IN THE DELHI HIGH COURT 

Gulshan Chawla for the petitioner. 

M. S. Butalia for the State. 

Ghanshyam Sharma for respondents Nos. 2 to 13(b). 

JUDGMENT 

M. S. A. SIDDIQUI J. - Briefly stated, the facts giving rise to the petition filed under section 482 of the Criminal Procedure Code, 1973, are that the petitioner-company filed a complaint under section 138/section 141 of the Negotiable Instruments Act, 1881 (for short "the Act"), against the respondents on the allegations that two cheques dated September 30, 1995, were issued by Montari Industries Ltd. (hereinafter to be referred to as "the company") in favour of the petitioner-company. When the cheques were presented for payment they were dishonoured on the ground that sufficient funds were not available. A notice was then sent by the petitioner calling upon the company to pay the amount but it failed to make the payment. This was followed by a complaint under section 138/section 141 of the Act. On the complaint being filed, process was issued against Ms. Ruchi Puri and Mr. Pradeep Narula along with the company. The learned magistrate did not take cognizance of the offence against the respondents. Feeling aggrieved by the said order dated February 18, 1997, the petitioner has come up before this court under section 482 of the Criminal Procedure Code. 

Learned counsel for the petitioner contended that the respondent Bhai Manjit Singh is the managing director of the company, respondents Bhai Mohan Singh is the Chairman, Bhai Mohan Singh Nagar, Gurpreet Singh, Vineet Virmani, Rajeev Sawhney, Prem Pandhi, Mantosh Sondhi, Ranjeetmal Bhandari, S. S. Grewal and Sirichand are directors of the company and A. S. Khosla is group executive vice president finance of the company and as such they are liable to be tried for violating the provisions of section 138 read with section 141 of the Act. According to learned counsel for the petitioner, the learned magistrate has committed an illegality in not taking cognizance of the offence against the said persons. 

Learned counsel for the respondents submitted that there is nothing on record to show that at the relevant time, the respondents were in charge of and were also responsible to the company for the conduct of its business or that the offence complained of was committed with their consent or connivance and thus the learned magistrate was perfectly justified in not taking cognizance of the offence against the said persons. Reliance is placed on the decisions of the Supreme Court in Municipal Corporation of Delhi v. Ram Kishan Rohtagi, AIR 1983 SC 67; State of Haryana v. Brij Lal Mittal [1998] 93 Comp Cas 329; [1998] 3 JT SC 584 and a decision of this court in Mahendra Pratap Singh Ratra v. N. K. Metals [1998] 2 JCC Delhi 270; [1999] 97 Comp Cas 152 (Delhi) in support of the said contention. 

At this stage, it would be appropriate to notice section 141 of the Act, which is as under : 

"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 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 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. 

(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 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 be proceeded against and punished accordingly." 

The law on the question as to under what circumstances every person who at the time the offence was committed by the company could be held liable for the offence is no longer res integra. In Municipal Corporation of Delhi v. Ram Kishan Rohtagi, AIR 1983 SC 67, while dealing with the provision of section 17(1) of the Prevention of Food Adulteration Act, which is in pari materia with the provision of section 141 of the Act, it was observed that (page 70) : 

"So far as the manager is concerned, we are satisfied that from the very nature of his duties it can be safely inferred that he would undoubtedly be vicariously liable for the offence; vicarious liability being an incident of an offence under the Act. So far as the directors are concerned, there is not even a whisper nor a shred of evidence nor anything to show, apart from the presumption drawn by the complainant, that there is any act committed by the directors from which a reasonable inference can be drawn that they could also be vicariously liable. In these circumstances, therefore, we find ourselves in complete agreement with the argument of the High Court that no case against the directors (accused Nos. 4 to 7) has been made out ex facie on the allegations made in the complaint and the proceedings against them were rightly quashed." 

In the case of State of Haryana v. Brij Lal Mittal [1998] 93 Comp Cas 329 (SC) while dealing with section 34 (1) of the Drugs and Cosmetics Act, which is also in pari materia with the provision of section 141 of the Act, it was observed that (page 333) : 

"It is thus seen that 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 of 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 necessarily mean that he fulfils both the above requirements so as to make him liable. Conversely, without being a director a person can be in charge of and responsible to the company for the conduct of its business. From the complaint in question we, however, find that except a bald statement that the respondents were directors of the manufacturers, there is no other allegation to indicate, even prima facie, that they were in charge of the company and also responsible to the company for the conduct of its business." 

In the case of Mahendra Pratap Singh Ratra v. N. K. Metals [1999] 97 Comp Cas 152 (Delhi) a learned single judge of this court while dealing with the applicability of section 141 of the Act, observed that (page 155) : 

"Sub-section (1) of section 141 of the Act provides that when an offence under section 138 is alleged to have been committed by a company, every person, who, at the time of the commission of the offence, was in charge of and was responsible to the company for the conduct of its business, can be made vicariously liable for the offence committed by the company. Sub-section (2) further provides that persons other than covered by sub-section (1), who are mere directors, or managers, etc., can be hauled up only if the offence by the company has been committed with the consent or connivance of the person falling in that category or is attributable to him, for which there should be averment in the complaint or prima facie proof for it. The section being penal had to be construed strictly. The initial onus to prove that a person was in charge of and was responsible to the company for the conduct of its business at the relevant time is obviously on the complainant. Even after the complainant discharges the initial onus, as per proviso to the said section, the person accused can still prove that the offence committed by the company was without his knowledge or that he had exercised due diligence to prevent the commission of such offence. There is no gainsaying that the stage to prove that a person, falling in sub-section (1), was in charge of and responsible for the conduct of the business of the company or that the offence was committed by the person, falling in sub-section (2), with his consent or connivance or is attributable to him, would arise only when the basic facts in that behalf are first pleaded in the complaint. In the absence of these basic facts it will neither be possible nor permissible to the complainant to bring home the charge of vicarious liability under section 141 of the Act." 

It is significant to mention that the statement of the complainant's witness R. M. Pandey does not reveal that except Bhai Manjit Singh the aforesaid persons were at any point of time directly or indirectly responsible for the conduct of day-to-day business of the company. The main clause of the complaint which is the subject-matter of the dispute is clause No. 2, which may be extracted thus : 

Accused No. 1 is a limited company incorporated under the provisions of the Companies Act, 1956. Accused No. 2 is the managing director of accused No. 1 - company and accused No. 3 is the chairman of accused No. 1 - company. Accused Nos. 4 to 12 are the directors of accused No.1 - company. Accused No. 13 is an officer of accused No. 1 - company. Accused Nos. 14 and 15 are officers and authorised signatories of accused No. 1 who have signed the cheques which are subject-matter of this complaint. Accused Nos. 2 to 15 are in charge and responsible for the conduct of the business of accused No. 1 company." 

Thus according to averments made in para. No. 2 of the complaint, Bhai Manjit Singh was the managing director of the company, A. S. Khosla was the group executive vice-president finance and the remaining respondents were directors of the company. So far as the managing director (Bhai Manjit Singh) is concerned, I am satisfied that from the very nature of his duties, it can safely be inferred that he would be vicariously liable for the offence under section 138/section 141 of the Act alleged to have been committed by the company. That being so, the learned magistrate has committed an illegality in not taking cognizance of the offence under section 138/section 141 of the Act against Bhai Manjit Singh. So far as the remaining respondents are concerned, there is nothing on record to show that there is any act committed by them from which an inference can be drawn that they could also be vicariously liable for the offence alleged to have been committed by the company. If, however, the prosecution can at any stage produce evidence which satisfies the trial court that the remaining respondents or any of them had also committed the offence complained of, the court can take cognizance against them by invoking provisions of section 319 of the Criminal Procedure Code and try them along with the other accused persons. 

For the foregoing reasons, the petition is partly allowed and the learned magistrate is directed to take cognizance of the offence punishable under section 138/section 141 of the Act against the managing director (Bhai Manjit Singh) of the company and try him along with the other accused persons. The impugned order is set aside to the extent indicated above. Parties are directed to appear before the court on November 18, 1999.