Dev Sareen vs D.C.M. Financial Ltd.

1. The petitioner seeks quashing of criminal proceedings filed by the respondent on allegations of commission of offence under Sections 138/141, Negotiable Instruments Act.

2. The respondent/complainant initiated the proceedings on 11.1.1999 against M/s. International Agro and Allied and Ors. It was alleged in the complaint that the present petitioner, accused No. 4 along with others was a director in charge of the affairs of the company. According to the complaint, a cheque was issued in favor of the complainant which upon presentation was not honoured. Notice was issued and thereafter a complaint was filed on 11.1.1999. It is contended that the averments in the complaint, particularly para 13 do not measure up to the standard prescribed to attract vicarious liability as provided for under Section 141, so far as the directors are concerned. The said averment reads as follows:

That the accused No. 1 is a company/firm and the accused Nos. 2 to 9 were in-charge and were responsible to the accused No. 1 for the conduct of the business of the accused No. 1, at the time when offence was committed. Hence, the accused Nos. 2 to 9 in addition to the accused No. 1, are liable to be prosecuted and punished in accordance with law by this Hon'ble Court, as provided by Section 141 of the N.I. Act, 1881. Further the offence has been committed by the accused No. 1 with the consent and connivance of the accused Nos. 2 to 9.

3. Learned Counsel for the respondent urged that the judgment of the Supreme Court in SMS Pharmaceuticals Ltd. v. Neeta Bhalla and Anr. , and the subsequent ruling in Saroj Kumar Poddar v. State (NCT of Delhi) and Anr. , as well as N.K. Wahi v. Shekhar Singh and Ors. , to conclude the issue. It was contended that the Court ruled that in order to fasten vicarious liability in accordance with Section 141 the averments as to the role of the concerned directors are to be specific. The description should be clear and there should be some unambiguous allegation as to how the concerned directors were alleged to be in charge of the conduct and affairs of the company.

4. Learned Counsel for the respondent resisted the petition and sought to place reliance on the judgment in SMS Pharmaceuticals Ltd. v. Neeta Bhalla and Anr. (supra). According to her, the averment in para 13 fulfills the requirements spelt out by the Supreme Court namely the need to aver clearly that the concerned accused directors were responsible for the affairs, and in control of the company. In this view it was stated that the petitioner accused have to stand trial.

5. If there were any doubts as to the intention of the Supreme Court in the law declared in SMS Pharmaceuticals Ltd. v. Neeta Bhalla and Anr. (supra), averments as to the nature of averments, they have been, in my considered opinion settled in the subsequent, judgment in N.K. Wahi's case (supra) as well as the two-Judge decision in SMS Pharmaceuticals Ltd. v. Neeta Bhalla and Anr. (supra), where the Court actually extracted the kind of averments which could pass muster. This in my opinion are indicative of the basic requirements of the law. Besides averring or stating that the concerned director is responsible for the conduct and affairs of the company, some detail as to how such assertion is made, is also necessary. This has also been clarified in the judgment reported as Everest Advertising Pvt. Ltd. v. State, Govt. of NCT of Delhi and Ors. II (2007) DLT (Crl.) 330 (SC) : II (2007) CCR 191 (SC) : 2007 (3) Supreme 699. In this case, the averments are unspecific and general; no facts or particular role is assigned to the petitioner. The petition, therefore, has to succeed. It is accordingly allowed. The summoning order so far as it concerns the petitioner is hereby quashed. However, nothing stated here shall preclude the exercise of powers under Section 319, Cr.P.C. by the Trial Court if the circumstances so warrant at a later stage.