Monika Sharma vs Ideal Pet Industries And Others

Cr. MMO No. 23 of 2023

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Reserved on: 29.7.2024

Date of Decision: 09.8.2024.

Monika Sharma ...Petitioner

Versus

Ideal Pet Industries and others

Coram r to ...Respondents

Hon'ble Mr Justice Rakesh Kainthla, Judge. Whether approved for reporting?1 Yes.

For the Petitioner : Mr. Suneet Goel, Advocate. For the Respondents : Mr. Dheeraj K. Vashisht, Advocate, for respondent No.1.

Mr. Nitin Thakur, Advocate, for

respondents No.2 and 3.

Rakesh Kainthla, Judge

The petitioner has filed the present petition for

quashing of Complaint Case No. 48-3 of 2022, pending before the

learned Chief Judicial Magistrate, Nahan, District Sirmour, H.P.

(learned Trial Court). (Parties shall hereinafter be referred to in the

1 Whether reporters of Local Papers may be allowed to see the judgment? Yes.

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same manner as they were arrayed before the learned Trial Court for

convenience).

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2. Briefly stated, the facts giving rise to the present

petition are that the complainant filed a complaint before the

learned Trial Court for the commission of an offence punishable

under Section 138 read with Section 142 of the Negotiable

Instrument Act (NI Act). It was asserted that the complainant is

carrying on a pharma business under the name and style of Ideal

Packed Industries. The accused MAC Bio Sciences Pvt. Ltd. is

carrying on the business at Alipur Barwala, District Panchkula.

Its day-to-day affairs have been looked after by its Managing

Director/Authorized Signatory/Partners, sole proprietor i.e.

accused No.2 Trilochan Dass and accused No.3 Monika Sharma.

Accused No.1 purchased pharma products/PET bottles through

accused No.2 and 3. Accused No.2 and 3 are the authorized

signatories and are fully responsible to accused No.1 for the

conduct of the business. The complainant issued the credit

bills/invoice showing the particulars of the materials purchased

and their value. The accused issued four cheques in favour of the

complainant, drawn on State Bank of India, Khatauli, Barwala,

District Panchkula (Haryana) in discharge of their legal liability.

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Three cheques were dishonoured with the remarks 'funds

insufficient' and one cheque was dishonoured with the remarks

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'payments stopped by the drawer'. The accused failed to pay the

amount despite receipt of the valid notice of demand. Hence, the

complaint was filed for taking action against the accused as per

the law.

3. Learned Trial Court found sufficient reasons to

summon the accused for the commission of an offence

punishable under Section 138 of the NI Act.

4. The accused filed the present petition for quashing

the complaint asserting that MAC Bio Sciences Pvt. Ltd. is a

Company duly registered under the Companies Act. Tarlochan

Dass, Managing Director of the Company, is looking after the

affairs of the company. The cheques were issued by him without

the knowledge of the petitioner. She is not looking after the day-

to-day affairs of the Company and was inducted as a director to

Comply with the requirements of the Companies Act, 1956. The

petitioner has not signed the cheques and the cheque bears the

signatures of respondent No.3/accused Tarlochan. The

summoning order is against the law and facts. It is the result of

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non-application of mind and was passed in a slipshod manner.

The complainant has failed to make a case against the petitioner

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as required under Section 141 of the NI Act. The cheques have

been signed by respondent No.3 in his capacity as a proprietor

rather than Managing Director. No document was filed to show

the status of the complainant. The resolution/authorization

dated 19.1.2022 is of no consequence. The petitioner never dealt

with the complainant and the present complaint against her is

not maintainable. Therefore, it was prayed that the present

petition be allowed and the summoning order and the complaint

pending before the learned Trial Court be ordered to be quashed.

5. No reply to the petition was filed.

6. I have heard Mr Suneet Goel, learned counsel for the

petitioner, Mr Dheeraj K. Vashisht, learned counsel for

respondent No.1/complainant and Mr Nitin Thakur, learned

counsel for respondents No.2 and 3/accused.

7. Mr Suneet Goel, learned counsel for the petitioner

submitted that the allegations in the complaint are not sufficient

to attract the provisions of Section 142 of the NI Act. The

petitioner being Director cannot be held liable unless it is proved

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that she was in charge and responsible to the Company for its

affairs. No such material was placed on record. The complainant

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failed to prove the proper authorization and the complaint could

not have been entertained by the Court. Learned Trial Court erred

in summoning the petitioner; therefore, he prayed that the

present petition be allowed, the complaint pending before the

learned Trial Court and the summoning order issued by the

learned Trial Court be ordered to be quashed. He relied upon the

judgments of the Hon'ble Supreme Court in Gunmala Sales (P)

Ltd. v. Anu Mehta, (2015) 1 SCC 103 in support of his submission.

8. Mr. Dheeraj K. Vashisht, learned counsel for

respondent No.1/complainant submitted that the question of

authorization cannot be seen at this stage and it is for the

complainant to prove the same during the trial. The complainant

had specifically asserted that accused No.2 and 3 are in charge

and responsible for the day-to-day activities of the company,

which is sufficient to summon them. Therefore, he prayed that

the present petition be dismissed. He relied upon the judgments

of the Hon'ble Supreme Court in Sunil Todi Vs. State of Gujarat

2021 SCC Online SC 1174 and this Court in Cian Healthcare Ltd. and

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others VS. M/s Pellcaps India, Cr.MMO No. 120 of 2023, decided on

24.6.2024 in support of his submission.

.

9. Mr. Nitin Thakur, learned counsel for respondents No.

2 and 3 adopted the submissions of Mr. Suneet Goel, learned

counsel for the petitioner and submitted that the FIR be ordered

to be quashed.

10.

I have given considerable thought to the submissions

made at the bar and have gone through the records carefully.

11. The parameters for exercising jurisdiction under

Section 482 of Cr.P.C. were laid down by the Hon'ble Supreme

Court in A.M. Mohan v. State, 2024 SCC OnLine SC 339, wherein it

was observed: -

9. The law with regard to the exercise of jurisdiction under

Section 482 of Cr. P.C. to quash complaints and criminal proceedings has been succinctly summarized by this Court in the case of Indian Oil Corporation v. NEPC India Limited

(2006) 6 SCC 736: 2006 INSC 452 after considering the earlier precedents. It will be apposite to refer to the following observations of this Court in the said case, which read thus:

"12. The principles relating to the exercise of jurisdiction under Section 482 of the Code of Criminal Procedure to quash complaints and criminal proceedings have been stated and reiterated by this Court in several decisions. To mention a few-- Madhavrao Jiwajirao Scindia v. Sambhajirao

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Chandrojirao Angre [(1988) 1 SCC 692: 1988 SCC (Cri) 234], State of Haryana v. Bhajan Lal [1992 Supp (1) SCC 335: 1992 SCC (Cri) 426], Rupan Deol Bajaj v. Kanwar Pal Singh Gill [(1995) 6 SCC 194: 1995 SCC (Cri) 1059], Central

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Bureau of Investigation v. Duncans Agro Industries Ltd. [(1996) 5 SCC 591: 1996 SCC (Cri) 1045], State of Bihar v. Rajendra Agrawalla [(1996) 8 SCC 164: 1996 SCC

(Cri) 628], Rajesh Bajaj v. State NCT of Delhi [(1999) 3 SCC 259: 1999 SCC (Cri) 401], Medchl Chemicals & Pharma (P) Ltd. v. Biological E. Ltd. [(2000) 3 SCC 269: 2000 SCC (Cri) 615], Hridaya Ranjan Prasad Verma v. State of

Bihar [(2000) 4 SCC 168: 2000 SCC (Cri) 786], M. Krishnan v. Vijay Singh [(2001) 8 SCC 645: 2002 SCC (Cri) 19] and Zandu Pharmaceutical Works Ltd. v. Mohd. Sharaful Haque [(2005) 1 SCC 122: 2005 SCC (Cri) 283].

The principles, relevant to our purpose are:

(i) A complaint can be quashed where the allegations made in the complaint, even if they are taken at their face value and accepted in their entirety, do not prima facie constitute any offence

or make out the case alleged against the accused.

For this purpose, the complaint has to be examined

as a whole, but without examining the merits of the allegations. Neither a detailed inquiry nor a

meticulous analysis of the material nor an assessment of the reliability or genuineness of the allegations in the complaint is warranted while

examining prayer for quashing a complaint.

(ii) A complaint may also be quashed where it is a clear abuse of the process of the court, as when the criminal proceeding is found to have been initiated with mala fides/malice for wreaking vengeance or to cause harm, or where the allegations are absurd and inherently improbable.

(iii) The power to quash shall not, however, be used to stifle or scuttle a legitimate prosecution. The

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power should be used sparingly and with abundant caution.

(iv) The complaint is not required to verbatim

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reproduce the legal ingredients of the offence

alleged. If the necessary factual foundation is laid in the complaint, merely on the ground that a few ingredients have not been stated in detail, the

proceedings should not be quashed. Quashing of the complaint is warranted only where the complaint is so bereft of even the basic facts which are necessary for making out the offence.

(v.) A given set of facts may make out: (a) purely a civil wrong; (b) purely a criminal offence; or (c) a civil wrong as also a criminal offence. A rcommercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking

remedy in civil law, may also involve a criminal offence. As the nature and scope of a civil proceeding are different from a criminal

proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or

has been availed, is not by itself a ground to quash the criminal proceedings. The test is whether the

allegations in the complaint disclose a criminal offence or not.

12. Similar is the judgment in Maneesha Yadav v. State of

U.P., 2024 SCC OnLine SC 643, wherein it was held: -

12. We may gainfully refer to the following observations of this Court in the case of State of Haryana v. Bhajan Lal1992 Supp (1) SCC 335: 1990 INSC 363:

"102. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of

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the extraordinary power under Article 226 or the inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration

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wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice, though it may not be

possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be

exercised.

(1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their

entirety do not prima facie constitute any

offence or make out a case against the accused. (2) Where the allegations in the first information report and other materials, if any,

accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the

Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.

(3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose

the commission of any offence and make out a case against the accused.

(4) Where the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code.

(5) Where the allegations made in the FIR or complaint are so absurd and inherently

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improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.

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(6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal

proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for

the grievance of the aggrieved party.

(7) Where a criminal proceeding is manifestly attended with mala fide and/or where the r proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the

accused and with a view to spite him due to private and personal grudge.

103. We also give a note of caution to the effect

that the power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too in the

rarest of rare cases; that the court will not be justified in embarking upon an enquiry as to the

reliability or genuineness or otherwise of the allegations made in the FIR or the complaint and that the extraordinary or inherent powers do not

confer an arbitrary jurisdiction on the court to act according to its whim or caprice."

13. It is undisputed that the principal accused MAC Bio

Sciences Pvt. Ltd. is a registered private limited company. This

fact was asserted in para-7 of the petition. Therefore, the

reference to the cheque and the use of the word proprietor in it

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will not assist the petitioner because the status of the petitioner

as a Company stands admitted.

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14. The Hon'ble Supreme Court dealt with the liability of

the Company and its Directors in Pawan Kumar Goel v. State of

U.P., 2022 SCC OnLine SC 1598 and held that a person, who is in

charge of and responsible to the Company for its affairs can be

summoned and punished under Section 138 read with Section 141

of NI Act. It was observed:

"22. A two-judge Bench of this Court in the case of K.K.

Ahuja v. V.K. Vora (2005) 8 SCC 89 after analysing the provisions contained in Section 141 of the Act, observed as under:--

"16. Having regard to section 141, when a cheque issued by a company (incorporated under the Companies Act, 1956) is dishonoured, in addition to the company, the following

persons are deemed to be guilty of the offence and shall be liable to be proceeded against and punished:

(i) 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;

(ii) any Director, Manager, Secretary or other officer of the company with whose consent and connivance, the offence under section 138 has been committed; and

(iii) any Director, Manager, Secretary or other officer of the company whose negligence resulted in the offence under section 138 of the Act, being committed by the company.

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While the liability of persons in the first category arises under sub-section (1) of Section 141, the liability of persons mentioned in categories (ii) and (iii) arises under sub- section (2). The scheme of the Act, therefore is, that a

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person who is responsible to the company for the conduct of the business of the company and who is in charge of the business of the company is vicariously liable by reason only

of his fulfilling the requirements of sub-section (1). But if the person responsible to the company for the conduct of business of the company, was not in charge of the conduct of the business of the company, then he can be made liable

only if the offence was committed with his consent or connivance or as a result of his negligence.

17. The criminal liability for the offence by a company under section 138, is fastened vicariously on the persons

referred to in sub-section (1) of section 141 by virtue of a

legal fiction. Penal statutes are to be construed strictly. Penal statutes providing constructive vicarious liability should be construed much more strictly. When conditions are prescribed for extending such constructive criminal

liability to others, courts will insist upon strict literal compliance. There is no question of inferential or implied compliance. Therefore, a specific averment complying with

the requirements of section 141 is imperative. As pointed out in K. Srikanth Singh v. North East Securities Ltd.

- (2007) 12 SCC 788, the mere fact that at some point of time, an officer of a company had played some role in the

financial affairs of the company, will not be sufficient to attract the constructive liability under section 141 of the Act.

18. Sub-section (2) of section 141 provides that a Director, Manager, Secretary or other officer, though not in charge of the conduct of the business of the company will be liable if the offence had been committed with his consent or connivance or if the offence was a result of any negligence on his part. The liability of persons mentioned in sub- section (2) is not on account of any legal fiction but on account of the specific part played-consent and connivance or negligence. If a person is to be made liable under sub-

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section (2) of section 141, then it is necessary to aver consent and connivance, or negligence on his part."

23. The scope of Section 141 of the NI Act was again

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exhaustively considered by this Court in S.M.S

Pharmaceuticals Ltd. v. Neeta Bhalla (2005) 8 SCC 89.:

"10. ....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 the business of the company at the time of the 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 the 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 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...

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18. To sum up, there is an almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 of the Act is sought to

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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 spelt 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 spelt 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 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."

(emphasis supplied)

15. This position was reiterated in Rajesh Viren Shah v.

Redington India Ltd., (2024) 4 SCC 305: 2024 SCC OnLine SC 143

wherein it was observed:

"3. The position of law as to the liability that can be fastened upon a Director for non-realisation of a cheque is no longer res integra. Before adverting to the judicial position, we must also take note of the statutory provision

-- Section 141 of the NI Act, which states that every person who at the time of the offence was responsible for the affairs/conduct of the business of the company, shall be

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held liable and proceeded against under Section 138 of the NI Act, with exception thereto being that such an act if done without his knowledge or after him having taken all necessary precautions, would not be held liable. However,

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if it is proved that any act of a company is proved to have been done with the connivance or consent or may be attributable to (i) a Director; (ii) a Manager; (iii) a

Secretary; or (iv) any other officer -- they shall be deemed to be guilty of that offence and shall be proceeded against accordingly.

4. Coming to the judicial position, we notice a judgment of

this Court in Monaben Ketanbhai Shah v. State of Gujarat [Monaben Ketanbhai Shah v. State of Gujarat, (2004) 7 SCC 15: 2004 SCC (Cri) 1857] wherein it was observed that:

(SCC pp. 18-19, para 6)

"6. ... The primary responsibility is on the complainant

to make necessary averments in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every

partner knows about the transaction. The obligation of the appellants to prove that at the time the offence was committed, they were not in charge of and were not

responsible to the firm for the conduct of the business of the firm, would arise only when first the complainant

makes necessary averments in the complaint and establishes that fact."

5. A Bench of three learned Judges in S.M.S.

Pharmaceuticals Ltd. v. Neeta Bhalla [S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89: 2005 SCC (Cri) 1975] observed: (SCC p. 102, para 18) "18. To sum up, there is an almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. ... A clear case should be spelt out in the complaint made against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the

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said provision. That the respondent falls within the parameters of Section 141 has to be spelt out."

6. We also notice this Court to have observed, in regard to

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the exercise of the inherent powers under Section

482CrPC, in cases involving negotiable instruments that interference would not be called for, in the absence of "some unimpeachable, incontrovertible evidence which is

beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of process of Court. (Ashutosh

Ashok Parasrampuriya case [Ashutosh Ashok Parasrampuriya v. Gharrkul Industries (P) Ltd., (2023) 14 SCC 770: 2021 SCC OnLine SC 915], SCC para 24)" This principle as held in S.M.S. Pharmaceuticals [S.M.S. Pharmaceuticals

Ltd. v. Neeta Bhalla, (2005) 8 SCC 89: 2005 SCC (Cri) 1975]

was followed in Ashutosh Ashok Parasrampuriya v. Gharrkul Industries (P) Ltd. [Ashutosh Ashok Parasrampuriya v. Gharrkul Industries (P) Ltd., (2023) 14 SCC 770: 2021 SCC OnLine SC 915]"

16. It was held by the Hon'ble Supreme Court in Susela

Padmavathy Amma v. Bharti Airtel Ltd., 2024 SCC OnLine SC 311

that a person can be vicariously liable if he is in charge and

responsible to the company for the conduct of its business. it was

observed:

18. In the case of State of Haryana v. Brij Lal Mittal (1998) 5 SCC 343, this Court observed thus:

"8. Nonetheless, we find that the impugned judgment of the High Court has got to be upheld for an altogether different reason. Admittedly, the three respondents were being prosecuted as directors of the manufacturers with the aid of Section 34(1) of the Act which reads as under:

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"34. Offences by companies.--(1) Where an offence under this Act has been committed by a company, every person who at the time the offence was committed, was in charge of, and was responsible to

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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 such person liable to any punishment provided in this Act if he proves that

the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence."

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 for 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."

19. It could thus be seen that this Court had held that simply because a person is a director of the company, it does not necessarily mean that he fulfils the twin requirements of Section 34(1) of the said Act so as to make him liable. It has been held that a person cannot be made liable unless, at the material time, he was in charge of and

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was also responsible to the company for the conduct of its business.

20. In the case of S.M.S. Pharmaceuticals Ltd. (supra), this

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Court was considering the question as to whether it was

sufficient to make the person liable for being a director of a company under Section 141 of the Negotiable Instruments Act, 1881. This Court considered the

definition of the word "director" as defined in Section 2(13) of the Companies Act, 1956. This Court observed thus:

"8. ....... There is nothing which suggests that simply by being a director in a company, one is supposed to discharge particular functions on behalf of a company. It happens that a person may be a director in a

company but he may not know anything about the day-

to-day functioning of the company. As a director, he may be attending meetings of the Board of Directors of the company where usually they decide policy matters and guide the course of business of a company. It may

be that a Board of Directors may appoint sub- committees consisting of one or two directors out of the Board of the company who may be made

responsible for the day-to-day functions of the company. These are matters which form part of

resolutions of the Board of Directors of a company. Nothing is oral. What emerges from this is that the role of a director in a company is a question of fact

depending on the peculiar facts in each case. There is no universal rule that a director of a company is in charge of its everyday affairs. We have discussed about the position of a director in a company in order to illustrate the point that there is no magic as such in a particular word, be it director, manager or secretary. It all depends upon the respective roles assigned to the officers in a company. ....."

21. It was held that merely because a person is a director of a company, it is not necessary that he is aware of the day-

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to-day functioning of the company. This Court held that there is no universal rule that a director of a company is in charge of its everyday affairs. It was, therefore, necessary, to aver as to how the director of the company was in

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charge of the day-to-day affairs of the company or responsible to the affairs of the company. This Court, however, clarified that the position of a managing director

or a joint managing director in a company may be different. This Court further held that these persons, as the designation of their office suggests, are in charge of a company and are responsible for the conduct of the

business of the company. To escape liability, they will have to prove that when the offence was committed, they had no knowledge of the offence or that they exercised all due diligence to prevent the commission of the offence.

22. In the case of Pooja Ravinder Devidasani v. State of Ma-

harashtra (2014) 16 SCC 1 this Court observed thus:

"17. ...... 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

the 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 NI Act. In National

Small Industries Corpn. [National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330 : (2010) 1 SCC (Civ) 677 : (2010) 2 SCC (Cri) 1113] this Court observed : (SCC p. 336, paras 13-14)

"13. 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

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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.

14. 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 fulfilment of the requirements under Section 141."

(emphasis in original)

18. In Girdhari Lal Gupta v. D.H. Mehta [Girdhari Lal Gupta v. D.H. Mehta, (1971) 3 SCC 189: 1971 SCC (Cri) 279: AIR 1971 SC 2162], 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 v. Pratap Chand [State of Karnataka v. Pratap Chand, (1981) 2 SCC 335: 1981 SCC (Cri) 453] ).

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 NI Act, there must be specific averments against the Director showing as to how and

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in what manner the Director was responsible for the conduct of the business of the company.

21. In Sabitha Ramamurthy v. R.B.S. Channabasavarad-

.

hya [Sabitha Ramamurthy v. R.B.S. Channabasavaradhya,

(2006) 10 SCC 581 (2007) 1 SCC (Cri) 621], it was held by this Court that: (SCC pp. 584-85, para 7)

"7. ... 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. Section 141 raises a legal fiction. By reason of the said provision, a person although is not personally liable for the 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."

(emphasis supplied)

By verbatim reproducing the words 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 NI Act."

23. It could thus clearly be seen that this Court has held that merely reproducing the words of the section without a clear statement of fact as to how and in what manner a director of the company was responsible for the conduct of the business of the company, would not ipso facto make the director vicariously liable.

24. A similar view has previously been taken by this Court in the case of K.K. Ahuja v. V.K. Vora (2009) 10 SCC 48.

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25. In the case of State of NCT of Delhi through Prosecuting Officer, Insecticides, Government of NCT, Delhi v. Rajiv Khu- rana (2010) 11 SCC 469, this Court reiterated the position thus:

.

"17. The ratio of all these cases is that the complainant is required to state in the complaint how a Director who is sought to be made an accused, was in charge of the

business of the company or responsible for the conduct of the company's business. Every Director need not be and is not in charge of the business of the company. If that is the position with regard to a Director, it is

needless to emphasise that in the case of non-director officers, it is all the more necessary to state what were his duties and responsibilities in the conduct of the business of the company and how and in what manner

he is responsible or liable."

26. In the case of Ashoke Mal Bafna (supra), this Court observed thus:

"9. To fasten vicarious liability under Section 141 of the

Act on a person, the law is well settled by this Court in a catena of cases that the complainant should specifically show as to how and in what manner the accused was

responsible. Simply because a person is a Director of a defaulter Company, does not make him liable under the

Act. Time and again, it has been asserted by this Court that only the person who was at the helm of affairs of

the Company and in charge of and responsible for the conduct of the business at the time of the commission of an offence will be liable for criminal action. (See Pooja Ravinder Devidasani v. State of Maharash- tra [Pooja Ravinder Devidasani v. State of Maharash- tra, (2014) 16 SCC 1 : (2015) 3 SCC (Civ) 384 : (2015) 3 SCC (Cri) 378: AIR 2015 SC 675].)

10. 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 Act, there must be specific averments against the

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Director showing as to how and in what manner the Director was responsible for the conduct of the business of the Company."

.

27. A similar view has been taken by this Court in the case

of Lalankumar Singh v. State of Maharashtra 2022 SCC On- Line SC 1383 to which one of us (B.R. Gavai, J.) was a party.

17. The Hon'ble Supreme Court held in Siby Thomas v.

Somany Ceramics Ltd., (2024) 1 SCC 348 that the primary

responsibility to make the averment, that the accused is in

charge and responsible for the Firm for its affairs lies upon the

complainant in absence of which the accused cannot be held

liable. It was observed :

9. Bearing in mind the averments made in the complaint

in relation to the role of the appellant and sub-section (1) of Section 141, we will have to appreciate the rival contentions. Going by the decision relied on by the respondent in the S.P. Mani case [S.P. Mani & Mohan

Dairy v. Snehalatha Elangovan, (2023) 10 SCC 685 : (2024) 1

SCC (Cri) 203] it is the primary responsibility of the complainant to make specific averments in the complaint, so as to make the accused vicariously liable.

Relying on para 58.2 of the said decision the learned counsel appearing for the respondent would also submit that the complainant is supposed to know only generally as to who were in charge of the affairs of the company or firm, as the case may be and he relied on mainly the following recitals thereunder : (SCC p. 716, para 58) "58. ... 58.2. The complainant is supposed to know only generally as to who were in charge of the affairs of the company or firm, as the case may be. The other administrative matters would be within the special knowledge of the company or the firm and

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those who are in charge of it. In such circumstances, the complainant is expected to allege that the persons named in the complaint are in charge of the affairs of the company/firm."

.

10. We are of the considered view that the respondent has misread the said decision. Under the sub-caption "Specific averments in the complaint", in para 51 of S.P.

Mani case [S.P. Mani & Mohan Dairy v. Snehalatha Elangovan, (2023) 10 SCC 685 : (2024) 1 SCC (Cri) 203] and paras 34.1 and 34.4 of Gunmala Sales case [Gunmala Sales (P) Ltd. v. Anu Mehta, (2015) 1 SCC 103 : (2015) 1 SCC (Civ)

433 : (2015) 1 SCC (Cri) 580] as also in para 52 of S.P. Mani case [S.P. Mani & Mohan Dairy v. Snehalatha Elangovan, (2023) 10 SCC 685 : (2024) 1 SCC (Cri) 203], it was held in the decision in S.P. Mani case [S.P. Mani & Mohan

Dairy v. Snehalatha Elangovan, (2023) 10 SCC 685 : (2024) 1

SCC (Cri) 203] thus : (SCC pp. 714-715, paras 51-52) "51. In Gunmala Sales [Gunmala Sales (P) Ltd. v. Anu Mehta, (2015) 1 SCC 103 : (2015) 1 SCC (Civ) 433 :

(2015) 1 SCC (Cri) 580], this Court after an exhaustive

review of its earlier decisions on Section 141 of the NI Act, summarised its conclusion as under : (SCC pp. 126-27, para 34)

'34. ... 34.1. Once in a complaint filed under Section 138 read with Section 141 of the NI Act

the basic averment is made that the Director was in charge of and responsible for the

conduct of the business of the company at the relevant time when the offence was committed, the Magistrate can issue process against such Director.

34.2.-34.3. * * * 34.4. No restriction can be placed on the High Court's powers under Section 482 of the Code. The High Court always uses and must use this power sparingly and with great circumspection to prevent inter alia the abuse

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of the process of the Court. There are no fixed formulae to be followed by the High Court in this regard and the exercise of this power depends upon the facts and circumstances of

.

each case. The High Court at that stage does not conduct a mini-trial or roving inquiry, but nothing prevents it from taking

unimpeachable evidence or totally acceptable circumstances into account which may lead it to conclude that no trial is necessary qua a particular Director.'

52. The principles of law and the dictum as laid in Gunmala Sales [Gunmala Sales (P) Ltd. v. Anu Mehta, (2015) 1 SCC 103 : (2015) 1 SCC (Civ) 433 :

(2015) 1 SCC (Cri) 580], in our opinion, still holds the

field and reflects the correct position of law.

11. In the light of the afore-extracted recitals from the decision in Gunmala Sales (P) Ltd. v. Anu Mehta [Gunmala Sales (P) Ltd. v. Anu Mehta, (2015) 1 SCC 103 : (2015) 1 SCC (Civ) 433 : (2015) 1 SCC (Cri) 580], quoted with agreement

in S.P. Mani case [S.P. Mani & Mohan Dairy v. Snehalatha Elangovan, (2023) 10 SCC 685 : (2024) 1 SCC (Cri) 203] and in view of sub-section (1) of Section 141 of the NI Act, it

cannot be said that in a complaint filed under Section 138 read with Section 141 of the NI Act to constitute basic

averment it is not required to aver that the accused concerned is a person who was in charge of and

responsible for the conduct of the business of the company at the relevant time when the offence was committed. In para 53 of S.P. Mani case [S.P. Mani & Mohan Dairy v. Snehalatha Elangovan, (2023) 10 SCC 685 :

(2024) 1 SCC (Cri) 203] it was held thus : (SCC p. 715) "53. In the case on hand, we find clear and specific averments not only in the complaint but also in the statutory notice issued to the respondent."

It is thereafter that in the decision in S.P. Mani case [S.P. Mani & Mohan Dairy v. Snehalatha Elangovan, (2023) 10 SCC 685 : (2024) 1 SCC (Cri) 203] in para 58.1 it was held

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that the primary responsibility of the complainant is to make specific averments in the complaint so as to make the accused vicariously liable.

.

12. Bearing in mind the afore-extracted recitals from

the decisions in Gunmala Sales [Gunmala Sales (P) Ltd. v. Anu Mehta, (2015) 1 SCC 103 : (2015) 1 SCC (Civ) 433 :

(2015) 1 SCC (Cri) 580] and S.P. Mani case [S.P. Mani &

Mohan Dairy v. Snehalatha Elangovan, (2023) 10 SCC 685 :

(2024) 1 SCC (Cri) 203], we have carefully gone through the complaint filed by the respondent. It is not averred anywhere in the complaint that the appellant was in

charge of the conduct of the business of the company at the relevant time when the offence was committed. What is stated in the complaint is only that Accused 2 to 6 being the partners are responsible for the day-to-day conduct

and business of the company. It is also relevant to note

that an overall reading of the complaint would not disclose any clear and specific role of the appellant.

18. The complainant specifically asserted in para-2

(wrongly mentioned as para-4) of the complaint that accused

No.1 had purchased the pharma products/PET bottles through

accused No.2 and 3. Accused No.2 and 3 are the authorized

signatories and fully responsible to the accused No.1 for the

conduct of its business. The truthfulness or otherwise of these

allegations is to be seen during the trial. Suffice it to say that

necessary averments required under Section 142 of Cr.P.C. have

been made.

19. It was laid down in N. Rangachari v. BSNL, (2007) 5 SCC

108: (2007) 2 SCC (Cri) 460: 2007 SCC OnLine SC 536 that a person

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dealing with the company is entitled to presume that he is the

Director and in charge for the affairs of the company and the

.

burden shifts upon the accused to prove any restriction. It was

observed:

"16. While Section 138 made a person criminally liable on dishonour of a cheque for insufficiency of funds or the circumstances referred to in the section and on the

conditions mentioned therein, Section 141 laid down a special provision in respect of the issuance of cheques by companies and commission of offences by companies under Section 138 of the Negotiable Instruments Act.

Therein, it was provided that if the person committing an

offence under Section 138 of the Act was 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. The scope of Section 141 has been

authoritatively discussed in the decision in S.M.S. Pharmaceuticals Ltd. [(2005) 8 SCC 89: 2005 SCC (Cri) 1975]

binding on us and there is no scope for redefining it in this case. Suffice it to say, that a prosecution could be launched not only against the company on behalf of which the

cheque issued has been dishonoured, but it could also be initiated against every person who at the time the offence was committed, was in charge of and was responsible for the conduct of the business of the company. In fact, Section 141 deems such persons to be guilty of such an offence, liable to be proceeded against and punished for the offence, leaving it to the person concerned, to prove that the offence was committed by the company without his knowledge or that he has exercised due diligence to prevent the commission of the offence. Sub-section (2) of Section 141 also roped in Directors, Managers, Secretaries

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or other officers of the company, if it was proved that the offence was committed with their consent or connivance.

17. A company, though a legal entity, cannot act by itself

.

but can only act through its Directors. Normally, the Board

of Directors act for and on behalf of the company. This is clear from Section 291 of the Companies Act which provides that subject to the provisions of that Act, the

Board of Directors of a company shall be entitled to exercise all such powers and to do all such acts and things as the company is authorised to exercise and do. Palmer described the position thus [Ed.: Palmer's Company Law,

20th Edn., p. 513.] :

"A company can only act by agents, and usually the persons by whom it acts and by whom the business of

the company is carried on or superintended are termed directors...."

It is further stated in Palmer that [Ibid., p. 515.] :

"Directors are, in the eye of the law, agents of the company for which they act, and the general principles

of the law of principal and agent regulate in most respects the relationship of the company and its directors."

18. The above two passages were quoted with approval

in R.K. Dalmia v. Delhi Admn. [AIR 1962 SC 1821 : (1963) 1 SCR 253] (SCR at p. 300). In Guide to the Companies Act by A. Ramaiya (16th Edn.) this position is summed up thus:

"All the powers of management of the affairs of the company are vested in the Board of Directors. The Board thus becomes the working organ of the company. In their domain of power, there can be no interference, not even by shareholders. The Directors as a Board are exclusively empowered to manage and are exclusively responsible for that management."

19. Therefore, a person in the commercial world having a transaction with a company is entitled to presume that the Directors of the company are in charge of the affairs of the

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company. If any restrictions on their powers are placed by the memorandum or articles of the company, it is for the Directors to establish it at the trial. It is in that context that Section 141 of the Negotiable Instruments Act provides

.

that when the offender is a company, every person, who at the time when the offence was committed was in charge of and was responsible to the company for the conduct of the

business of the company, shall also be deemed to be guilty of the offence along with the company. It appears to us that an allegation in the complaint that the named accused are Directors of the company itself would usher in the

element of their acting for and on behalf of the company and of their being in charge of the company. In Gower and Davies' Principles of Modern Company Law (17th Edn.), the theory behind the idea of identification is traced as

follows:

"It is possible to find in the cases varying formulations of the underlying principle, and the most recent definitions suggest that the courts are prepared today to give the rule of attribution based on identification a

somewhat broader scope. In the original formulation in Lennard's Carrying Company case [Lennard's Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd., [1915] AC 705 (HL)]

Lord Haldane based identification on a person 'who is really the directing mind and will of the corporation,

the very ego and centre of the personality of the corporation'. Recently, however, such an approach has

been castigated by the Privy Council through Lord Hoffmann in the Meridian Global case [Meridian Global Funds Management Asia Ltd. v. Securities Commission, (1995) 2 AC 500 (PC)] as a misleading 'general metaphysic of companies'. The true question in each case was who as a matter of construction of the statute in question, or presumably other rule of law, is to be regarded as the controller of the company for the purpose of the identification rule."

20. But as has already been noticed, the decision in S.M.S. Pharmaceuticals Ltd. [(2005) 8 SCC 89: 2005 SCC (Cri) 1975]

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binding on us, has postulated that a Director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of his business in the context of Section 141 of the Act. Bound as we are by that decision, no

.

further discussion on this aspect appears to be warranted.

21. A person normally having business or commercial dealings with a company, would satisfy himself about its

creditworthiness and reliability by looking at its promoters and Board of Directors and the nature and extent of its business and its memorandum or articles of association. Other than that, he may not be aware of the arrangements within

the company in regard to its management, daily routine, etc. Therefore, when a cheque issued to him by the company is dishonoured, he is expected only to be aware generally of who are in charge of the affairs of the company. It is not

reasonable to expect him to know whether the person who

signed the cheque was instructed to do so or whether he has been deprived of his authority to do so when he actually signed the cheque. Those are matters peculiarly within the knowledge of the company and those in charge

of it. So, all that a payee of a cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in charge of its affairs. The Directors are

prima facie in that position.

22. In fact, in an earlier decision in Monaben Ketanbhai Shah v. State of Gujarat [(2004) 7 SCC 15: 2004 SCC (Cri) 1857] two learned Judges of this Court noticed that: (SCC p.

17, para 4) "The laudable object of preventing bouncing of cheques and sustaining the credibility of commercial transactions resulting in enactment of Sections 138 and 141 has to be borne in mind."

23. In the light of the ratio in S.M.S. Pharmaceuticals Ltd. [(2005) 8 SCC 89: 2005 SCC (Cri) 1975] what is to be looked into is whether in the complaint, in addition to asserting that the appellant and another are the Directors of the company, it is further alleged that they are in charge

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of and responsible to the company for the conduct of the business of the company. We find that such an allegation is clearly made in the complaint which we have quoted above. Learned Senior Counsel for the appellant argued

.

that in Saroj Kumar Poddar case [(2007) 3 SCC 693 : (2007) 2 SCC (Cri) 135 : (2007) 2 Scale 36] this Court had found the complaint unsustainable only for the reason that there was

no specific averment that at the time of issuance of the cheque that was dishonoured, the persons named in the complaint were in charge of the affairs of the company. With great respect, we see no warrant for assuming such a

position in the context of the binding ratio in S.M.S. Pharmaceuticals Ltd. [(2005) 8 SCC 89: 2005 SCC (Cri) 1975] and in view of the position of the Directors in a company as explained above.

24. In Rajesh Bajaj v. State (NCT of Delhi) [(1999) 3 SCC 259:

1999 SCC (Cri) 401: AIR 1999 SC 1216], two learned Judges of this Court stated: (SCC p. 262, para 9) "For quashing an FIR (a step which is permitted only in

extremely rare cases) the information in the complaint must be so bereft of even the basic facts which are absolutely necessary for making out the offence."

25. In Bilakchand Gyanchand Co. v. A. Chinnaswami [(1999) 5 SCC 693: 1999 SCC (Cri) 1034: AIR 1999 SC 2182] this Court

held that a complaint under Section 138 of the Act was not liable to be quashed on the ground that the notice as contemplated by Section 138 of the Act was addressed to

the Director of the company at its office address and not to the company itself. The view was reiterated in Rajneesh Aggarwal v. Amit J. Bhalla [(2001) 1 SCC 631: 2001 SCC (Cri) 229: AIR 2001 SC 518]. These decisions indicate that too technical an approach on the sufficiency of notice and the contents of the complaint is not warranted in the context of the purpose sought to be achieved by the introduction of Sections 138 and 141 of the Act." (Emphasis supplied)

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20. This position was reiterated in Paresh P. Rajda v. State

of Maharashtra, (2008) 7 SCC 442 : (2008) 3 SCC (Cri) 118: 2008 SCC

.

OnLine SC 932 wherein it was observed:

"11. It will be clear from the afore-quoted judgments that

the entire matter would boil down to an examination of the nature of averments made in the complaint though we observe a slight digression in the judgment in N. Rangachari case [(2007) 5 SCC 108 : (2007) 2 SCC (Cri) 460].

It is in this background, that the complaint needs to be examined. Paras 2 and 8 are reproduced below:

"(2) I know all the accused. Accused 1 is a Company registered under the Companies Act, 1956. Accused 2 is

the Chairman of Accused 1. Accused 3 is the Joint

Managing Director of Accused 1 and Accused 4, 5 and 6 are the Directors of Accused 1.

***

(8) Accused 2 is the Chairman of Accused 1 and is responsible for the day-to-day affairs of Accused 1 and therefore he is liable to repay the amount of

dishonoured cheques. Accused 3 being Joint Managing Director and Accused 4, 5 and 6 being the Directors of

Accused 1 are responsible officers of Accused 1 and therefore they are liable to repay the amounts of the dishonoured cheques. As the accused have failed to

make the payment within the stipulated period of 15 days after receipt of statutory notice they have committed an offence punishable under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 (as amended). Hence this complaint is filed before this Hon'ble Court."

A perusal of the aforesaid paragraphs would show that Accused 2 is Paresh Rajda, the Chairman of the Company, and as per the impugned judgment of the High Court, the question of his responsibility for the business of the

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Company has not been seriously challenged. We, nonetheless, find clear allegations against both the appellant-accused to the effect that they were officers and responsible for the affairs of the Company. We are of the

.

opinion that at a stage where the trial has not yet started, it would be inappropriate to quash the proceedings against them in the light of the observations of this Court quoted

above. We, accordingly, find no merit in the appeals. They are dismissed."

21. In the present case, the necessary averments that the

accused were in charge and responsible for the affairs of the

company have been made and the burden will shift to the accused

to show any restriction on her power.

22. Hence, the complaint cannot be quashed on the

ground that necessary averments regarding the liability of the

petitioner have not been made in it.

23. It was submitted that the complainant has not filed

proper authorization. The authorization on the record does not

show the status of the complainant. It also does not show who

has given the authorization in favour of the complainant.

Therefore, the complaint is liable to be quashed on this ground

alone. This submission cannot be accepted.

24. The question whether the complaint filed by the

company could have been dismissed for want of proper

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authorization was considered by the Hon'ble Supreme Court in

Associated Company Limited versus Keshvanand, 1998 (1) SCC 687

.

wherein it was held that the Company is a juristic person and has

to act through a natural person for proceeding before the Court.

It is permissible for the company to change the natural person

with the permission of the Court. It was observed:

"23. The above scheme of the new Code makes it clear that the complainant must be a corporeal person who is capable of making a physical presence in the court. Its

corollary is that even if a complaint is made in the name of

an incorporeal person (like a company or corporation) it is necessary that a natural person represents such a juristic person in the court and it is that natural person who is looked upon, for all practical purposes, to be the

complainant in the case. In other words, when the complainant is a body corporate it is the de jure complainant, and it must necessarily associate a human

being as a de facto complainant to represent the former in court proceedings.

xxxxxx

25. Be that so, we suggest as a pragmatic proposition that

no magistrate shall insist that the particular person, whose statement was taken on oath at the first instance, alone can continue to represent the company till the end of the proceedings. There may be occasions when a different person can represent the company e.g. the particular person who represents the company at the first instance may either retire from the company's services or may otherwise cease to associate therewith or he would be transferred to a distant place. In such cases, it would be practically difficult for the company to continue to make

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the same person represent the company in court. In any such eventuality, it is open to the de jure complainant company to seek permission from the court for sending

.

any other person to represent the company in court. At any

rate, the absence of the complainant envisaged in Section 249 or Section 256 of the new Code would include the absence of the corporeal person representing the

incorporeal complainant."

25. It was held in MMTC Limited versus M/s Medchl

Chemicals and Pharma Private Limited, 2002 (1) SCC 234 that even

if there was no authority, such an authority could be filed

subsequently. It was observed:

"12. In the case of Associated Cement Co. Ltd. v. Keshvanand [(1998) 1 SCC 687: 1998 SCC (Cri) 475] it has been held by this Court that the complainant has to be

a corporeal person who is capable of making a physical appearance in the court. It has been held that if a complaint is made in the name of an incorporeal person (like a company or corporation) it is necessary that a

natural person represents such juristic person in the court.

It is held that the court looks upon the natural person to be the complainant for all practical purposes. It is held that when the complainant is a body corporate it is the de jure

complainant, and it must necessarily associate a human being as a de facto complainant to represent the former in court proceedings. It has further been held that no Magistrate shall insist that the particular person, whose statement was taken on oath at the first instance, alone can continue to represent the company till the end of the proceedings. It has been held that there may be occasions when different persons can represent the company. It has been held that it is open to the de jure complainant company to seek permission from the court for sending any other person to represent the company in court. Thus,

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even presuming, that initially there was no authority, still the company can, at any stage, rectify that defect. At a subsequent stage, the company can send a person who is competent to represent the company. The complaints could thus not have

.

been quashed on this ground." (Emphasis supplied)

26. This Court also considered this question in Uttam

Traders Ranghri versus Tule Ram, Menu/HP/1499/2018 and held

that it is permissible for the complainant company to rectify the

defect regarding lack of authority at a subsequent stage. It was

observed: r "12. In M.M.T.C.Ltd. And another vs. Medchl Chemicals and

Pharma (P)Ltd. And another (2002) 1 SCC 234, the Hon'ble Supreme Court held that the only eligibility criteria prescribed by Section 142 for maintaining a complaint under Section 138are that the complaint must be by the

payee or the holder in due course and once this criterion is satisfied as the complaint is in the name and on behalf of the appellant-Company. Therefore, even presuming that

initially there was no authority, still, the company can, at any stage, rectify that defect at a subsequent stage, and the

company can send a person who is competent to represent the Company. It is apt to reproduce the relevant observations as contained in paras 11 and 12 of the

judgment, which reads thus:

"11. This Court has, as far back as, in the case of Vishwa Mitter v. O. P. Poddar reported in (1983) 4 SCC 701, held that it is clear that anyone can set the criminal law in motion by filing a complaint of facts constituting an offence before a Magistrate entitled to take cognizance. It has been held that no court can decline to take cognizance on the sole ground that the complainant was not competent to file the complaint. It has been held that if any special statute

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prescribes offences and makes any special provision for taking cognizance of such offences under the statute, then the complainant requesting the Magistrate to take cognizance of the offence must

.

satisfy the eligibility criterion prescribed by the statute. In the present case, the only eligibility criteria prescribed by Section 142 is that the

complaint must be by the payee or the holder in due course. This criterion is satisfied as the complaint is in the name and on behalf of the appellant company.

12. In the case of Associated Cement Co. Ltd. v.

Keshvanand (1998) 1 SCC 687, it has been held by this Court that the complainant has to be a corporeal person who is capable of making a physical appearance in the court. It has been held that if a

complaint is made in the name of an incorporeal

person (like a company or corporation) it is necessary that a natural person represents such juristic person in the court. It is held that the court looks upon the natural person to be the complainant

for all practical purposes. It is held that when the complainant is a body corporate it is the de jure complainant, and it must necessarily associate a

human being as a de facto complaint to represent the former in court proceedings. It has further been

held that no Magistrate shall insist that the particular person, whose statement was taken on

oath at the first instance, alone can continue to represent the company till the end of the proceedings. It has been held that there may be occasions when different persons can represent the company. It has been held that it is open to the de jure complainant company to seek permission from the court to send any other person to represent the company in court. Thus, even presuming, that initially there was no authority, still the Company can, at any stage, rectify that defect. At a subsequent stage, the Company can send a person who is

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competent to represent the company. The complaints could thus not have been quashed on this ground."

.

13. Likewise in Samrat Shipping Co. Pvt. Ltd. vs. Dolly George

(2002) 9 SCC 455, the Hon'ble Supreme Court termed the dismissal of the complaint at the threshold by the Magistrate on the ground that the individual through

whom the complaint was filed had not produced the certified copy of the resolution of the Board of Directors of the Company authorising him to represent the Company before the Magistrate has also not justified and termed

this exercise to be "too hasty an action". It is apt to reproduce the observation as contained in para 3 of the judgment, which reads thus:

"3. Having heard both sides we find it difficult to support the orders challenged before us. A Company

can file a complaint only through a human agency. The person who presented the complaint on behalf of the Company claimed that he was the authorised

representative of the company. Prima facie, the trial court should have accepted it at the time when a complaint was presented. If it is a matter of evidence

when the accused disputed the authority of the said individual to present the complaint, the opportunity

should have been given to the complainant to prove the same, but that opportunity needs to be given only when the trial commences. The dismissal of the

complaint at the threshold on the premise that the individual has not produced a certified copy of the resolution appears to be too hasty an action. We, therefore, set aside the impugned orders and directed the trial court to proceed with the trial and dispose of it in accordance with the law. Parties are directed to appear before the trial court on 31.01.2000."

14. A similar matter of dishonour of cheque came before a three-judge Bench of the Hon'ble Supreme Court in M/s Haryana State Co.Op., Supply and Marketing Federation Ltd.

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vs. M/s Jayam Textiles and another AIR 2014 SC 1926 wherein it was held that the dismissal of the complaint for mere failure to produce authorisation would not be proper and an opportunity ought to be granted to produce and

.

prove the authorisation. It is apt to reproduce the apposite observations as contained in paras 6 and 7 of the judgment, which read thus:

"6. Having heard learned counsel for the parties and after perusing the material on record, we find that admittedly authorisation by the Board of Directors of the appellant-ederation was not placed before the

Courts below. But, we may notice that a specific averment was made by the appellant- Federation before the learned Judicial Magistrate that the said General Power of Attorney has been filed in a

connected case being CC No. 1409/1995, which has

neither been denied nor disputed by the respondents. In any case, in our opinion, if the Courts below were not satisfied, an opportunity ought to have been granted to the appellant

Federation to place the document containing authorisation on record and prove the same in accordance with the law. This is so because

procedural defects and irregularities, which are curable, should not be allowed to defeat substantive

rights or to cause injustice. The procedure, a handmaiden to justice, should never be made a tool

to deny justice or perpetuate injustice, by any oppressive or punitive use. {See Uday Shankar Triyar Vs. Ram Kalewar Prasad Singh, (2006) 1 SCC 75}. : (AIR 2006 SC 269: 2005 AIR SCW 5851).

7. In view of the fact that in spite of the arbitration award against the respondents, there was non- payment of amount by the respondents to the appellant-Federation, and also in the light of authorisation contained in Annexure-P/7, we are of the opinion that, in the facts and circumstances of the case, an opportunity should be given to the

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appellant-Federation to produce and prove the authorisation before the Trial Court, more so, when money involved is public money. We, therefore, set aside the judgments of the Courts below and remit

.

the matters back to the Trial Court with a direction to conduct the trial afresh taking into consideration the authorisation placed before us and dispose of the

matter as expeditiously as possible in accordance with the law."

15. Bearing in mind the aforesaid exposition of the law, I am of the considered view that the appellant-applicant

ought to be granted one chance to place and prove on record the partnership deed. Accordingly, Cr.M.P. No. 464 of 2018 is allowed."

27.

Therefore, even if the authorization is not placed on

record, it is open to the complainant to bring on record the same

during the trial and the complaint cannot be quashed on the

ground that proper authorization has not been filed on record.

28. It was submitted that the learned Trial Court had

failed to apply its mind. This is not acceptable. Learned Trial

Court had specifically mentioned that it had gone through the

averments in the complaint and the affidavit of the complainant

and was of the opinion that sufficient material existed on record

to summon the accused. This was the only requirement at the

stage of summoning and a detailed order was not required to be

passed. It was laid down by the Hon'ble Supreme Court in Iveco

Magirus Brandschutztechnik GMBH v. Nirmal Kishore Bhartiya,

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(2024) 2 SCC 86 : (2024) 1 SCC (Cri) 512: 2023 SCC OnLine SC 1258

that the Magistrate is required to give detailed reasons for

.

dismissing the complaint but no reasons are required to be

recorded for summoning the accused. It was observed on page

118:

"61. Since initiation of prosecution is a serious matter, we are minded to say that it would be the duty of the

Magistrate to prevent false and frivolous complaints eating up precious judicial time. If the complaint warrants dismissal, the Magistrate is statutorily mandated to record

his brief reasons. On the contrary, if from such materials a prima facie satisfaction is reached upon application of

judicial mind of an "offence" having been committed and there being sufficient ground for proceeding, the Magistrate is under no other fetter from issuing process.

Upon a prima facie case being made out and even though much can be said on both sides, the Magistrate would have no option but to commit an accused for trial, as held in

Chandra Deo Singh [Chandra Deo Singh v. Prokash Chandra Bose, 1963 SCC OnLine SC 4 : (1964) 1 SCR 639]. The

requirement of recording reasons at the stage of the issuing process is not the statutory mandate; therefore, the Magistrate is not required to record reasons for the

issuing process. This is also the law declared by this Court in Jagdish Ram v. State of Rajasthan [Jagdish Ram v. State of Rajasthan, (2004) 4 SCC 432: 2004 SCC (Cri) 1294]. Since it is not the statutory mandate that reasons should be recorded in support of the formation of an opinion that there is sufficient ground for proceeding whereas dismissal of a complaint has to be backed by brief reasons, the degree of satisfaction invariably must vary in both situations. While in the former it is a prima facie satisfaction based on probability of complicity, the latter would require a higher degree of satisfaction in that the

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Magistrate has to express his final and conclusive view of the complaint warranting dismissal because of the absence of sufficient ground for proceeding."

.

29. In the present case, the learned Magistrate has

mentioned in his order that it had gone through the complaint,

and statements contained in the affidavit, thus it is difficult to

infer that there was non-application of the mind.

30. No other point was urged.

31. Consequently, the complaint cannot be quashed at

this stage. Hence, the present petition fails and the same is

dismissed.

32. The observation made hereinabove shall remain

confined to the disposal of the petition and will have no bearing,

whatsoever, on the merits of the case.

(Rakesh Kainthla) Judge

9th August, 2024 (Chander)

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