Supreme Court of India
HARSHENDRA KUMAR D.versusREBATILATA KOLEY ETC.
- Citation
- 2011 INSC 111
- Decided
- 8 February 2011
- Disposal
- Appeal(s) allowed
- Bench
- AFTAB ALAM
Holding
A director whose resignation has been accepted and duly notified to the Registrar of Companies cannot be held vicariously liable under Section 141(1) of the Negotiable Instruments Act for offences committed after his resignation.
Summary
The complainants placed orders with Rifa Healthcare (India) Pvt. Ltd. and issued demand drafts, but the company failed to deliver the goods and later issued 18 cheques that were dishonoured. The complainants filed complaints under Sections 138 and 141 of the Negotiable Instruments Act, implicating the company and one of its directors, Harshendra Kumar D., who had resigned as director on 2 March 2004, with the resignation accepted and notified to the Registrar of Companies on 4 March 2004. The Metropolitan Magistrate issued summons to the director, who filed 18 revision applications arguing that he was not a director at the time the cheques were issued (30 April 2004). The Calcutta High Court dismissed the revisions, holding that resignation was a defence to be considered at trial, but the Supreme Court held that the statutory language of Section 141(1) requires the accused to have been in charge of the company at the time of the offence, and a director whose resignation has been accepted and notified cannot be held liable for acts committed thereafter. The Court also clarified that, in appropriate cases, a High Court may examine uncontroverted documents at the revisional stage to prevent abuse of process. Consequently, the Supreme Court set aside the High Court judgment and the magistrate's summons, quashing the complaints against the appellant.
Issues considered
- The applicability of vicarious liability under Section 141(1) of the Negotiable Instruments Act to a director who resigned before the alleged offence.
- Whether a High Court, in revisional jurisdiction, may consider uncontroverted documentary evidence of resignation to determine liability.
- The significance of the phrase "every person who, at the time of the offence was committed" in Section 141(1).
- The requirement of specific averments in a complaint to fasten criminal liability on a director.
Legislation cited
- Code of Criminal Procedure, 1973s. 397, s. 401, s. 482
- Companies Act, 1956s. 303
- Negotiable Instruments Act, 1881s. 138, s. 141(1)
Subjects
vicarious liabilitydirector resignationNegotiable Instruments ActSection 138Section 141criminal liabilityrevisional jurisdictionabuse of process
Judgment
[2011] 2 S.C.R. 670
A HARSHENDRA KUMAR D.
v.
REBATILATA KOLEY ETC.
(Criminal Appeal Nos. 360-377 of 2011)
FEBRUARY 8, 2011
8
[AFTAB ALAM AND R.M. LODHA, JJ.]
NEGOTIABLE INSTRUMENTS ACT, 1881:
C ss. 138 and 141(1) -Vicarious liability of Director of a
company -Complaints against a Company for dishonour of
cheques -Metropolitan Magistrate directing summons to
issue to accused -Revision petitions by one of the Directors
contending that he had resigned as Director of the Company
before issuance of the cheques l:Jy it-Held :The words "every
0 person who, at the time of the offence was committedn,
occurring in s.141 ·are not without significance, and indicate
that criminal liability of a Director must be determined on the
date the offence is alleged to have been committed -A
Director whose resignation has been accepted and notified
E to Registrar of Companies, cannot be made accountab{e for
the acts of the company committed after his resignation -
Complaints ·against Director concerned quashed -
Companies Act, 1956 -s.303 -Code of Criminal Procedure,
1973-ss.397, 401 rlw s. 402.
F
CODE OF CRIMINAL PROCEDURE, 1973:
Section 397 rlw ss. 401 and 482 -Revisional jurisdiction
of High Court -Complaints filed against a company and its
officers for dishonour of cheques issued by the company -
G Metropolitan Magistrate directing summons to issue -
Revision petitions filed by one of the Directors of the company
seeking to quash the proceedings against him as he had
resigned before the cheques were issued by the company -
H. 670
- HARSHENDRA KUMAR D. v. REBATILATA KOLEY 671
ETC.
Dismissed by High Court -Held : High Court fell into grave A
error in not taking into consideration tho uncontroverted
documents relating to resignation of the Director concerned
-On the date the offence was committed by the Company the
revision-petitioner was not the Director and he had nothing to
do with the affairs of the Company -Therefore, if the criminal B
proceedings are allowed to proceed against him, it would
result in gross-injustice to him and would be tantamount to
abuse of process of the court -Judgment of the High Court
and the order of the Magistrate directing summons to issue
to Director concerned are set aside and complaints gainst c
him quashed -Negotiable Instruments Act, 1881 -ss. 138 and
141(1) -Administration of Criminal Justice.
Eighteen complaints for offences punishable uls 138
read with s. 141 of the Negotiable Instruments Act, 1881
_were filed against the appellant and others. The case of D
the complainants was that they placed orders with the
Company, of which the appellant was one of the
Directors, for the sale of certain products, and issued
demand drafts in favour of the Company; but the
Company did not deliver the products and when they E
asked the Company for return of their money, the
Company, on 30-4-2004, issued 18 cheques in their
favour ; that the said 18 cheques, on presentation were
dishonoured by the Bank/s. The Metropolitan Magistrate
, directed to issue summons to all the accused. F
The appellant challenged the proceedings by filing
18 revision applications uls 397 read with s. 401 of the
Code of Criminal Procedure 1973, before the High Court,
primarily on the ground that the cheques were issued on G
behalf of the Company to the complainants after he had
resigned from the post of Director of the Company and,
thus, at the time when the cheques were issued, the
appellant had no concern or connection with the
Company. The High Court, however, held that resignation H
672 SUPREME COURT REPORTS [2011) 2 S.C.R.
A by the appellant as Director of the Company was a
defence for consideration at the trial on the basis of
evidence which could not be decided by the High Court
in revisional jurisdiction.
Allowing the appeals, the Court
B
HELD: 1.1. By virtue of the provisions of s.303 of the
Companies Act, 1956, there is statutory requirement of
informing the Registrar of Companies about change
among Directors of the company. In this view of the
C matter, a Director -whose resignation has been accepted
by the company and that has been duly notified to the
Registrar of Companies -cannot be made accountable
and fastened with liability for anything done by the
company after the acceptance of his resignation. The
D words 'every person who, at the time the offence was
committed', occurring in s. 141 (1) of the NI Act are not
without significance and these words indicate that
criminal liability of a Director must be determined on the
date the offence is alleged to have been committed. [para
E 15] [686-G-H; 687-A]
S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and
Another 2005 (3 ) Suppl. SCR 371 = (2005) 8 SCC 89; N.
Rangachari v. Bharat Sanchar Nigam Ltd. 2007 (5 ) SCR 329
= 2007(5) SCC 108 ; K.K. Ahuja v. V.K. Vora & Another
F (2009) 10 SCC 48 and National Small Industries Corporation
Limited v. Harmeet Singh Paintal and Another 201 O (2 )
SCR 805 = (2010) 3 SCC 330 - relied on
1.2. In the instant case, the documents placed on
G record, which have not been controverted, show that on
2-3-2004, the appellant sent a letter of resignation to the
Managing Director of the Company. The Board of
Directors held the meeting on 2-3-2004 and accepted the
appellant's resignation on that day itself. On 4-3-2004, the
H
HAR~HENDRA KUMAR D. v. REBATILATA KOLEY 673
ETC.
Company informed the Registrar of Companies in tlie A
prescribed form (Form no. 32) about the resignation of the
appellant from the post of Director of the Company and,
thus, change among directors. [para 16-18] (687-A-G]
2.1. It is fairly settled that while exercising inherent . 8
jurisdiction u/s 482 or revisional jurisdiction u/s 397 of the
Code of Criminal Procedure, 1973, in a case where
complaint is sought to be quashed, it is not proper for the
High Court to consider the defence of the accused or
embark upon an enquiry in respect of merits of the
accusations. However, in an appropriate case, if on the C
face of the documents - which are beyond suspicion or
doubt - placed by accused, the accusations .against him
cannot stand, it would be travesty of justice .if accused
is relegated to trial and asked to prove his defence before
the trial court. In such a matter, for promotion of justice D
or to prevent injustice or abuse of process, the High Court
may look !nto the materials which have significant bearing
on the matter at prima facie stage. [para 21) [689-B-E]
Saroj Kumar Jhunjhunwa/a v. State of West Bengal and E -· ·
Anr. (2007) 1 C Cr. LR (Cal) 793; State of Madhya Pradesh
v. Awadh Kishore Gupta and Others 2003 (5 ) Suppl.
SCR 672 = (2004) 1 SCC 691 and Fateh Chand Bhansa/i
v. Mis. Hindustan Development Corporation Ltd. (2005) 1 C
Cr.LR (Cal) 581- referred to F
2.2. Criminal prosecution is a serious matter; it affects
· the liberty of a person. No greater damage can be done
to the reputation of a person than dragging him in a
criminal case. In the instant case, the High Court fell into
grave error in not taking into consideration the G
uncontroverted documents relating to appellant's
resignation from the post of Director of the Company. The
facts leave no manner of doubt that on the date the
offence was committed by the Company, the appellant
H
674 SUPREME COURT REPORTS [2011) 2 S.C.R.
A was not the Director; he had nothing to do with the affairs
of the Company. In this view of the matter, if the criminal
complaints are allowed to proceed against the appellant,
it would result in gross injustice to the appellant and
would be tantamount to abuse of process of the court.
B The judgment of the High Court and the order of th~
Metropolitan Magistrate directing summons to issue to the
appellant are set aside. The complaints as against the
appellant stand quashed. [para 22-23) [689-F-H; 690-A-F]
Case Law Reference:
c
(2005) 1 C Cr.LR (Cal) 581 relied on para 7
2005 (3) Suppl. SCR 371 relied on para 9
2007 (5 ) SCR 329 relied on para 11
D
(2009) 1o sec 48 relied on para 12
2010 (2 ) SCR 805 relied on para 14
(2007) 1 C Cr. LR (Cal) 793 referred to para 19
E 2003 (5 ) Suppl. SCR 672 referred to para 19
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal
Nos. 360-377 of 2011.
From the Judgment & Order dated 06.09.2007 of the High
· F Court of Calcutta in C.R.R. Nos. 3716, 3718, 3719, 3720, 3722,
3723,3724,3725,3726,3731,3732,3733,3734,3735,3736,
3737, 3738 & 3739 of 2006.
Basava Prabhu S. Patil, B. Subrahmanya Prasad (for V.N.
G Raghupathy) for the Appellant.
Subhasish Bhowmick, S.C. Patel, Tara Chandra Sharma,
Neelam Sharma for the Respondent.
The Judgment of the Court was delivered by
H
HARSHENDRA KUMAR D. v. REBATILATA KOLEY 675
Ere:
R.M. LODHA, J. 1. Leave granted. A
2. These 18 appeals, by special leave, are directed against
the common judgment and order dated September 6, .2007
passed by Calcutta High Court whereby 18 criminal revision
applications filed by the appellant for quashing the proceedings 8
· initiated by the complainants in 18 complaint cases under
Section 138 read with Section 141 of Negotiable Instruments
·Act, 1881 (for short, 'NI Act') against him have been dismissed.
3. The brief facts are these. The complainants were
interested in business relationship with Rifa Healthcare (India) C
Pvt. Ltd. (for short, 'the Company') for the sale of bio-ceramic
products. The complainants, for the orders they had placed,
issued demand drafts in favour of the Company. It appears that
the Company had not delivered the products ordered by the
complainants and accordingly they asked the Company for D
return of their money. On April 30, 2004, the Company issued
-18 cheques bearing Nos. (i) 000843 for Rs. 30,000/-; (ii) 00870
for Rs. 40,000/-; (iii) 000845 for Rs. 30,000/-; (iv) 000852 for
Rs. 3,00,000/-; (v) 00842 for Rs. 60,000/-; (vi) 000862 for Rs.
40,000/-; (vii) 000834 for Rs. 60,000/-; (viii) 000572 for Rs. · E
40,000/-; (ix) 000827 for Rs. 30,350/-; (x) 000854 for Rs.
3,00,000/-; (xi) 000826 for Rs. 60,000/-; (xii) 000855 for Rs ..
·3,00,000/-; (xiii) 000857 for Rs. 3,00,000/-; (xiv) 000858 for Rs.·
3,00,000/-; (xv) 000841 for Rs. 60,000/-; (xvi) 000871 for Rs.
40,000/-; (xvii) 000568 for Rs. 40,000/- and (xviii) for Rs. F
60,130/- drawn on UTI Bank Ltd., Jayanagar, Bangalore in
favour of the complainants. These 18 cheques were
- dishonoured by the Bank/s on presentation.
4. In the month of December, 2004, the complainants filed
18 complaints under Section 138 read with Section 141 of the G
NI Act. For the sake of brevity and convenience, we shall refer
to the complaint no. 14512 of 2004. In the complaint, besides
the Company, the appellant was arraigned as accused No. 3. ·
It was alleged in the complaint that the Managing Director and
H
676 SUPREME COURT REPORTS [2011] 2 S.C.R.
A the two Directors (including the appellant) were responsible for
day-to-day affairs of the Company and that it was on their
assurance that the complainant issued demand draft in favour
of the Company and when the products of the Company were
not received by the complainant, she contacted the accused
a persons and told them that she could not continue business with
them and asked for return of her money. Accordingly, for and
on behalf of the Company, in discharge of the existing liability,
an account payee cheque was issued but the cheque was
returned by the complainant's banker on presentation with the
c endorsement 'insufficient fund'. The complainant then sent legal
notice asking the accused persons to pay the amount of cheque
within 15 days from the date of the receipt of the n'otice but
despite service of notice, no payment has been made.
5. The concerned Metropolitan Magistrate issued
D summons to all the accused persons including the appellant.
6. The appellant challenged the proceedings initiated by
the complainants against him by filing 18 revision applications
under Section 397 read with Section 401 of the Criminal
E Procedure Code, 1973 (for short, 'Code') before the Calcutta
High Court. In these revision applications, notices were is-sued
to the complainants. On behalf of the appellant, the principal
contention canvassed was that the appellant was appointed as
Director of the Company on August 27, 2003. He resigned from
F the directorship on March 2, 2004 which was accepted by the
Board of Directors on that day itself with immediate effect. The
factum of his resignation is also recorded in Form No. 32 filed
by the Company with the Registrar of Companies on March 4,
2004. The 18 cheques which were issued on behalf of the '
Company to the complainants were issued after his
G resignation. The dishonour of these cheques through the
complainants' bankers' was also subsequent to his resignation.
In other words, it was submitted by the counsel for the appellant
before High Court that at the time when the cheques were
issued or when the cheques were dishonoured, the appellant
H
HARSHENDRA KUMAR D. v. REBATILATA KOLEY 677
ETC. [R.M. LODHA, J.]
had no concern or connection with the Company. A
7. The High Court, however, relying upon a decision of
Sillgle Judge of that Court in Fateh Chand Bhansali v. M/s.
Hindustan Development Corporation Ltd. 1 , held that
resignation by the petitioner as Director of the Company is a 8
defence of the accused and the defence is a matter for
consideration at the trial on the basis of evidence which cannot
be decided by the Court in revisional jurisdiction. The High
Court considered the matter thus:
"The question of the learned Advocate for the petitioner is C
that the petitioner was not director of a company at the
material point of time because there is form 32 which
shows the date when the petitioner was appointed a
director and when there came to be a change of
directorship of the company. According to Mr. Trivedi D
learned Advocate for the petitioner, a Hon'ble Judge of this
Court in Saroj Kumar Jhunjhunwala Vs. State of West
Bengal and Anr. (2007) 1 C Cr.LR (Cal) 793 was pleased
to hold that if before the issuance of cheques, the
accused-petitioner had resigned from the directorship, E
then he cannot be held liable for the offence. This decision
which favours the petitioner has been pitted against the
decision in Fateh Chand Bhansali Vs. Mis. Hindustan
Development Corporation Ltd., (2005) 1 C Cr. LR (Cal) ·'
581 wherein another Hon'ble Single Judge of this court with F
reference to a good number of decisions including the
decision in State ofM.P. Vs. Awadh Kishore Gupta & Ors.,
2004 SCC (Cr.) 352 held that the High Court while
considering the revisional application cannot look into the
papers and documents annexed to such application as G
those were neither verified nor tested. In that decision also
the point was raised with reference to form 32 and His
Lordship held that the decision of State of M.P. Vs. Awadh
Kishore Gupta and Ors. (Supra) is an authority regarding
1. (2005) 1 C Cr.LR (Cal~581. H
678 SUPREME COURT REPORTS [2011] 2 S.C.R.
A permissibility of the High Court to look into the papers and
documents annexed to the revisional application and the
story of the petitioner that they resigned from the company
by submitting Form 32 and are, in no way, responsible for
the alleged offence is a defence of the accused person
B and the defence is a matter for consideration at the trial
on the basis of evidence which cannot be decided by the
court. It is worth mentioning that this decision in Fateh
Chand Bhansali was rendered on 23.3.2005 while the
decision in Saroj Kumar Jhunjhunwala was rendered on
c 05.04.2007 and in this decision Fateh Chand Bhansali
was not placed before his Lordship for consideration and
judicial discipline demands that I should go by the earlier
decision, namely, Fateh Chand Bhansali (Supra)."
8. Section 138 and Section 141 were brought in the NI Act
D by the Banking, Public Financial Institutions and Negotiable
Instruments Laws (Amendment) Act, 1988 (Act 66 of 1988) with
effect from April 1, 1989. These provisions as amended from
time to time read as under :
E "S.138. Dishonour of cheque for insufficiency, etc., of
funds in the accounts.-Where any cheque drawn by a
person on an account maintained by him with a banker for
payment of any amount of money to another person from
out of that account for the discharge, in whole or in part,
F of any debt or other liability, is returned by the bank unpaid,
either because of the amount of money standing to the
credit of that account is insufficient to honour the cheque
or that it exceeds the amount arranged to be paid from that
account by an agreement made with that bank, such person
shall be deemed to have committed an offence and shall
G
without prejudice to any other provisions of this Act, be
punished with imprisonment for a term which may extend
to two years, or with fine which may extend to twice the
amount of the cheque, or with both:
H
HARSHENDRA KUMAR D. v. REBATILATA KOLEY 679
ETC. [R.M. LODHA, J.]
Provided that nothing contained in this section shall A
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;
B
(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 drawer of the cheque, within thirty days of the receipt
of information by him from the bank regarding the return C
of the cheque as unpaid; and
(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 0
fifteen days of the receipt of the said notice.
Exp/anation.-For the purposes of this section, "debt or
other liability" means a legally enforceable debt or other
liability.
E
S. 141. Offences by companies.-(1) If the person
committing an offence under section 138 is a company,
every person who, at the time the offence was committed,
was in charge of, and was responsible to the company for
the conduct of the business of the company, as well as the F
company, shall be deemed to be guilty of the offence and
shall be liable to be proceeded against and punished
accordingly:
Provided that nothing contained in this sub-section shall G
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:
H
680 SUPREME COURT REPORTS [2011] 2 S.C.R.
A Provided further that where a person is nominated as a
Director of a company by virtue of his holding any office
or employment in the Central Government or State
Government or a financial corporation owned or controlled
by the Central Government or the State Government, as
B the case may be, he shall not be liable for prosecution
under this Chapter.
(2) Notwithstanding anything contained in sub-section (1),
where any offence under this Act has been committed by
a company and it is proved that the offence has been
c committed with the consent or connivance of, or is
attributable to, any neglect on the part of, any director,
manager, secretary or other officer of the company, such
director, manager, secretary or other officer shall also be
deemed to be guilty of that offence and shall be liable to
D be proceeded against and punished accordingly.
Exp/anation.-For the purposes of this section,-
(a) "company" means any body corporate and includes a
firm or other association of individuals; and
E
(b) "director", in relation to a firm, means a partner in the
firm.]
9. The legal position concerning the vicarious liability of a
F director in a company which is being prosecuted for the offence
under Section 138, NI Act has come up for consideration before
this Court on more than one occasion. In the case of S.M.S.
Pharmaceuticals Ltd. v. Neeta Bhalla and Another2, the
following questions were referred to a 3-Judge Bench for
G determination :
"(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
H 2. 2005 (8) sec 89.
HARSHENDRA KUMAR D. v. REBATILATA KOLEY 681
ETC. [R.M. LODHA, J.]
section and it is not necessary to specifically state in the A
. 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 8
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, C
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 again.i;;t." D '
10. The 3-Judge Bench· of this Court answered the
aforesaid questions thus:
"(a) It is necessary to specifically aver in a complaint under E
Section 141 that at the time the offence was committed,
the person accused was in charge of, and responsible for
the conduct of business of the company. This averment is
an essential requirement of Section 141 and has to be
made in a complaint. Without this averment being m~de
in a complaint, the requirements of Section 141 cannot be F
said to be satisfied.
(b) The answer to the question posed in sub-para (b) has
to be in the negative. Merely being a director of a
company is not sufficient to make the person liable under G
Section 141 of the Act. A director in a company cannot
be deemed to be in charge of and responsible to the
company for the conduct of its business. The requirement
·of Section 141 is that the person sought to be made liable
H
682 SUPREME COURT REPORTS [2011) 2 S.C.F
A should be in charge of and responsible for the conduct o
the business of the company at the relevant time. This has
to be averred as a fact as there is no deemed liability oi
a director in such cases.
(c) The answer to Question (c) has to be in the affirmative.
B
The question notes that the managing director or joint
managing director would be admittedly in charge of the
company and responsible to the company for the conduct
of its business. When that is so, holders of such positions
in a company become liable under Section 141 of the Act.
c By virtue of the office they hold as managing director or
joint managing director, these persons are in charge of
and responsible for the conduct of business of the
company. Therefore, they get covered under Section 141.
So far as the signatory of a cheque which is dishonoured
D is concerned, he is clearly responsible for the incriminating
act and will be covered under sub-section (2) of Section
141."
11. In N. Rangachari v. Bharat Sanchar Nigam Ltd. 3, a
E 2-Judge Bench of this Court discussed and considered S.M. S.
Pharmaceuticals Ltd.2 and observed as follows :
".......The scope of Section 141 has been authoritativ~ly
discussed in the decision in S. M. S. Pharmaceuticals Ltd.
[2005 (8) sec 89] binding on us and there is no scope
F for redefining it in this case. Suffice it to say, 'that a
prosecution could be launched not only against the
company on behalf of which the cheque issued has been
dishonoured, but it could also be initiated against every
person who at the time the offence was committed, was
G in charge of and was responsible for the conduct of the
business of the company. In fact, Section 141 deems such
persons to be guilty of such offence, liable to be proceeded
against and punished for the offence, leaving it to the
H 3. 2001 (5) sec 10s
HARSHENDRA KUMAR D. v. REBATILATA KOLEY 683
ETC. [R.M. LODHA, J.]
person concerned, to prove that the offence was A
committed by the company without his knowledge or that
he has exercised due diligence to prevent the commission
of the offence. Sub-section (2) of Section 141 also roped
in Directors, Managers, Secretaries or other officers of the
company, if it was proved that the offence was committed B
with their consent or connivance.
But as has already been noticed, the decision in S.M.S.
Pharmaceuticals Ltd. [2005 (8) SCC 89) binding on us, C
has postulated that a Director in a company cannot be
deemed to be in charge of and responsible to the
company for the conduct of his business in the context of
Section 141 of the Act. Bound as we are by that decision
no further discussion on this aspect appears to be D
warranted."
12. In the case of K.K. Ahuja v. V.K. Vora & Another.4, a
2-Judge Bench of this Court had an occasion to consider the
earlier decisions of this Court including the decision in the case E
of S.M.S. Pharmaceuticals Ltd.2 It was held that mere fact that
at some point of time an officer of a company had played some
role in the financial affairs of the company, that will not be
sufficient to attract the constructive liability under Section 141 ,
of the NI Act. The Court summarized the legal position as
follows: F
"(1) If the accused is the Managing Director or a Joint
Managing Director, it is not necessary to make an avennent
in the complaint that he is in charge of, and is responsible
to the company, for the conduct of the business of the G
company. It is sufficient if an averment is made that the
accused was the Managing Director or Joint Managing
Director at the relevant time. This is because the prefix
4. (2009) 10 sec 48. H
684 SUPREME COURT REPORTS [2011] 2 S.C.R
A "Managing" to the word "Director'' makes it clear that they
were in charge of and are responsible to the company, fot
the conduct of the business of the company.
(ii) In the case of a Director or an officer of the company
who signed the cheque on behalf of the company, there is
B
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 dishonoured cheque was
c 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
D referred 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
E averment would be necessary in 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 under1hat
F sub-section.
(iv) Other officers of a company cannot be made liable
under 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
G and duties in the company and their role in regard to the
issue and dishonour of the cheque, disclosing consent,
connivance or negligence."
13. In K.K. Ahuja 4, this Court observed that if a mere
H reproduction of the wording of Section 141(1) in the complaint
HARSHENDRA KUMAR D. v. REBATILATA KOLEY 685
ETC. [R.M. LODHA, J.]
was sufficient to make a person liable to face prosecution, A
virtually every officer/employee of a company without exception
could be impleaded as accused by merely making an averment
that at the time when the offence was committed they were in
charge of and were responsible to the company for the conduct
and .business of the company. B
14. In a recent decision in the case of National Small
Industries Corporation Limited v. Harmeet Singh Paintal and
Another6, after survey of earlier decisions wherein legal position
concerning Section 138 and Section 141 of the NI Act was
considered, this Court culled out the following.principles: C
"(1) 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 D
. that every Director knows about the transaction.
(it) 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{ E
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
only if the requisite statements, which are required to be F
averred in the complainVpetition, are made so as to make
the accused therein vicariously liable for offence committed
by the company along with averments in the petition
containing that the accused were in charge of and
responsible for the business of the company and by virtue G
of their position they are liable to be proceedtyd with.
(iv) Vicarious liability on the part of a person must be
pleaded and proved and not inferred.
5. 2010 (3) sec 330. H
686 SUPREME COURT REPORTS [2011] 2 S.C.R
A (v) If the accused is a Managing Director or a 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.
(vt) If the accused is a Director or an officer of a company
B
who signed the cheques on behalf of the company then
also it is not necessary to make specific averment in the
complaint.
(vit) The person sought to be made liable should be in
c 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."
0 15. Every company is required to keep at its registered
office a register of its directors, managing director, manager
and secretary containing the particulars with respect to each
of them as set out in clauses (a) to (e) of sub-section (1) of
Section 303 of the Companies Act, 1956. Sub-section (2) of
E Section 303 mandates every company to send to the Registrar
a return in duplicate containing the particulars specified in the
register. Any change among its directors, managing directors,
managers or secretaries specifying the date of change is also
required to be furnished to the Registrar of Companies in the
prescribed form within 30 days of such change. There is, thus,
F statutory requirement of informing the Registrar of Companies
about change among directors of the company. In this view of
the matter, in our opinion, it must be held that a director - whose
resignation has been accepted by the company and that has
been duly notified to the Registrar of Companies - cannot be
G made accountable and fastened with liability for anything done
by the company after the acceptance of his resignation. The
words 'every person who, at the time the offence was
committed', occurring in Section 141 (1) of the NI Act are not
without significance and these words indicate that criminal
H liability of a director must be determined on the date the offence
HARSHENDRA KUMAR D. v. REBATILATA KOLEY 687
ETC. [R.M. LODHA, J.]
is alleged to have been committed. A
16. On March 2, 2004, the appellant sent a letter of
resignation to the Managing Director of the Company, the
relevant part of that reads as follows:
"Subject : Resignation to the Post of Director B
With reference to the above subject I hereby resign
to the post of Director in your company (sic.) immediate
effect as I am pre-occupied with my other business
activities and unable to concentrate, participate in the c
affairs of the company.
Therefore it is kind request with you to accept my
resignation and intimate the R.O.C. by filing necessary
applications to comply the legal formality."
D
17. The Board of DirectOrs held the meeting on March 2,
2004 and accepted the appellant's resignation on that day itself.
The extract of resolution to that effect reads as follows :
"Mr. Harshendra Kumar D S/o Rathnavarma Hegde E
residing at No. -55, Vittal Mallya Road, Bangalore. Due to
his personal inconivenceses (sic.) he requested to accept
his resignation for the Director, and the Board accepted
the resignation and it will be effected immediately on the
date of resignation."
F
18. On March 4, 2004, the Company informed the
Registrar of Companies in the prescribed form (Form no. 32)
about the resignation of the appellant from the post of Director
of the Company and, thus, change among directors.
G
19. The above documents placed on record by the
appellant have not been disputed nor controverted by the
complainants. As a matter of fact, it was not even the case of
the complainants before the High Court that the change among
Directors of the Company, on resignation of the appellant with H
688 SUPREME COURT REPORTS [2011] 2 S.C.R.
A effect from March 2, 2004, has not taken place. The argumen
on behalf of the complainants before the High Court was that it
was not permissible for the High Court to look into the papers
and documents relating to the appellant's resignation since
these are the matters of defence of the accused person and
B defence is a matter for consideration at the trial on the basi.s
of evidence which cannot be decided by the High Court. The
complainants in this regard relied upon a decision of Single
Judge of that Court in the case of Fateh Chand Bhansali1 .
The counsel for the present appellant (revision petitioner
c therein) on the other hand referred to a later decision of a Single
Judge of the Calcutta High Court in the case of Saroj Kumar
Jhunjhunwa/a v. State of West Bengal and Anr. wherein it was
held that if before the issuance of cheques, the accused had
resigned from the directorship, then he cannot be held liable
for the offence. Confronted with two Single Bench decisions of
0
that Court in Fateh Chand Bhansali1 and Saroj Kumar
Jhunjhunwala6, the Single Judge held that the judicial discipline
demanded that he should go by the earlier decision, namely,
Fateh Chand Bhansali1 and, accordingly, refused to take into
consideration the documents relating to the appellant's
E resignation as Director from the Company with effect from
March 2, 2004. While relying upon Fateh Chand Bhansali1,
the Single Judge referred to a decision of this Court in State
of Madhya Pradesh v. Awadh Kishore Gupta and Others which
was referred in Fateh Chand Bhansali1 .
F
20. In Awadh Kishore Gupta7 , this Court while dealing with
the scope of power under Section 482 of the Code observed:
"13. It is to be noted that the investigation was not complete
and at that stage it was impermissible for the High Court
G
to look into materials, the acceptability of which is
essentially a matter for trial. While exercising jurisdiction
6. (2007) 1 C Cr. LR (Cal) 793.
H 7. (2004) 1 sec 691.
HARSHENDRA KUMAR D. v. REBATILATA KOLEY
'
689
.
ETC. [R.M. LODHA, J.]
.under Section 482 of the Code, it is not permissible for A
the Court to act as if it was a trial Judge ......... ."
21. In our judgment, the above observations cannot be read
to mean that in a criminal case where trial is yet to take place
and the matter is atthe stage of issuance of summons or taking 8
cognizance, materials relied upon by the accused which are in
the nature of public documents or the materials which are
beyond suspicion or doubt, in no circumstance, can be looked
into by the High Court in exercise of its jurisdiction under
Section 482 or for that matter in exercise of revisional
jurisdiction under Section 397 of the Code. It is fairly settled C
now that while exercising inherent jurisdiction under Section 482
or revisional jurisdiction under Section 397 of the Code in a
case where complaint is sought to be quashed, it is not proper
for the High Court to consider the defence of the accused or
embark upon an enquiry in respect of merits of the accusations. D
However, in an appropriate case, if on the face of the
documents -which are beyond suspicion or doubt - placed .
by accused, the accusations against him cannot stand, it would
be travesty of justice if accused is relegated to trial and he is
asked to prove his defence before the trial court. In such a E
matter, for promotion of justice or to prevent injustice or abuse
of process, the High Court may look into the materials which
ha.ve significant bearing on the matter at prima facie stage.
f
· 22. riminal prosecution is a serious matter; it affects the F
liberty of a person. No greater damage can be done to the
reputation of a person than dragging him in a criminal case. In
our opinion, the High Court fell into grave error in not taking into
consideration the uncontroverted documents relating to
appellant's resignation from the post of Director of the G
Company. Had these documents been considered by the High
Court, it would have been apparent that the appellant has
resigned much before the cheques were issued by the
Company. As noticed above, the appellant resigned from the
post of Director on March 2, 2004. The dishonoured cheques H
690 SUPREME COURT REPORTS [2011) 2 S.C.R.
A were issued by the Company on April 30, 2004, i.e., much afte
the appellant had resigned from the post of Director of the
Company. The acceptance of appellant's resignation is duly
reflected in the resolution dated March 2, 2004. Then in the
prescribed form (Form No. 32), the Company informed to the
B Registrar of Companies on March 4, 2004 about appellant's
resignation. It is not even the case of the complainants that the
dishonoured cheques w~re issued by the appellant. These facts
leave no manner of doubt that on the date the offence was
committed by the Company, the appellant was not the Director;
c he had nothing to do with the affairs of the Company. In this
view of the matter, if the criminal complaints are allowed to
proceed against the appellant, it would result in gross injustice
to the appellant and tantamount to an abuse of process of the
rou~ ·
D 23. These appeals are, accordingly, allowed. The judgment
of the Calcutta High Court dated September 6, 2007 and the
summons issued by the Metropolitan Magistrate, Calcutta to the
appellant are set aside. The romplaints as against the appellant
stand quashed.
R.P. Appeals allowed.
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