M ARUMUGAM Vs. UPASANA FINANCE LIMITED

JUDGEMENT

(1.) ALL these criminal original petitions have arisen in this way. The respondent herein, a finance company, has preferred private complaints under section 200 of the Criminal Procedure Code, 1973, against M/s. Sivanandha Steels Ltd., its executive director, R. P. Krishnamurthi, managing director Venkatesan, directors Pitty Thiagarayam Chetty, M. Arumugam, A. R. Varadharajelu and Munuswamy alleging that they had committed an offence punishable under section 138 of the Negotiable Instruments Act, 1881. According to the respondent herein, the complainant, on behalf of the first respondent-company, the managing director, executive director and the rest of the other directors entered into hire-purchase agreements with the complainant and availed of finance facilities. In part payment of the liability the second accused in his capacity as the executive director issued 12 cheques for and on behalf of the first accused company during the period between January 25, 1998, and July 4, 1998. The cheques were returned by the bank with an endorsement that the cheque amount exceeds arrangement. The dishonour of the cheques was intimated to the complainant by the banker's memo dated July 13, 1998, July 14, 1998, July 15, 1998 and July 16, 1998. The respondent herein, complainant, sent a statutory notice to the accused on July 17, 1998, calling upon them to pay the amount. The accused received the notice on July 29, 1998, but they had not made any payment. According to the respondent herein, complainant, by virtue of the restriction imposed under section 219 of the Criminal Procedure Code, 1973, he is restricting each of his complaints for three cheques only. Accordingly, C.C. No. 2725 of 1999, has been filed with respect to cheques issued by the accused on March 4, 1998, February 25, 1998 and January 25, 1998; C.C. No. 2730 of 1999 has been filed with respect to cheques dated February 4, 1998, March 25, 1998 and April 4, 1998; C.C. No. 6894 of 1998 has been filed with respect to cheques dated June 4, 1998, July 4, 1998 and May 25, 1998; C.C. No. 2727 of 1998 has been filed with respect to cheques dated June 25, 1998, April 25, 1998 and May 4, 1998. Now, a few of the directors, namely, accused Nos. 5 to 11 have come forward with the instant criminal original petitions to quash the respective proceeding on the ground that there are no averments in the complaints that the petitioners are responsible for the day-to-day affairs of the company. According to them, they have not signed the cheques and that they are not vicariously liable unless and until the complaints show the specific overt act committed by them.Notice of motion was ordered. The respondent entered appearance.

(2.) HEARD both the sides. It is not in dispute that the petitioners herein are the directors of the first accused-company. In the light of the decisions rendered by the Supreme Court in Sheoratan Agarwal v. State of Madhya Pradesh and Anil Hada v. Indian Acrylic Ltd. 2000 1 LW (Crl.) 423, it is settled that by virtue of the fiction envisaged in section 141 of the Negotiable Instruments Act, not only the company, but every one who was in charge of and responsible for the business of the company and any other person who is a director or manager or secretary or officer of the company with whose connivance or due to whose negligence, the company committed the offence, are jointly or severally liable. But the sine qua non is, such averment ought to have been made in the complaint, that is, that the other persons who have not signed the cheques were in charge of and responsible for the business of the company or, if they happened to be directors, the offence was committed by the company with their connivance or due to their negligence. In the case of a company, the day-to-day finance affairs are not carried out by all the directors in view of the board delegating the powers to one or two directors or other officers of the company, like, the manager, secretary, etc. But where there is an averment in the complaint that the directors were in charge of and responsible for day-to-day affairs of the company, in the face of such averment in the complaint, a prima facie case for summoning the accused-directors can be made out. If such averment is made in the complaint, then the liability of the other directors of the company other than the director who had signed the cheques could be determined by the trial court. If no averment is made in the complaint that the directors were in charge of and responsible for the day-to-day affairs of the company, then it cannot be said that they could be made liable under section 138 of the Negotiable Instruments Act.Learned counsel for the petitioners cited a decision in Natasha Singh v. Klen and Marshalls Manufactures and Exports Pvt. Ltd. in which it has been held that there must be averments in the complaint making the accusation constituting the alleged offence to enable the magistrate to take cognizance of such offences and to issue process to such of the persons against whom the allegations have been made in the complaint.