MANU/TN/0088/2001

IN THE HIGH COURT OF MADRAS

Crl.O.P. No. 19846 and 19852 of 1999
Decided On: 15.12.2000
Appellants: Ashok Muthanna
Vs.
Respondent: Wipro Finance Ltd.
Hon'ble Judges/Coram:
M. Karpaga Vinayagam, J.
Counsels:
For Appellant/Petitioner/Plaintiff: Mr. K. Ravi Anantha Padmanabhan, Adv.
For Respondents/Defendant: Mr. S. Venkatesan, Adv.
Case Note:

Criminal - non-payment - Section 3 of Indian Evidence Act, 1872, Sections

138 and 141 of Negotiable Instruments Act, 1881, Section 482 of Code of
Civil Procedure, 1908 and Section 17 (1) of Food Adulteration Act, 1954 -
respondent filed complaints against appellants for offence under Sections 138
and 141 - appellants filed petition under Section 482 to quash entire
proceedings - 2nd appellant retired and was not functioning as director on
date of issuance of cheque or when cause of action arose for non-payment -
appellants instructed authorised signatory on behalf of company to issue
cheques - cheques issued by authorised signatory only at instructions of
appellants who were incharge of affairs of company - held, sufficient
allegations to maintain complaint against appellants.

ORDER
1. Wipro Finance Limited, Chennai filed two complaints against M/s. Fidelity Industries
Ltd. Chennai and its Directors and Authorised Signatory arraying them as A1 to A6 for
the offences under Section 138 and 141 of the Negotiable Instruments Act.
2 . On receipt of summons the petitioners 1 to 4, who are accused 2 to 5, have filed
these two petitions under Section 482, Cr.P.C. praying to quash the entire proceedings
in those two complaints, on the following grounds:-
(i) Mr. V.G. Subbaraman, the second petitioner (A3), retired on 28.3.1998
itself, as evidenced by Form No. 32 issued by the Registrar of Companies.
Hence, he is not responsible for the issuance of the cheque on 23.1.1999 and
the non-payment of the cheque amount after its dishonour and as such, the
proceedings under Section 138 of the Act are not valid in law in so far as he is
concerned.
(ii) Though in the complaint, there is allegation against the petitioners that they

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 are incharge of and responsible for the conduct of the business of the company
(A1), no overt act or specific allegation has been attributed to these petitioners.
The cheque has been signed and issued only by the 6th accused, who is the
authorised signatory. Therefore, other accused, namely, these petitioners,
cannot be held responsible for the offence under Section 138 of the Act.
3. On these two grounds, I heard the arguments of the learned counsel on either side.
4. In regard to the first point in relation to the second petitioner V.G. Subbaraman (A3),
I find merit in the contention of the learned counsel for the petitioners, inasmuch- as
Form No. 32 issued by the Registrar of Companies, which has been produced before this
Court and the same has not been disputed by the counsel for the
respondent/complainant, would reveal that the said second petitioner retired on
28.3.1998 itself and as such, he did not function as a Director either on the date when
the cheques were issued (i.e.) on 23.1.1999 or when the cause of action arose for non-
payment of the cheque amount on receipt of the statutory notice on 10.7.1999.
5 . Though the said document is not form part of the complaint and other records
accompanied with the complaint, this can be taken into consideration by this Court,
since the contents of the said document, which is a public document, is not disputed by
the learned counsel for the respondent.
6. As held by the Supreme court in Satish Mehra v. Delhi Administration and another,
MANU/SC/1580/1996 : 1996 (3) Crimes 85 the Court is within its powers to consider
even materials which the accused may produce even before the commencement of trial
for the purpose of deciding whether the accused could be discharged, when those
documents are not in dispute.
7. In the present case, as noted above, the document Form No. 32 would reveal that the
second petitioner was not the director who was in-charge of and responsible for the
affairs of the company during the relevant period and as such, the proceedings as
against the second petitioner are liable to be quashed and accordingly, quashed.
8. In view of the number of decisions cited by the learned counsel for the petitioners in
respect of the second point, we shall deal with the said point in detail.
9. While dealing with the said point, it would be appropriate to refer to the allegations
against the petitioners as contained in the complaint.
10. Para. 10 of the complaint would provide the relevant words:-
"The said cheques were issued by the 1st accused herein, as per the
instructions of the accused 2 to 6 herein who are the Managing Director.
Directors and Authorised Signatory, incharge of the day to day affairs of the
first accused company. The said cheque was signed by the 6th accused in his
capacity as the Authorised signatory of the first accused company herein."
11. According to the counsel for the petitioner, the mere words that "they are in-charge
and responsible for the day today affairs of the company" would not be sufficient to
make all the directors as accused, especially in this case, the 6th accused alone in his
capacity as Authorised Signatory has signed and issued the cheques.
1 2 . The authorities for substantiating the said ground cited by the counsel for the
petitioners are as follows:-

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 (1) Parmeet Singh Sawney MANU/DE/0563/1987 ; (2) Sham Sunder and others
v. State of Haryana MANU/SC/0494/1989 ; (3) P. Jeyanthi v. State 1990 L.W.
(Crl.) 398; (4) P. Vasantha v. K.E.Muthiah and another 1991 L.W. (Cri.) 178;
(5) A.K. Jain v. State of Sikkim MANU/SI/0002/1991 ;(6) R. Banerjee& others
v. H.D. Dubey & others, 1993 L.W. 4; (7) Sudesh Kumar Sharma & another v.
K.S. Selvamani MANU/TN/0101/1994 : 1994 (1) L.W.337; (8) J.K. Industries
Ltd. v. Chief Inspector of Factories, 1997 L.L.J. 112 (S.C) ; (9) State of
Haryana v. Brij Lal Mittal, MANU/SC/0336/1998 ; (10) Col. R.S. Agarwal and
others v. M/s. Ashok Leyland Ltd MANU/TN/1501/1997 : 1998 (1) L.W.24; (11)
Modern Denim Ltd. v. Lucas T.V.S. Ltd, MANU/TN/0195/1999 ; (12) Sagar Suri
v. State of U.P. MANU/SC/0045/2000 ; (13) K.P.G. Nair v. Jindal Menthol India
Ltd. MANU/SC/2327/2000 .
13. The guidelines given in these decisions are as follows:-
(1) The partners of the firm, who at the time of commission of offence were
responsible for the conduct of the business of the firm, could alone be
prosecuted. Mere reproduction of the expression in the relevant Section in the
complaint does not meet the requirement of law.
(ii) More often it is common that some of the partners of a firm may not even
be knowing of what is going on day to day in the firm. There may be partners,
better known as sleeping partners, who are not required to take part in the
business of the firm. It does not make all the partners liable whether they do
business or not. The requisite condition is that the partner was responsible for
carrying on the business and was during the relevant time in charge of the
business. In the absence of any such proof, no partner could be convicted.
(iii) There may be ladies and minors who were admitted for the benefit of
partnership. They may not know anything about the business of the firm. It
would be a travesty of justice to prosecute all partners and ask them to prove
under the proviso to sub-section (1) of Section 141 of the Negotiable
instruments Act that the offence was committed without their knowledge. The
obligation for the accused to prove under the proviso that the offence took
place without his knowledge or that he exercised all due diligence to prevent
such offence arises only when the prosecution establishes the requisite
condition that the partner was responsible for carrying on the business during
the relevant time. The mere fact that the petitioner was a partner of the
company would not be sufficient to mulct the said person with criminal liability.
(iv) Merely extracting the words of the Section in the complaint is not sufficient
to find the accused guilty. The expression "a person in-charge and responsible
for the conduct of the affairs of the company" must mean that the person
should be in overall control of the day to day business of the firm.
(v) In a case arisen out of the Food Adulteration , Act where a person has been
nominated under sub-section (2) of Section 17, he alone can be proceeded
against and punished for the crime in question. It is only where no such person
has been nominated that every person who at the time the offence was
committed was in charge of and was responsible to the company for the
conduct of its business can be proceeded against and punished.
(vi) In the case of a company, the ultimate control of the affairs of a factory,
where the company is the owner of the factory, always vests with the company,

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 through its Board of Directors. The Manager or any other employee of whatever
status, can be nominated by the Board of Directors to have immediate or day to
day or even supervisory control over the affairs of the factory. There is a vast
difference between a person having the ultimate control of the affairs of the
factory and the one who has immediate or day to day control over the affairs of
the factory.
(vii) The vicarious liability of a person for being prosecuted for an offence
committed under the Act by a company arises if at the material time, he was in-
charge and was also responsible to the company for the conduct of its business.
Simply because a person is a director of the company, it does not mean that he
fulfills the requirements so as to make him liable.
(viii) To bring persons within the purview of Section 138 of the Negotiable
Instruments Act, there must be some specific averment against those person to
take cognizance of the offence by the learned Magistrate with respect to the
persons. On that basis, the specific allegation that the directors or partners of
the company are incharge or and responsible to the company for the conduct of
the business of the said company is necessary to maintain the complaint
against those directors or partners.
(ix) The words of Section 141(1) of the Negotiable Instruments Act need not be
incorporated in a complaint as magic words, but the substance of the
allegations read as a whole should answer and fulfill the requirements of the
ingredients of the said provision, namely, Section 141(1), for being proceeded
against for an offence, which he is alleged to have committed. If those words
may not be exact reproduction of section 141(1) would convey the meaning
that if the persons concerned were incharge of and was responsible to the
company for the conduct of the business when the offence was committed, then
those persons other than the company also be proceeded against.
14. In the light of these guidelines, we shall look into the allegations of the complaint
in order to verify whether the requirements of Section 141(1) of the Act has been
satisfied.
15. As noted above, it is mentioned in the complaint that the accused 2 to 6 (including
the petitioners (A2 to A5) instructed the Authorised Signatory (A6) on behalf of the
company (A1) to issue the said cheques and during the relevant period, they were
incharge of the day to day affairs of the first accused company. It is also mentioned in
the complaint that the statutory notice was sent to the accused on 10.7.1999 and
despite receipt of the notice, they have not made any payment whatsoever towards the
amount covered by the said cheque. Thus, it is clear that the allegations in the
complaint would reveal that the cheques were issued by A6 being the authorised
signatory of the company only at the instructions of the petitioners, who were incharge
of the day to day affairs of the first accused company on behalf of the company.
Therefore, it cannot be said that there are no necessary averments in the complaint.
16. It is contended by the learned counsel for the petitioners that mere reproduction of
the words used in the Section is not sufficient. But, in this case, it is not only stated
that the petitioners were incharge and responsible for the day to day affairs of the
company, but also stated that only on the instructions given by the petitioners, the
cheques were issued by A6 on behalf of the company. Therefore, as per the complaint,
they had also taken a vital role in the act of issuance of the cheques.

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17. Similarly, as mentioned in the complaint, despite receipt of the statutory notice on
10.7.1999, they have not paid any amount within the stipulated period. These things
would show that the petitioners, who are in-charge of the day to day affairs of the
company are responsible for these acts also.
18. All the decisions cited by the learned counsel for the petitioners rendered by this
Court as well as the Apex Court would deal with the situation where the accused came
before the Court either after conviction or after acquittal. Under those circumstances,
the courts would hold that mere words used in the Section is not sufficient in the
absence, of any material to prove the same.
19. The decision in R. Banerjee & others v. H.D. Dubey & others, 1993 L.W. (Cri.) 4
would, however, observe that when a person on behalf of the company has been
nominated under Section 17(1) of the Food Adulteration Act, he alone can be
prosecuted and not other directors even though they were in-charge and responsible for
the affairs of the company. But, such a contingency sub-section as contained in Section
17(1) or Section 17(2) of the Prevention of Food Adulteration Act is not available in
Section 141(1) or 141(2) of the Negotiable Instruments Act. Therefore, the contention
that when the authorised signatory who issued the cheque was made as an accused, the
other directors cannot be prosecuted has to be rejected.
2 0 . In view of the above discussion, I am of the view that there are sufficient
allegations in the complaint so as to maintain the complaint as against the petitioners.
Therefore, the arguments advanced by the learned counsel for the petitioners cannot he
accepted to be a valid one. Therefore, the said submission is liable to be rejected and
accordingly, the petitions are dismissed as far as petitioners 1, 3 and 4.
21. Since, as contained in the earlier paragraphs, no proceedings will lie as against the
2nd petitioner V.G. Subbaraman (A3), the proceedings as against him alone are
quashed. So, the petitions as far as the petitioners 1, 3 and 4 are dismissed and the
petitions as far as 2nd petitioner is concerned are allowed.

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