Crl.M.C. 915 of 2018 (In the High Court of Kerala at Ernakulam)

## **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** ## **`PRESENT`** ``` THE HONOURABLE MRS. JUSTICE MARY JOSEPH THURSDAY, THE 14[TH] DAY OF JULY 2022 / 23RD ASHADHA, 1944 CRL.MC NO. 915 OF 2018 ``` ``` IN CC NO.3158/2015 OF JUDICIAL FIRST CLASS MAGISTRATE COURT-XII (SPECIAL COURT FOR TRIAL OF CASES UNDER SECTION 138 OF NEGOTIABLE INSTRUMENTS ACT), THIRUVANANTHAPURAM ``` ## **`- PETITIONERS/ACCUSED NOS.3 TO 9 :`** |`1`|`JAMES T.T, T.C.20/1654,"ORIENT HOUSE",`| |---|---| ||`KUNCHALUMMODU, KARAMANA.P.O,`| ||`THIRUVANANTHAPURAM-695002.`| |`2`|`DR.EAPEN THOMAS, T.C.21/213-1, KARAMANA.P.O,`| ||`THIRUVANANTHAPURAM-695 002.`| |`3`|`SHIRLEY EAPEN`| ||`T.C.21/213-1, KARAMANA.P.O,`| ||`THIRUVANANTHAPURAM-695 002.`| |`4`|`NIRMALA JAMES, T.C.20/1654,`| ||`"ORIENT HOUSE", KUNCHALUMMODU, KARAMANA.P.O,`| ||`THIRUVANANTHAPURAM-695 002.`| |`5`|`SERGI JOSEPH JAMES`| ||`T.C.21/214-1, KARAMANA.P.O,`| ||`THIRUVANANTHAPURAM-695 002.`| |`6`|`JULIEMOL SERGI`| ||`T.C.21/214-1, KARAMANA.P.O,`| ||`THIRUVANANTHAPURAM-695 002.`| |`7`|`REJIMOL THOMAS, T.C.20/1654,`| ||`"ORIENT HOUSE", KUNCHALUMMODU, KARAMANA.P.O,`| ||`THIRUVANANTHAPURAM-695 002.`| ||`BY ADVS.SRI.A.MOHAMMED`| ||`SRI.RENJIT GEORGE`| Crl.M.C.No. 915 of 2018 ``` 2 ``` ## **`- RESPONDENT/COMPLAINANT AND STATE :`** - `1 S.WILLIAMS, AGED 57 YEARS, S/O.LATE SAMUEL, CHITHIRA, TC 14/415,VIKAS BHAVAN.P.O, PALAYAM, THIRUVANANTHAPURAM-695 033.` - `2 STATE OF KERALA REPRESENTED BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM.` - `3 THE BRANCH MANAGER, INDIAN OVERSEAS BANK, KILLIPALAM BRANCH, KARAMANA.P.O, THIRUVANANTHAPURAM-695 002.` ``` BY ADVS. ``` ``` R1 BY SRI.T.S.HARIKUMAR R3 BY SRI.ARUN RANJIT SRI.K.JAGADEESH SMT.K.PARVATHY P-938 SRI.P.B.SAHASRANAMAN SRI.K.N.SIVASANKARAN SRI.SUNIL SHANKER SRI.S.UNNIKRISHNAN VARKALA ``` ``` R2 BY SMT.T V NEEMA, SR.PUBLIC PROSECUTOR ``` ``` THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 14.07.2022, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: ``` Crl.M.C.No. 915 of 2018 ``` 3 ``` ## **ORDER** ## **Dated this the 14[th] day of July, 2022** This petition is filed under Section 482 of the Code of Criminal Procedure, 1973 (for short ‘Cr.P.C’) seeking to quash the complaint filed to launch the prosecution under Section 138 of the Negotiable Instruments Act, 1881 (for short ‘NI Act’), which has been taken on file and registered C.C.No.3158/2015 before Judicial First Class Magistrate Court-XII (Special Court for the trial of cases under Section 138 of the Negotiable Instruments Act), Thiruvananthapuram on it’s basis. 2. The allegation of the petitioners was that though vicarious liability was sought to be fixed on petitioners under Section 141 NI Act, in the prosecution launched against them by filing the complaint an allegation was not incorporated to attract that. The learned counsel has invited the attention of this Court to Section 141 of the NI Act to contend that when vicarious liability is alleged against the accused, the complainant has to make specific pleadings in the complaint that at the relevant Crl.M.C.No. 915 of 2018 ``` 4 ``` time when the offence was committed, the parties sought to be made vicariously liable for the offence under Section 138 NI Act were in charge of and responsible to the company for the conduct of the business of the company. 1[st] accused is a partnership Firm. The explanation appended to Section 141 NI Act has also extended the benefit of the provision to a Firm also. Therefore, when vicarious liability is sought to be fastened on petitioners who were officiating the firm in different capacities, the complainant must plead in the complaint specifically that they were in charge of and responsible to the Firm for the conduct of the business of the Firm at the relevant time when the offence was allegedly committed. 3. The copy of the complaint is produced alongwith the petition on hand as Annexure A1. This Court has gone through Annexure A1 and convinced that a pleading was not incorporated in it to the effect that petitioners were in charge of and responsible for the conduct of the affairs of the Firm at the relevant time when the offence alleged was committed. Therefore, for want of pleadings in Annexure A1, it has only to suffer and fail. Crl.M.C.No. 915 of 2018 ``` 5 ``` 4. The learned counsel has relied on decisions in support of his argument that in the absence of a plea as contemplated under Section 141 NI Act raised in the complaint, it will not sustain and the prosecution will only be defeated. 5. In **National Small Industries Corpn. Ltd. V Harmeet Singh Paintal and Another** [2010 (2) KHC 355 (SC)] the question came up for consideration before the Apex Court was, whether liability could be fastened on the Director of the Company in the absence of specific averments regarding the role of the said Director. The Apex Court formulated the following principles: “(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. (ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. (iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 Crl.M.C.No. 915 of 2018 ``` 6 ``` only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make accused therein vicariously liable for offence committed by company along with averments in the petition containing that accused were in-charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with. (iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (v) If accused is Managing Director or Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with. (vi) If accused is a Director or an Officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint. (vii) The person sought to be made liable should be incharge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases.” ## 6. In **Central Bank of India v. M/s.Asian Global Ltd.** **and Others** [2010 KHC 4479 (SC)] the Apex Court has observed that in the case save and except for the statement that the respondents, Mr.Rajiv Jain and Sarla Jain and some of the other Crl.M.C.No. 915 of 2018 ``` 7 ``` accused were Directors of the accused Companies and were responsible and liable for the acts of the said Companies, no specific allegation has been made against any of them. The Apex Court observed as follows: “15. xxxxxxx The question of proving a fact which had not been mentioned in the complaint did not, therefore, arise in the facts of this case. This has prompted the High Court to observe that the Bank had relied on the mistaken presumption that as Directors, Rajiv Jain, Sarla Jain and the other Directors were vicariously liable for the acts of the Company. Admittedly, except for the aforesaid statement, no other material has been disclosed in the complaint to make out a case against the respondents that they had been in charge of the affairs of the Company and were responsible for its action. The High Court, therefore, rightly held that in the absence of any specific charge against the Respondents, the complaint was liable to be quashed and the respondents were liable to be discharged.” ## 7. In **S.M.S Pharmaceuticals Ltd. v. Neeta Bhalla** [2005 KHC 1468 (SC)] the Apex Court held when reference is made by a Two Judge Bench of the Court for determination of the following questions by a larger Bench: "(a) Whether for purposes of Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the allegation read as a whole fulfil the requirements of the said Crl.M.C.No. 915 of 2018 ``` 8 ``` section and it is not necessary to specifically state in the complaint that the person accused was in charge of, or responsible for, the conduct of the business of the company. (b) Whether a director of a company would be deemed to be in charge of, and responsible to, the company for conduct of the business of the company and, therefore, deemed to be guilty of the offence unless he proves to the contrary. (c) Even if it is held that specific averments are necessary, whether in the absence of such averments the signatory of the cheque and or the managing directors or joint managing director who admittedly would be in charge of the company and responsible to the company for conduct of its business could be proceeded against." ## The Court answered the questions posed for reference as under: “(a) It is necessary to specifically aver in a complaint under S.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 S.141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of S.141 cannot be said to be satisfied. (b) The answer to the question posed in sub-para (b) has to be in negative. Merely being a director of a company is not sufficient to make the person liable under S.141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its Crl.M.C.No. 915 of 2018 ``` 9 ``` business. The requirement of S.141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases. (c) The answer to question (c) has to be in affirmative. The question notes that the Managing Director or Joint Managing Director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under S.141 of the Act. By virtue of the office they hold as Managing Director or Joint Managing Director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under S.141. So far as signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub- s.(2) of S.141." ## 8. In **Katta Sujatha (Smt.) v. Fertilizers And Chemicals Travancore Ltd.** [2002 KHC 1373 (SC)] it was held ## by the Apex Court that : “the partner of a firm is liable to be convicted for an offence committed by the firm if he was in charge of and was responsible to, the firm for the conduct of the business of the firm or if it is proved that the offence was committed with the consent or connivance of, or was attributable to any neglect on the part of the partner concerned.” Crl.M.C.No. 915 of 2018 ``` 10 ``` Accordingly, the Apex Court allowed the appeal preferred against an order of the High Court after setting it aside. 9. The above decisions cited by the learned counsel unambiguously support the view taken by this Court as above. Therefore, Crl.M.C is only to be allowed. In the result, Crl.M.C is allowed. Annexure A1 and all further proceedings initiated in C.C.No.3158/2015 registered on the files of Judicial First Class Magistrate Court-XII (Special court for the trial of cases under Section 138 of the Negotiable Instruments Act), Thiruvananthapuram on it’s basis are quashed forthwith as against the petitioners. **MARY JOSEPH JUDGE** NAB Crl.M.C.No. 915 of 2018 ``` 11 ``` ## **`APPENDIX OF CRL.MC 915/2018`** ``` PETITIONER’S ANNEXURES: ``` - `ANNEXURE A-1 CERTIFIED COPY OF THE COMPLAINT IN C.C.NO.3158/2015 ON THE FILES OF THE COURT OF THE JUDICIAL FIRST CLASS MAGISTRATE-XII(SPECIAL COURT FOR THE TRIAL OF CASES UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT) THIRUVANANTHAPURAM` - `ANNEXURE A-2 TRUE PHOTOCOPY OF THE CHEQUE DATED 6/7/2011 DRAWN IN INDIAN OVERSEAS BANK` - `ANNEXURE A-3 TRUE COPY OF THE PLAINT IN O.S.NO.1158/2011 ON THE FILES OF THE SUBORDINATE JUDGES COURT, THIRUVANANTHAPURAM DATED 29/9/2011` - `ANNEXURE A-4 TRUE COPY OF THE WRITTEN STATEMENT IN OS. NO.1158/2011 ON THE FILES OF THE PRINCIPAL SUB COURT, THIRUVANANTHAPURAM` - `ANNEXURE A-5 TRUE COPY OF THE ADDITIONAL WRITTEN STATEMENT IN OS NO.1158/2011 ON THE FILES OF THE PRINCIPAL SUB COURT, THIRUVANANTHAPURAM` ``` ANNEXURE A-6TRUE COPY OF THE DEED OF DISSOLUTION OF THE FIRM M/S ORIENT EXPORTS AND IMPORTS DATED 01/04/2008. ``` ``` RESPONDENT’S ANNEXURES: NIL ``` ``` //TRUE COPY// ``` ``` P A TO JUDGE ```