SUNNY Vs. VENUGOPAL

JUDGEMENT

(1.) Does the mere fact that an indictee is Director of a Company attract culpability under Section 138 read with 141 of the Negotiable Instruments Act (for Short the Act) On whom does the burden lie to prove that such indictee director was (or was not) in charge of and responsible to the company for the conduct of its affairs Does Rangachari v. B.S.N.L,2007 2 KLT 1030(SC) lay down a proposition that at the stage of evidence/trial, it must be presumed that every director is in charge of and responsible to the company for the conduct of its affairs These interesting questions are raised in this case.

(2.) This application for leave under S. 378(4) Cr.P.C. is to prefer and appeal against a judgment of acquittal in a prosecution under S. 138 of the Negotiable Instruments Act.

(3.) The petitioner herein filed a complaint alleging commission of offences under S. 138 read with 141 of the Negotiable instruments Act. Altogether there were nine accused persons. First accused is a company. Second accused is the Managing Director of the Company. Accused 3 to 8 are the directors of the company. Accused 9 is the Manager of the Company. Accused 2 and 9 have allegedly singed the cheque in question on behalf of the first accused. Accused No.8 had expired and the allegations against him had abated. Accused 3 to 7 alone were available for trial. The only allegation against them is that they were the directors of the company and that they were in charge of and responsible to the company for the conduct of its affairs. Accused 3 to 7 denied the offences alleged against them. Accused 1,2 and 9 were not available for trial. The complainant examined PW1 and proved Exts.Pl to Pll.'The accused examined DWs 1 to 7 and proved Exts. Dl to Dll. The learned Magistrate, on an anxious consideration of all the relevant inputs, entered the verdict of not guilty in favour of accused 3 to 7 and acquitted them. The relevant discussion appears in para 8 under point No. 3. The question whether accused 3 to 7 were in charge of and responsible to the first accused for the conduct of business was considered. I extract below para 8 in which the crucial findings appear. The discussion is of course continued in paras 9 and 10 also and it is finally answered that Accused 3 to 7 were not in charge of and responsible to the company for the conduct of its affairs at the relevant time. Para 8 reads as follows :"8. Point No.3: The only averment in the affidavit is that A3 to A8 were directors, and A2 was the Managing Director and A9 was the Manager of the 1st accused during alleged period. According to PW1, A2 and A9 are the signatories to Ext.Pl. To fix vicarious liability on A3 to A7 there should be clear evidence either oral or documentary, that A3 to A7 were incharge of and responsible for the conduct of the business of the company at the relevant time. Mere averment in the complaint is not enough to satisfy this requirement of S. 141. There should be evidence also to that effect. Neither any oral evidence nor any documentary evidence was adduced by PW1. Merely being a Director of a company one be held liable under S.141."