The petitioners who have been arrayed as accused 4 and 5 in the private complaint seeks to quash the proceedings in C.C.No.539 of 2006 on the file of the learned Judicial Magistrate No.V, Coimbatore.
2.The brief facts of the case is as follows:
The complainant is the Branch President of the Trade Union namely Kovai Mavatta Poriyiyal Thozhilalar Sangam affiliated to the AITUC. On 07.11.2001, the first accused company declared suspension of operation of work in its factory and subsequently closed down its factory and that on behalf of the first accused to 3, 4 and 5 entered into a settlement under
Section 18(1) of the Industrial Disputes Act. On 30.01.2003, the accused has agreed to pay gratuity amount due and other dues to the workers and that the accused promised to honour its commitment. On the request of the accused, two separate settlements under
Section 18(1) of Industrial Disputes Act were entered into between second and third accused with the workers separately on 11.07.2004.
Further allegation is that the accused had attempted to remove the machinery from the factory and that while it was objected by the workers the accused had issued a cheque bearing No.517144 dated 21.11.2005for a sum of Rs.8,64,707/- drawn on Karur Vysya Bank, Opanakar Street. When the cheque was presented for encashment by the complainant, it was returned unpaid due to insufficient funds. At the request of the first accused, the cheques were represented again and even on representation the cheques met the same fate.
It appears that the complainant has sent two legal notices issued on 06.04.2006 and the same was received by the accused 1, 3 and 5 on 12.04.2006 and the second accused on 17.04.2006 and the fourth accused on 30.04.2006. In view of the non-payment of the cheque amount the present complaint had been filed.
3.The learned counsel for the petitioners contended that except the bald allegation that the petitioners are the Directors in the first accused company, there is no other averment indicating that the petitioners were incharge of and responsible for the day-to-day affairs of the company. He would further submit that the petitioners are not the signatory to the cheque and based on the general statement made in the complaint no vicarious liability could be fastened on the petitioners.
4.M/s.Gita Asokan, learned counsel appearing for the petitioners referred to a decision reported in (2007) 3 SUPREME COURT CASES (Crl.) 203 [N.K.WAHI vs. SHEKHAR SINGH] and adverted to the following observations of the Hon'ble Apex Court, on this aspect.
"8.To launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction. There should be clear and unambiguous allegation as to how the Directors are in-charge and responsible for the conduct of the business of the company. The description should be clear. It is true that precise words from the provisions of the Act need not be reproduced and the Court can always come to a conclusion in facts of each case. But still, in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable."
The said decision of the Hon'ble Supreme Court was followed by this Court in (2008) 2 MLJ (Crl.) 789 [BHARAT NIKETAN ENGINEERING COLLEGE vs. S.NATARAJAN] and 2009-2-L.W. (Crl.) 838 [NATHAN INDUSTRIES AND OTHERS vs. M.ARULSELVAM].
5.Per contra, the learned counsel for the respondent submitted that since they are the directors of the first accused company, they are responsible for the affairs of the first accused company and all of them are liable to be punished under Section 438 and 142 of the Negotiable Instruments Act.
6.Section 141 of the Negotiable Instruments Act clearly shows that so far as the companies are concerned, if any offence is committed by it, then every person who is a Director or employee of the company is not liable and only such person could be held liable if at the time when the offence was committed, he was incharge of and was responsible to the company for the conduct of the business of the company as well as the company. Merely being a Director of the company in the absence of above factors will not make him liable.
7.It is well settled principle that mere stating that they were aware of the borrowal and were jointly responsible and incharge of the day-to-day affairs of the company by itself is not sufficient to implicate the accused for the alleged offence. To make the Director of the company vicariously liable for the company it is obligatory on the part of the complainant to make specific allegations as required in law.
8.Admittedly, there is no averment in the complaint petition as to how in what manner the petitioners were responsible for the conduct of the business of the company or responsible to it in regard to its functioning. Therefore, the bald allegations made in the complaint in my opinion does not satisfy the requirements under Section 141 of the Act. Therefore, this Court is of the considered view that allowing the proceedings to continue against the petitioners would amount to a clear abuse of process of Court and as such, this Court is constrained to quash the proceedings in so far as the petitioners / A-4 and A-5 are concerned. As against the other accused 1 to 3 the proceedings shall go on. Since the complaint has been filed in the year 2006, this Court is constrained to direct the learned Judicial Magistrate No.V, Coimbatore to expedite the trial as expeditiously as possible more particularly within a period of six months from the date of receipt of a copy of this order.
9.With the above direction, this Criminal Original Petition stands allowed. Consequently, connected miscellaneous petition is closed.
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