This petition has been filed by the Petitioner/Accused No.3 to quash the complaint in C.C.No.352 of 2010 on the file of the Judicial Magistrate No.III, Erode, filed by the Respondent herein for the offence under Section 138 read with 141 and 142 of Negotiable Instruments Act.
2. Heard Mr.A.J.Mohammed Kasim, appearing on behalf of the petitioner and Mr.V.Iyappan appearing on behalf of the Respondent.
3. It is submitted by the petitioner that the allegation in the complaint filed by the Respondent is that they are doing business under the name and style of M/s. K.P.R.and Co. as partnership firm and the first accused is doing business under the name and style of M/s. Shree Venkateswara Industries as partnership firm. The further allegation is that the accused No.2 and 3 are active partners and looking after the day to day affairs of the accused No.1 firm. The further allegation is that the accused No.2 is one of the customers of the complainant company and that the accused used to purchase Steels for his industries from the complainant on credit basis and in the aforesaid transaction from 13.02.2009 to 02.01.2010, there was a balance amount of Rs.1,74,781/- payable by the accused No.2 under various invoice bills. To discharge the aforesaid balance amount, on 06.12.2009, accused No.2 issued a post-dated cheque in favour of the respondent/complainant on behalf of the accused No.1 and 3. The cheque bearing No.100833 for a sum of Rs.1,74,781/- drawn on Union Bank of India, SSI Branch, Erode, dated 06.01.2010. Accused No.2 had signed the aforesaid cheque on behalf of the accused No.1 and 3. The accused had assured that on the aforesaid cheque due date if the the aforesaid cheque is presented for collection then the same would be duly honoured and further the accused had also agreed to pay interest at 18% per annum for the delayed payment as per custom. The further averment in the complaint is that as per the request of the accused the respondent/complainant had presented the above said cheque for collection on 12.01.2010 through his bankers namely Canara Bank, Erode Branch and it had been returned with an endorsement Exceeds Arrangement, on 12.01.2010 and the same was intimated to the respondent/complainant by debit advice on 13.01.2010. Hence, it is crystal clear that the accused have wantonly, intentionally, deliberately and mala fidely issued the aforesaid cheque to cheat, defeat and procrastinate the lawful claim of the complainant. The intentional act of the accused in issuing the said cheque without having sufficient funds in his account is an offence punishable under Section 138 of the Negotiable Instruments Act and that the accused No.2 and 3 are jointly and severally liable to pay the aforesaid cheque amount. Therefore, the respondent/complainant issued a legal notice on 02.02.2010 calling upon the accused to pay the aforesaid cheque amount i.e. Rs.1,74,781/- within 15 days from the date of receipt of the notice and the accused No.1 and 2 have received the notice on 03.02.2010 and the accused No.3 was received intimation of the legal notice on 03.02.2010 and hence the same was returned unclaimed on 16.02.2010. But they did not chose to give reply nor paid any amount till now. Hence, the complaint had been filed before the Judicial Magistrate No.III, Erode, which has been numbered as C.C.No.352 of 2010.
4. The main ground raised by the petitioner/Accused No.3 in the quash petition is that A3 is the wife of A-2 who is Managing Partner of A1 Firm, it is only A2 who has signed the cheque as Managing Partner and that A3 is only a sleeping partner in the firm and that there is no specific averments against the petitioner herein with regard to the issuance of cheque and she being the drawer of the cheque, but there is only a vague allegation that she is an active partner taking part in the day to day affairs of the firm whereas nothing had been stated about any specific role played by her in the firm.
5. Further it was contended by the counsel for the petitioner that when there is no specific allegation against the petitioner in respect of the act and role played by her in the running of the business of the company or with regard to the business dealings with respondent/ complainant and that even in the cheque the second accused her husband has signed as the Managing Partner of the first accused firm.
6.Learned counsel for the petitioner contended that the petitioner is the wife of the second accused and she has not involved in the day to day affairs of the business of the first Accused firm and she cannot be mulcted with vicariously liability. Further, it was submitted that Section 141 of N.I. Act, is a penal provision creating vicarious liability which has to be strictly construed and that it is not sufficient to make a bald cursory statement in the complaint that the petitioner who has been arrayed as accused No.3, is in charge of and responsible to the company for the conduct of the business of the company without anything more as to her role of the partner, but the complaint should spell out as to how and in what manner the Accused No.3 was in charge of or was responsible to the partnership and has submitted that even as per the complaint there is allegation only against A2 who is stated to be one of the customers of the complainant and that he used to purchase steel for his industries from the complainant on credit basis and that there is further averment in the complaint that A2 is the person who had signed the aforesaid cheque on behalf of the accused No.1 and 3 and contended that since A2 being the Managing Partner the proceedings against A3 has to be quashed. Moreover, the learned counsel for the petitioner produced the deed of partnership of A1 Firm and referred to clause 8, 11 and 13 of the Deed.
Clause 8 Bank Accounts:
Bank accounts for the partnership shall be opened and operated in any bank as decided by the partners. Such accounts shall be opened and operated only by first part of J.K.Deivasigamani, and as may be decided by the partners from time to time.
He is entitled to operate the bank account opened in the name of the firm. He is authorized to draw, accept, endorse, negotiate and discount all cheques, promissory notes, bills of exchange and other negotiable instruments on behalf of the firm and to receive all letters, articles, insured, registered or unregistered, money orders etc., from the postal authorities. and Clause 11-Responsibility to the partners:
That Second part of D.Malarvizhi is only sleeping partner, and First part of J.K.Deivasigamani shall carry on the business of the firm to the greatest common advantage, be just and faithful to each other, and render true accounts and full information of all things affecting the firm to the other partner or his legal representative. Clause 13-Management and Duties:
That the overall management will vest with party of the First Part of J.K.Deivasigamani and he will be designated as managing partner, all the day to day/routine decisions would be taken by the party of the both partners in the normal course of working.
7. Per contra, it is contended by the learned counsel for the Respondent/Complainant that averments are there in the complaint with regard to the involvement of the petitioner in the day to day affairs of the firm and that the involvement of the petitioner in the affairs of the business of the firm A2 has been specifically pleaded in the complaint.
8. In the case of Pooja Ravinder Devidasani v. State of Maharashtra reported in [(2014) 16 SCC 1, the Hon'ble Apex Court held as follows:- (paragraphs 17 to 21) 17. There is no dispute that the appellant, who was wife of the Managing Director, was appointed as a Director of the Company-M/S Elite International Pvt. Ltd. on 1st July, 2004 and had also executed a Letter of Guarantee on 19th January, 2005. The cheques in question were issued during April, 2008 to September, 2008. So far as the dishonor of Cheques is concerned, admittedly the cheques were not signed by the appellant. There is also no dispute that the appellant was not the Managing Director but only a non-executive Director of the Company. Non-executive Director is no doubt a custodian of the governance of the Company but does not involve in the day-to-day affairs of the running of its business and only monitors the executive activity. To fasten vicarious liability under Section 141 of the Act on a person, at the material time that person shall have been at the helm of affairs of the Company, one who actively looks after the day-to-day activities of the Company and particularly responsible for the conduct of its business. Simply because a person is a Director of a Company, does not make him liable under the N.I. Act. Every person connected with the Company will not fall into the ambit of the provision. Time and again, it has been asserted by this Court that only those persons who were in charge of and responsible for the conduct of the business of the Company at the time of commission of an offence will be liable for criminal action. A Director, 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 for an offence under Section 141 of the N.I. Act. In National Small Industries Corporation (supra) this Court observed: "Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent 1 was in charge of or was responsible to the accused Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability. A company may have a number of Directors and to make any or all the Directors as accused in a complaint merely on the basis of a statement that they are in charge of and responsible for the conduct of the business of the company without anything more is not a sufficient or adequate fulfillment of the requirements under Section 141.
18. In Girdhari Lal Gupta Vs. D.H. Mehta & Anr. (1971) 3 SCC189 this Court observed that a person 'in charge of a business' means that the person should be in overall control of the day to day business of the Company.
19. A Director of a Company is liable to be convicted for an offence committed by the Company if he/she was in charge of and was responsible to the Company for the conduct of its business or if it is proved that the offence was committed with the consent or connivance of, or was attributable to any negligence on the part of the Director concerned [See: State of Karnataka Vs. Pratap Chand & Ors. (1981) 2 SCC335.
20. In other words, the law laid down by this Court is that for making a Director of a Company liable for the offences committed by the Company under Section 141 of the N.I. Act, there must be specific averments against the Director showing as to how and in what manner the Director was responsible for the conduct of the business of the Company.
21. In Sabitha Ramamurthy & Anr. Vs. R.B.S. Channbasavaradhya (2006) 10 SCC581 it was held by this Court 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 is vicariously liable. [pic].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. By verbatim reproducing the wording of the Section without a clear statement of fact supported by proper evidence, so as to make the accused vicariously liable, is a ground for quashing proceedings initiated against such person under Section 141 of the N.I. Act.
9. On a close look at the complaint, it is seen that at para 3 it has been averred that A2 is one of the customers of the complainant and that the accused need to purchase steels for his industries from the complainant on credit basis. Apart from the averment nothing had been stated about any specific role of A3 in the running of the business of partnership. Other than that there are only general averments that the second accused issued the cheque on behalf of the first and third accused and further in para 6 it had been stated that accused No.2 and 3 are jointly and severally liable to pay the aforesaid amount. Further the perusal of the cheque shows that it is A2 who has signed as Managing Partner.
10. In the light of the above discussion and the materials culled out from the complaint and Partnership Deed, this Court holds that the petitioner who is a house-wife and a dormant partner and who is not a signatory to the cheque cannot be vicariously held liable for the act of her husband A2 who has specifically signed as the Managing Partner of A1 firm and that too when no role has been attributed to her in the transactions.
11. When the court was about to allow the quash complaint in respect of A3, the court felt the need to clarify the doubt with regard to the name of the second accused, that is, in the complaint the second accused was shown to be Mani, Partner: Shree Venkateswara Industries, whereas in the Partnership Deed filed by the petitioner the name of the petitioner's husband-A2 has been shown as J.K.Deivasigamani. Hence in order to protect the interest of the respondent/complainant the petitioner was directed to clarify it. The husband of the petitioner who is A2 in the complaint has by way of clarification filed an affidavit before this Court in which he had stated as follows:- (paragraphs 5 to 8) 5.I submit that I am Deivasigamani as stated in the partnership deed and in short I am called as Mani as stated in the complaint.
6. I submit that I have been running the business of the firm alone and dealing with all the transactions of the business and any other activities regarding the business transactions.
7. I submit that I am the only one signing all cheques regarding the business transactions as specifically stated in the clause No.8 and 11 of the partnership deed.
8. I submit that my wife/the petitioner herein is not at all the signing authority on cheques regarding the business transactions of the firm. The affidavit of A2 is taken on record.
12. Taking into consideration the specific facts of this case and the materials on record, this Court holds that the petitioner is a sleeping partner who has not involved herself in the business of the partnership firm and thereby cannot be held liable for prosecution.
13. In the result, the proceedings pending in C.C.No.352 of 2010 on the file of the Judicial Magistrate-III, Erode, in respect of the petitioner/A3 alone is quashed.
14. The counsel for the respondent requested that in view of the pendency of the quash petition, the trial proceedings have been stalled and prayed for a direction to the Learned Magistrate to complete the trial expeditiously.
15. Since the matter has been pending on the file of the Judicial Magistrate No.III, Erode, from the year 2010, the learned Magistrate is directed to commence the trial in C.C.No.352 of 2010 and conclude the same in respect of the other accused, within a period of three months from the date of receipt of copy of this order. Consequently, connected Miscellaneous Petition stands closed.
06.09.2017 gr.
Index:yes/no Copy to The Judicial Magistrate No.III, Erode.
A.D.JAGADISH CHANDIRA,J., gr.
CRL.O.P.NO.8151 of 2011 06.09.2017