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REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NOS.271-273 OF 2016 (Arising out of S.L.P.(Crl.) Nos.484-486 of 2016)

Standard Chartered Bank …Appellant

                Versus

State of Maharashtra and Others Etc. …Respondents

J U D G M E N T

Dipak Misra, J.

Leave granted.

2. The  present  appeals,  by  special  leave,  are  directed  

against the order dated 13th October, 2015, passed by the High  

Court of Judicature at Bombay in Criminal Writ Petition Nos.  

1482-1484 of 2015 whereby the learned single Judge by the  

common impugned order has quashed the orders of issuance

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of  summons  against  the  respondent  Nos.  2  and  3  herein  

(original accused Nos. 5 and 4) by the Metropolitan Magistrate,  

23rd Court at Esplanade, Mumbai, under Section 138 of the  

Negotiable Instruments Act, 1881 (for short, ‘the Act’).  Be it  

noted that the High Court has declined to quash the order of  

the Magistrate issuing summons against the respondent No. 4  

(original  accused  No.  2),  but  the  said  accused  has  not  

approached this Court.

3. The facts, briefly stated, are that M/s ABG Shipyard Ltd.  

is a company registered under the Companies Act, 1956. On  

being approached by the authorities of the company, a short  

term loan facility for a sum of Rs. 200 crores was granted by  

the appellant-bank to the company on 28.04.2012.  As averred  

in  the  complaint,  the  company  executed  an  indemnity  in  

favour of the appellant-bank and agreed to repay the amount  

in  three  instalments;  one  on  15.12.2012,  the  second  on  

15.01.2013 and the last on 15.02.2013.  The company issued  

three cheques, one dated 15.12.2012 for Rs.66,67,00,000/-,  

and  the  two  others  dated  15.01.2013  and  15.02.2013  for

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Rs.66,67,00,000/-  and  Rs.66,66,00,000/-  respectively  

towards  the  repayment  of  the  liability.   As  per  the  dates  

mentioned  in  the  cheques,  they  were  presented  before  the  

bank but due to “insufficient funds” and “account blocked” the  

cheques  were  dishonoured.   The  appellant-bank  issued  

requisite statutory notice for each cheque. As no response was  

given by the respondents, the appellant filed three complaints,  

being C.C. No. 451/SS of 2013, C.C. No. 843/SS of 2013 and  

C.C. No. 1145/SS of 2013 under Section 138 of the Act before  

the Metropolitan Magistrate, 23rd Court at Esplanade, Mumbai  

who  took  cognizance  and  issued  summons  against  all  the  

accused persons.

4. The respondent nos. 2 to 4 herein, being grieved by the  

orders  issuing  summons,  preferred  three  revision  petitions,  

that is, Revision Application Nos. 1123 to 1125 of 2014 before  

the City Civil & Sessions Court, Mumbai, and the revisional  

court after due deliberation did not perceive any merit in the  

said challenge and dismissed the revision petitions.

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5. The  dismissal  order  constrained  the  respondents  to  

prefer criminal  writ petitions, bearing Criminal  Writ Petition  

Nos.  1482  to  1484  of  2015,  before  the  High  Court  of  

Judicature at  Bombay and the learned single Judge by the  

order  impugned  allowed  the  writ  petitions  preferred  by  

accused  nos.  4  and  5  holding  that  the  complainant  had  

averred the said respondent to be responsible without making  

any specific assertion in the complaint about their role.  As  

mentioned earlier, the High Court dismissed the writ petition  

preferred by the respondent no.4.

6. On a perusal of the impugned order, it transpires that  

the learned Single Judge of the High Court has quashed the  

summons  singularly  on  the  ground  that  there  are  no  

allegations against the successful writ petitioners connecting  

them with the affairs of the Company.

7. Criticizing the aforesaid order passed by the High Court,  

it is submitted by Mr. Divan, learned senior counsel appearing  

for  the  appellant-bank  that  the  High  Court  has  failed  to  

properly scrutinize the assertions made in the complaint, for

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the complaint has clearly stated about the role of the accused  

persons in the complaint.  Learned counsel would submit that  

it is a case where the respondents had availed loan of Rs.200  

crores  and  the  cheques  that  had  been  issued  were  

dishonoured on due presentation, the High Court should not  

have  exercised  the  inherent  jurisdiction  under  Section  482  

CrPC  to  set  aside  the  order  issuing  summons  against  the  

Executive Director and the whole-time Director who are really  

the persons responsible and in charge of day to day affairs of  

the company.   

8. Resisting  the  aforesaid  submissions  put  forth  by  Mr.  

Divan, Ms. Indu Malhotra, learned senior counsel appearing  

for the respondents would contend that the learned Magistrate  

had  taken  cognizance  in  a  mechanical  manner  without  

perusing the averments made in the complaint petition and,  

therefore,  the  exercise  of  jurisdiction  by  the  High  Court  in  

setting aside the order issuing summons cannot be faulted.  

She  has  commended  us  to  the  decisions  in  S.M.S.  

Pharmaceuticals  Ltd.  v.  Neeta  Bhalla  and  another1  

1

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(hereinafter  referred  to  as  ‘SMS  Pharma  I’),  Gunmala  

Sales Pvt.  Ltd. v. Anu Mehta and Ors.2,  National Small  

Industries Corpn. Ltd. v. Harmeet Singh Paintal & Anr.3,  

Tamil Nadu News Print & Papers Ltd. v. D. Karunakar &  

Ors.4, A.K. Singhania v. Gujarat State Fertilizer Company  

Ltd. & Anr.5.

9. To appreciate the controversy in proper perspective, it is  

appropriate  to  refer  to  Sections  138  and  141  of  the  Act.  

Section 138 reads as follows:-:-   

“138.  Dishonour of cheque for insufficiency,  etc.,  of  funds  in  the  account.—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, 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  

 (2005) 8 SCC 89 2

 (2015) 1 SCC 103 3

 (2010) 3 SCC 330 4

 (2015) 8 SCALE 733 5

 (2013) 16 SCC 630

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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,  without  prejudice to any other provision of  this Act,  be  punished  with  imprisonment  for  a  term  which  may be extended to two years, or with fine which  may extend to twice the amount of the cheque, or  with both:

Provided that  nothing contained in this  section  shall 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) 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 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 fifteen days of the  receipt of the said notice.

Explanation.—For  the  purposes  of  this  section,  ‘debt  or  other  liability’  means  a  legally  enforceable debt or other liability.”

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10. On a  studied  scrutiny  of  the  aforesaid  provision,  it  is  

quite  limpid  that  to  constitute  the  criminal  liability  the  

complainant is  required to show that  a cheque was issued;  

that it  was presented in the bank in question;  that on due  

presentation,  it  was dishonoured;  that,  as  enshrined in the  

provision, requisite notice was served on the person who was  

sought to be made liable for criminal liability; and that in spite  

of service of notice, the person who has been arraigned as an  

accused did not comply with the notice by making payment or  

fulfilling other obligations within the prescribed period, that is,  

15 days from the date of receipt of notice.

11. Section 141 of the Act deals with offences by companies.  

It reads as follows:-

“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

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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:

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  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  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.

Explanation.—For the purposes of this section— (a)  ‘company’  means  any  body  corporate  and  includes  a  firm  or  other  association  of  individuals; and

(b) ‘director’, in relation to a firm, means a  partner in the firm.”

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12. On a  perusal  of  the  aforesaid  provision,  it  is  clear  as  

crystal  that  if  the  person  who  commits  an  offence  under  

Section 138 of the Act is a company, the company as well as  

other person in charge of or responsible to the company for  

the conduct  of  the business of  the company at  the time of  

commission of the offence is deemed to be guilty of the offence.  

Thus,  it  creates  a  constructive  liability  on  the  persons  

responsible for the conduct of the business of the company.

13. At  one  point  of  time,  an  issue  had  arisen  before  this  

Court, whether a complaint could be held to be maintainable  

without making the company a party.  The said controversy  

has  been  put  to  rest  by  a  three-Judge  Bench  decision  in  

Aneeta  Hada  v.  Godfather  Travels  and  Tours  Private  

Limited6 wherein it has been held that when the company can  

be prosecuted, then only the persons mentioned in the other  

categories could be vicariously liable for the offence subject to  

the averments in the petition and proof thereof.  It has been  

further held therein that there cannot be any vicarious liability  

6

(2012) 5 SCC 661

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unless there is  a prosecution against  the company.  In the  

case at hand, the company has been arrayed as the accused  

No. 1 along with the Chairman and other Directors.  

14. Now, we must go back in time to appreciate what has  

been  stated  in  S.M.S.  Pharma  I (supra),  wherein  a  

three-Judge Bench answered a reference on three issues.  The  

answers  on  two  issues  which  are  relevant  for  the  present  

purpose are as follows:-

“(a)  ………

(b)  Whether  a  director  of  a  company  would  be  deemed to 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,  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  against.”

15. The three-Judge Bench referred to Section 138 and 141  

of the Act, Sections 203 and 204 of CrPC and observed that a

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complaint must contain material to enable the Magistrate to  

make up his mind for issuing process and if this were not the  

requirement,  consequences  would  be  far-reaching.  If  a  

Magistrate has to issue process in every case, the burden of  

work before the Magistrate as well as the harassment caused  

to the respondents to whom process has to be issued would be  

tremendous.  It has been observed therein that Section 204 of  

the CrPC commences with the words “if in the opinion of the  

Magistrate taking cognizance of an offence there is sufficient  

ground for proceeding” and that apart, the words “sufficient  

ground for proceeding” again suggest that ground should be  

made  out  in  the  complaint  for  proceeding  against  the  

respondent.   The  three-Judge  Bench  has  ruled  that  it  is  

settled  law  that  at  the  time  of  issuing  of  the  process,  the  

Magistrate  is  required  to  see  only  the  allegations  in  the  

complaint and where the allegations in the complaint or the  

chargesheet do not constitute an offence against a person, the  

complaint is liable to be dismissed.

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16. After so stating, the Court adverted to the complaint filed  

under Section 138 of the Act and opined that the complaint  

should make out a case for issue of process.  As far as the  

officers responsible for conducting the affairs of the company  

are concerned, the Court referred to various provisions of the  

Companies Act, 1956 and analysed Section 141 of the Act to  

lay down as follows:-

“What  is  required  is  that  the  persons  who are  sought to be made criminally liable under Section  141  should  be,  at  the  time  the  offence  was  committed,  in charge of  and responsible  to the  company for the conduct of the business of the  company.  Every  person  connected  with  the  company shall  not  fall  within  the  ambit  of  the  provision.  It  is  only those persons who were in  charge  of  and  responsible  for  the  conduct  of  business  of  the  company  at  the  time  of  commission of an offence, who will be liable for  criminal  action.  It  follows  from  this  that  if  a  director of a company who was not in charge of  and was not responsible for the conduct of  the  business of the company at the relevant time, will  not  be  liable  under  the  provision.  The  liability  arises from being in charge of and responsible for  the conduct of  business of  the company at the  relevant  time  when  the  offence  was  committed  and  not  on  the  basis  of  merely  holding  a  designation or office in a company. Conversely, a  person not holding any office or designation in a  company may be liable if  he satisfies the main  requirement of being in charge of and responsible

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for the conduct of business of a company at the  relevant time. Liability depends on the role one  plays  in  the  affairs  of  a  company  and  not  on  designation  or  status.  If  being  a  director  or  manager  or  secretary  was  enough  to  cast  criminal liability, the section would have said so.  Instead of “every person” the section would have  said  “every  director,  manager  or  secretary  in  a  company is liable”…, etc. The legislature is aware  that it is a case of criminal liability which means  serious consequences so far as the person sought  to be made liable is  concerned.  Therefore,  only  persons who can be said to be connected with the  commission of a crime at the relevant time have  been subjected to action”.

17. After  so  stating,  the  Court  placed  reliance  on  

sub-Section 2 of Section 141 of the Act for getting support of  

the  aforesaid  reasoning  as  the  said  sub-Section  envisages  

direct  involvement  of  any  Director,  Manager,  Secretary  or  

other officer of  a company in the commission of an offence.  

The  Court  proceeded  to  observe  that  the  said  provision  

operates when in a trial it is proved that the offence has been  

committed with the consent or connivance or is attributable to  

neglect on the part of  any of the holders of the offices in a  

company.  It has also been observed that provision has been  

made for directors, managers, secretaries and other officers of

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a company to cover them in cases of their proved involvement.  

It is because a person who is in charge of and responsible for  

conduct of business of a company would naturally know why a  

cheque in question was issued and why it  got  dishonoured  

and simultaneously it means no other person connected with  

a company is made liable under Section 141 of the Act.  The  

liability arises, as the three-Judge Bench opined, on account  

of conduct, act or omission on the part of an officer and not  

merely on account of holding office or position in a company  

and, therefore, in order to bring a case within Section 141 of  

the Act, the complaint must disclose the necessary facts which  

makes a person liable.  In the said case, the Court has referred  

to  the  decisions  in  Secunderabad  Health  Care  Ltd.  v.   

Secunderabad Hospitals  (P)  Ltd.7,   V.  Sudheer Reddy v.  

State of A.P.8, R. Kanan v. Kotak Mahindra Finance Ltd.9,  

Lok Housing ad Constructions Ltd. v. Raghupati Leasing  

7

 (1999) 96 Comp Cas 106 (AP) 8

 (2000) 107 Comp Cas 107 (AP) 9

 (2003) 115 Comp Cas 321 (Mad)

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and  Finance  Ltd.10,  Sunil  Kumar  Chhaparia  v.  Dakka  

Eshwaraiah11, State of Haryana v. Brij Lal Mittal12, K.P.G.  

Nair  v.  Jindal  Menthol  India  Ltd.13,  Katta  Sujatha  v.  

Fertilizers & Chemicals Travancore Ltd.14 and eventually  

expressed thus:-

“A liability under Section 141 of the Act is sought  to be fastened vicariously on a person connected  with a company, the principal accused being the  company itself. It is a departure from the rule in  criminal  law  against  vicarious  liability.  A  clear  case  should  be  spelled  out  in  the  complaint  against  the  person  sought  to  be  made  liable.  Section 141 of the Act contains the requirements  for  making  a  person  liable  under  the  said  provision.  That  the  respondent  falls  within  the  parameters of Section 141 has to be spelled out.  A  complaint  has  to  be  examined  by  the  Magistrate  in the first  instance on the basis of  averments contained therein. If the Magistrate is  satisfied  that  there  are  averments  which  bring  the case within Section 141, he would issue the  

10

  (2003) 115 Comp Cas 957 (Del) 11

 (2002) 108 Comp Cas 687 (AP) 12

 (1998) 5 SCC 343 13

 (2001) 10 SCC 218 14

 (2002) 7 SCC 655

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process.  We  have  seen  that  merely  being  described  as  a  director  in  a  company  is  not  sufficient  to  satisfy  the  requirement  of  Section  141.  Even  a  non-director  can  be  liable  under  Section  141  of  the  Act.  The  averments  in  the  complaint would also serve the purpose that the  person  sought  to  be  made  liable  would  know  what  is  the  case  which is  alleged against  him.  This will enable him to meet the case at the trial”.

18. On the basis of the aforesaid analysis, the Court in this  

regard concluded that:-

“It is necessary to specifically aver in a complaint  under 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 made in a complaint, the requirements of  Section 141 cannot be said to be satisfied”.

19. After the three-Judge Bench answered the reference, the  

matter was placed before a two-Judge Bench.  The two-Judge  

Bench,  hearing  S.M.S.  Pharmaceuticals  Ltd. v.  Neeta  

Bhalla  and  another15 (hereinafter  referred  to  as  ‘SMS  

Pharma  II’),  reproduced  a  passage  from  Sabitha  

15

(2007) 4 SCC 70

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Ramamurthy v. R.B.S. Channabasavaradhya16 which reads  

as follows:-  

“7.  A  bare  perusal  of  the  complaint  petitions  demonstrates  that  the  statutory  requirements  contained  in  Section  141  of  the  Negotiable  Instruments Act had not been complied with. It  may  be  true  that  it  is  not  necessary  for  the  complainant  to  specifically  reproduce  the  wordings of the section but what is required is a  clear statement of fact so as to enable the court  to  arrive  at  a  prima  facie  opinion  that  the  accused are vicariously liable. Section 141 raises  a legal fiction. By reason of the said provision, a  person  although  is  not  personally  liable  for  commission  of  such  an  offence  would  be  vicariously liable therefor. Such vicarious liability  can be inferred so far as a company registered or  incorporated under the Companies Act, 1956 is  concerned only if the requisite statements, which  are  required  to  be  averred  in  the  complaint  petition,  are  made  so  as  to  make  the  accused  therein  vicariously  liable  for  the  offence  committed by the company. Before a person can  be made vicariously liable, strict compliance with  the statutory requirements would be insisted.”

 20. Thereafter the Court referred to the authority in  Saroj  

Kumar Poddar v. State (NCT of Delhi) and another17 and  

noted the observations which we think it apt to reproduce:-

16

(2006) 10 SCC 581 17

(2007) 3 SCC 693

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 “14. Apart from the Company and the appellant,  as  noticed  hereinbefore,  the  Managing  Director  and all other Directors were also made accused.  The appellant did not issue any cheque. He, as  noticed  hereinbefore,  had  resigned  from  the  directorship of the Company. It may be true that  as to exactly on what date the said resignation  was accepted by the Company is not known, but,  even  otherwise,  there  is  no  averment  in  the  complaint  petitions  as  to  how  and  in  what  manner  the  appellant  was  responsible  for  the  conduct  of  the  business  of  the  Company  or  otherwise  responsible  to  it  in  regard  to  its  functioning. He had not issued any cheque. How  he is responsible for dishonour of the cheque has  not been stated. The allegations made in para 3,  thus,  in  our  opinion  do  not  satisfy  the  requirements of Section 141 of the Act.”

21. The said observations were clarified by stating that:-  

“26. A faint suggestion was made that this Court  in Saroj Kumar Poddar (supra) has laid down the  law  that  the  complaint  petition  not  only  must  contain averments satisfying the requirements of  Section 141 of the Act but must also show as to  how  and  in  what  manner  the  appellant  was  responsible for the conduct of the business of the  company or otherwise responsible to it in regard  to  its  functioning.  A  plain  reading  of  the  said  judgment would show that no such general law  was  laid  down  therein.  The  observations  were  made in the context of  the said case as it  was  dealing with a contention that although no direct  averment was made as against the appellant of  the  said  case  fulfilling  the  requirements  of  Section  141  of  the  Act  but  there  were  other

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averments which would show that the appellant  therein was liable therefor.”

22. The  said  clarification  was  reiterated  in  Everest  

Advertising (P)  Ltd. v.  State,  Govt.  of NCT of Delhi and   

others18.

23. In  the  said  case,  taking  note  of  the  assertions  in  the  

complaint  which  were  really  vague,  the  Court  declined  to  

interfere with the order passed by the High Court which had  

opined that the complainant did not disclose commission of  

offence against the accused persons.

24. Be  it  noted,  the  observations  made  in  Saroj  Kumar  

Poddar (supra)  and  clarification  given  in  SMS  Pharma  II  

(supra)  and Everest Advertising (P) Ltd. (supra) were taken  

note of  in  K.K. Ahuja v. V.K. Vora and Anr19.  In the said  

case, the Court explaining the position under Section 141 of  

the Act has stated thus:-

18

(2007) 5 SCC 54 19

 (2009) 10 SCC 48

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“The position under Section 141 of the Act can be  summarised thus:

(i) If the accused is the Managing Director or a Joint  Managing Director, it is not necessary to make an  averment in the complaint that he is in charge of,  and is responsible to the company, for the conduct  of the business of the 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  “Managing”  to  the  word  “Director”  makes  it  clear  that they were in charge of and are responsible to  the company, for 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  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  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 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  averment  would  be  necessary  in  the  complaint,

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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 under that 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 and duties in the company  and their role in regard to the issue and dishonour  of  the  cheque,  disclosing  consent,  connivance  or  negligence.”

25. In  Harmeet Singh Paintal (supra), a two-Judge Bench  

did not agree with the stand of the appellant, emphasized on  

the averments and found that in the complaint petition there  

were  no  specific  averments  and,  accordingly,  dismissed  the  

appeal filed by the appellant-Corporation therein.  The Court  

in paragraphs 17 and 18 of the judgment reproduced the part  

of  the  complaint.   We  have  carefully  perused  the  said  

averments in the claim petition and we are of the opinion that  

there cannot be any shadow of doubt that the assertions made  

therein did not meet the requirements of Section 141 of the  

Act.

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26. In A.K. Singhania (supra), after referring to the previous  

judgments, the Court found that it was difficult to infer that  

there was any averment that  the two accused persons who  

had come to this Court, were in charge and responsible for the  

conduct  of  the  business  of  the  Company  at  the  time  the  

offence was committed.  The allegation in the complaints in  

sum and substance was that business and financial affairs of  

the Company used to be decided, organized and administered  

by accused persons along with other Directors.

27. In  Gunmala  Sales  Pvt.  Ltd. (supra)  the  Court  was  

concerned  with  Directors  who  issued  the  cheques.   This  

authority, as we notice, has to be appositely understood.  The  

two-Judge Bench referred to SMS Pharma I and other earlier  

decisions, and came to hold that:-

“30.  When  a  petition  is  filed  for  quashing  the  process, in a given case, on an overall reading of the  complaint, the High Court may find that the basic  averment  is  sufficient,  that  it  makes  out  a  case  against the Director; that there is nothing to suggest  that  the  substratum of  the  allegation against  the  Director is destroyed rendering the basic averment  insufficient  and  that  since  offence  is  made  out  against him, his further role can be brought out in  the  trial.  In  another  case,  the  High  Court  may

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quash the complaint despite the basic averment. It  may come across some unimpeachable evidence or  acceptable circumstances which may in its opinion  lead to a conclusion that the Director could never  have  been  in  charge  of  and  responsible  for  the  conduct  of  the  business  of  the  company  at  the  relevant time and therefore making him stand the  trial would be an abuse of process of court as no  offence is made out against him.

31.  When in view of the basic averment process is  issued  the  complaint  must  proceed  against  the  Directors. But, if any Director wants the process to  be quashed by filing a petition under Section 482 of  the Code on the ground that only a bald averment is  made  in  the  complaint  and  that  he  is  really  not  concerned with the issuance of the cheque, he must  in order to persuade the High Court to quash the  process either furnish some sterling incontrovertible  material  or  acceptable  circumstances  to  substantiate  his  contention.  He must make out a  case that making him stand the trial would be an  abuse  of  process  of  court.  He  cannot  get  the  complaint quashed merely on the ground that apart  from the basic averment no particulars are given in  the complaint about his role, because ordinarily the  basic averment would be sufficient to send him to  trial and it  could  be  argued that  his  further  role  could  be  brought  out  in  the  trial.  Quashing  of  a  complaint is a serious matter. Complaint cannot be  quashed for the asking. For quashing of a complaint  it must be shown that no offence is made out at all  against the Director.”

[Emphasis supplied]  

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28. After so stating, the Court proceeded to summarise its  

conclusions, appreciated the averments made in the complaint  

petition and opined thus:-  

“…  Pertinently,  in  the  application  filed  by  the  respondents, no clear case was made out that at the  material time, the Directors were not in charge of  and  were  not  responsible  for  the  conduct  of  the  business  of  the  Company  by  referring  to  or  producing  any  incontrovertible  or  unimpeachable  evidence which is beyond suspicion or doubt or any  totally acceptable circumstances. It is merely stated  that  Sidharth  Mehta  had  resigned  from  the  directorship of the Company on 30-9-2010 but no  incontrovertible  or  unimpeachable  evidence  was  produced  before  the  High  Court  as  was  done  in  Anita  Malhotra20 to  show  that  he  had,  in  fact,  resigned long before the cheques in question were  issued. Similar is the case with Kanhaiya Lal Mehta  and  Anu  Mehta.  Nothing  was  produced  to  substantiate  the contention that  they were not  in  charge of and not responsible for the conduct of the  business of  the Company at  the relevant time.  In  the circumstances, we are of  the opinion that the  matter deserves to be remitted to the High Court for  fresh hearing. However, we are inclined to confirm  the order passed by the High Court quashing the  process as against Shobha Mehta. Shobha Mehta is  stated to be an old lady who is over 70 years of age.  Considering this fact and on an overall reading of  the  complaint  in  the  peculiar  facts  and  circumstances of the case, we feel that making her  stand  the  trial  would  be  an  abuse  of  process  of  

20

(2012) 1 SCC 520

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court. It is however, necessary for the High Court to  consider the cases of other Directors in light of the  decisions  considered  by  us  and  the  conclusions  drawn by us in this judgment.”

. 29. We have referred to the aforesaid decision in extenso, as  

we are of the convinced opinion that the analysis made therein  

would squarely apply to the case at hand and it shall be clear  

when we reproduce certain passages from the complaint.  

30. Prior  to  that,  we  may  profitably  refer  to  a  two-Judge  

Bench decision in Tamil Nadu News Print & Papers Ltd. v.   

D. Karunakar and Others21.  In the said case, the Court has  

referred to the decision rendered in S.M.S. Pharma I (supra)  

and,  thereafter,  taken  note  of  the  averments  made  in  the  

complaint.  Be it noted, in the said case it had been averred in  

the  complaint  petition  that  the  accused  Nos.  2  to  9  were  

Directors and were in day to day management of the accused  

company and in that context the Court has opined as follows:-

“Upon perusal of the complaint, we find that an  averment  has  been  made  to  the  effect  that  Accused Nos.3 to 10 were in fact, in-charge of the  day-to-day business of Accused No.1-company.”

21

(2015) 8 SCALE 733

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31. We  have  referred  to  these  decisions  as  they  explicitly  

state the development of law and also lay down the duty of the  

High  Court  while  exercising  the  power  of  quashing  regard  

being had to the averments made in the complaint petition to  

attract the vicarious liability of the persons responsible under  

Section 141 of the Act.  

32. Now,  is  the  time  to  scan  the  complaint.   Mr.  Divan,  

learned senior counsel appearing for the appellant-bank, has  

drawn  our  attention  to  paragraphs  2,  4  and  10  of  the  

complaint petition.  They read as follows:-

“2. I further say that I know the accused above  named.  The  accused  No.1  is  a  Company  incorporated  under  the  Companies  Act,  1956  having its registered address as mentioned in the  cause  title.   The  accused  Nos.2  to  7  are  the  Chairman, Managing Director, Executive Director  and  whole  time  Director  and  authorized  signatories of accused No.1 respectively.  As such  being  the  Chairman,  Managing  Director,  Executive Director and Whole Time Director were  and are the persons responsible and in charge of  day  to  day  business  of  the  accused  No.1  viz.  When the offence was committed.  The accused  Nos.6 and 7 being signatories of the cheque are  aware  of  the  transaction  and  therefore  the  accused Nos.2 to 7 are  liable  to be prosecuted  jointly or severally for having consented and/or

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connived in the commission of present office in  their  capacity  as  the  Chairman,  Managing  Director, Executive Director, Whole Time Director  and  authorized  signatories  of  accused  No.1,  further  the  offence  is  attributable  to  accused  Nos.2 to 7 on account of their neglect to ensure  and make adequate arrangements to Honour the  cheque issued by accused No.1 and further on  account of the neglect of accused Nos.1 to 7 to  comply with the requisition made in the Demand  Notice  issue  under  the  provisions  of  Section  138(c)  of  the Negotiable Instruments Act within  the stipulated period.  The accused are therefore  liable to be proceeded.

xxxxx xxxxx

4. I  say  that  the  Accused  No.  1  through  Accused  Nos.  2  and  3  approached  the  Complainant  Bank  at  its  Branch  situated  at  Mumbai for a Short Term Loan facility for a sum  of Rs. 200 Crore to meet the expenditure of Four  ORV vessels being built at ABG Shipyard.  After  verifying  the  documents  submitted  the  Complainant Bank vide its sanction letter dated  28th April  2012 sanctioned the  said Facility  for  the purpose mentioned therein.  The said terms  and conditions mentioned in the sanction letter  dated 28th April 2012 were duly accepted by the  Accused No. 1 by signing the same.  Accused No.  1  also  agreed to  pay  interest  at  the  negotiated  rate by the Complainant bank.  Hereto annexed  the marked as Exhibit ‘B’ is a copy of the said  sanction letter dated 28th April 2012.

xxxxx xxxxx

10. I  say  that  the  accused  Nos.1  to  7  were  aware  that  the  aforesaid  cheque  would  be

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dishonoured for being “Account Blocked” and all  the accused, in active connivance mischievously  and intentionally issued the aforesaid cheques in  favour of the complainant Bank.”

33. The  aforesaid  averments,  as  we  find,  clearly  meet  the  

requisite test.  It is apt to mention here that there are seven  

accused  persons.   Accused  No.1  is  the  Company,  accused  

Nos.2  and  3  are  the  Chairman  and  Managing  Director  

respectively and accused Nos.6 and 7 were signatory to the  

cheques.  As far as the accused Nos.4 and 5 were concerned,  

they were whole-time Directors and the assertion is that they  

were in charge of day to day business of the Company and all  

of  them  had  with  active  connivance,  mischievously  and  

intentionally issued the cheques in question.

34. Thus, considering the totality of assertions made in the  

complaint  and  also  taking  note  of  the  averments  put  forth  

relating to the respondent Nos. 2 and 3 herein that they are  

whole-time Director and Executive Director and they were in  

charge of day to day affairs of the Company,  we are of the  

considered opinion that the High Court has fallen into grave  

error by coming to the conclusion that there are no specific

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averments  in the complaint for issuance of summons against  

the said accused persons.  We unhesitatingly hold so as the  

asseverations made in the complaint meet the test laid down  

in Gunmala Sales Pvt. Ltd. (supra).  

35. Resultantly,  the  appeals  are  allowed  and  the  order  

passed by the High Court is set aside.  The learned Magistrate  

is directed to proceed with the complaint cases in accordance  

with law.

……....................J. [Dipak Misra]

……....................J. [Shiva Kirti Singh]

New Delhi April 06, 2016.