific averment that such person
      was in charge of and responsible for the conduct of business of the
      company was an essential requirement of Section 141 of the NI Act.
      The High Court also rightly held that merely being a Director of the
      company is not sufficient to make the person liable under Section 141 of
      the NI Act. The requirement of Section 141 of the NI Act was that the
C     person sought to be made liable should be in charge of and responsible
      for the conduct of the business of the company. This has to be averred
      as a fact.
             37. The High Court also rightly held that the Managing Director
      or Joint Managing Director would admittedly be in charge of the company
D     and responsible to the company for the conduct of its business by virtue
      of the office they hold as Managing Director or Joint Manging Director.
      These persons are in charge of and responsible for the conduct of the
      business of the company and they get covered under Section 141 of the
      NI Act. A signatory of a cheque is clearly liable under Section 138/141
E     of the NI Act.
             38. The High Court, however, failed to appreciate that none of
      these Appellants were Managing Director or Joint Managing Director
      of the Accused Company. Nor were they signatories of the cheque which
      was dishonoured.
F            39. The High Court proceeded to hold that, in construing a
      complaint, a hyper technical approach should not be adopted, to quash
      the same. The High Court observed rightly that the laudable object of
      preventing bouncing of cheques and sustaining the credibility of
      commercial transactions, resulting in enactment of Sections 138 and 141
      of the NI Act has to be borne in mind. A complaint should also not be
G
      read with a pedantically hyper technical approach to deny relief under
      Section 482 of the Cr.P.C. to those impleaded as accused, who do not
      have any criminal liability in respect of the offence alleged in the complaint.
      As observed by the High Court, the provisions of Section 138/141 of the
      NI Act create a statutory presumption of dishonesty, against those
H     covered by Section 138/141 of the NI Act and expose them to criminal
    SUNITA PALITA & OTHERS v. M/S PANCHAMI STONE                                 475
             QUARRY [INDIRA BANERJEE, J.]

liability, if payment is not made within the statutory period, even after        A
issue of notice.
      40. The High Court further held that the power of quashing is
required to be exercised sparingly. The High Court, in effect, found that
even though, on perusal of the complaint, it appeared that the exact
words used in Section 141 of the NI Act had not been used in the                 B
complaint, the essential pleadings were there in the complaint.
      41. There can be no doubt that in deciding a Criminal Revisional
Application under Section 482 of the Cr.P.C. for quashing a proceeding
under Section 138/141 of the NI Act, the laudable object of preventing
bouncing of cheques and sustaining the credibility of commercial                 C
transactions resulting in enactment of the said Sections has to be borne
in mind. The provisions of Section 138/141 of the NI Act create a statutory
presumption of dishonesty on the part of the signatory of the cheque,
and when the cheque is issued on behalf of a company, also those persons
in charge of or responsible for the company or the business of the
company. Every person connected with the company does not fall within            D
the ambit of Section 141 of the NI Act.
       42. A Director of a company who was not in charge or responsible
for the conduct of the business of the company at the relevant time, will
not be liable under those provisions. As held by this Court in, inter alia,
S.M.S. Pharmaceuticals Ltd. (supra), the liability under Section 138/            E
141 of the NI Act arises from being in charge of and responsible for the
conduct of the 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. It would be a travesty of justice to
drag Directors, who may not even be connected with the issuance of a
                                                                                 F
cheque or dishonour thereof, such as Director (Personnel), Director
(Human Resources Development) etc. into criminal proceedings under
the NI Act, only because of their designation.
       43. Liability depends on the role one plays in the affairs of a company
and not on designation or status alone as held by this Court in S.M.S.
                                                                                 G
Pharmaceuticals Ltd. (supra). The materials on record clearly show
that these Appellants were independent, non-executive Directors of the
company. As held by this Court in Pooja Ravinder Devidasani v. State
of Maharashtra and Anr. (supra) a non-Executive Director is not
involved in the day-to-day affairs of the company or in the running of its
business. Such Director is in no way responsible for the day-to-day              H
476               SUPREME COURT REPORTS                        [2022] 14 S.C.R.


A     running of the Accused Company. Moreover, when a complaint is filed
      against a Director of the company, who is not the signatory of the
      dishonoured cheque, specific averments have to be made in the pleadings
      to substantiate the contention in the complaint, that such Director was in
      charge of and responsible for conduct of the business of the Company
      or the Company, unless such Director is the designated Managing
B
      Director or Joint Managing Director who would obviously be responsible
      for the company and/or its business and affairs.
            44. The High Court correctly observed that three categories of
      persons were covered by Section 141 of the NI Act – the company who
      committed the offence as alleged; everyone who was in-charge of or
C     was responsible for the business of the company and any other person
      who was a Director or a Manager or a Secretary or Officer of the
      Company with whose connivance or due to whose neglect the company
      had committed the offence.
             45. Even though the High Court deprecated the adoption of a
D     hyper technical approach in construing pleadings, to quash criminal
      proceedings, the High Court adopted a hyper technical approach in
      rejecting the application under Section 482 of the Cr.P.C., on a cursory
      reading of the formalistic pleadings in the complaint, endorsing the contents
      of Section 141 of the NI Act, without any particulars. What the High
E     Court overlooked was, the contention of these Appellants that they were
      non-Executive Independent Directors of the Accused Company, based
      on unimpeachable materials on record. The High Court observed that in
      the petition it had specifically been averred that all the accused persons
      were responsible and liable for the whole business management of the
      Accused Company, andtook the view that the averments in the complaint
F     were sufficient to meet the requirements of Section 141 of the NI Act.
             46. As held by this Court in National Small Industries
      Corporation Ltd. v. Harmeet Singh Paintal4 quoted with approval in
      the subsequent decision of this Court in Pooja Ravinder Devidasani v.
      State of Maharashtra and Anr. (supra) the impleadment of all Directors
G     of an Accused Company on the basis of a statement that they are in
      charge of and responsible for the conduct of the business of the company,
      without anything more, does not fulfil the requirements of Section 141 of
      the NI Act.

      4
H         (2010) 3 SCC 330
       SUNITA PALITA & OTHERS v. M/S PANCHAMI STONE                           477
                QUARRY [INDIRA BANERJEE, J.]

       47. In any event there could be no justification for not dispensing    A
with the personal appearance of the Appellants, when the Company had
entered appearance through an authorized officer. As held by this Court
in Pepsi Foods Ltd. v. Special Judicial Magistrate and Ors. 5
summoning an accused person cannot be resorted to as a matter of
course and the order must show application of mind.
                                                                              B
      48. In our considered view, the High Court erred in law in not
exercising its jurisdiction under Section 482 of the Cr.P.C in the facts
and circumstances of this case to grant relief to the Appellants.
      49. For the reasons discussed above, the appeal is allowed. The
judgment and order of the High Court is set aside. Criminal Case No.          C
AC/121/2017 pending under Section 138/141 of the NI Act in the Court
of Judicial Magistrate, 2nd Court, Suri, Birbhum is quashed in so far as
these Appellants are concerned. It is made clear that the proceedings
may continue against the other accused in the criminal case, including in
particular the Accused Company, its Managing
                                                                              D
      Director/Additional Managing Director and/or the signatory of
the cheque in question.

Devika Gujral                                               Appeal allowed.
(Assisted by : Shubhanshu Das, LCRA)
                                                                              E




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5
    (1998) 5 SCC 749                                                          H