Susela Padmavathy Amma vs M/S. Bharti Airtel Limited

REPORTABLE IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NOS.___________OF 2024 [Arising out of Special Leave Petition (Criminal) No.12390- 12391 of 2022]

SUSELA PADMAVATHY AMMA ...APPELLANT (S)

VERSUS M/S BHARTI AIRTEL LIMITED ...RESPONDENT (S)

JUDGMENT

B.R. GAVAI, J.

1. Leave granted.

2. The present appeals challenge the common judgment and

order dated 26th April, 2022 passed by the High Court of

Judicature at Madras (hereinafter referred to as “High Court”), in Signature Not Verified Crl. O.P. Nos. 3470 & 5767 of 2019 and Crl. M.P. Nos. 2224, Digitally signed by Deepak Singh Date: 2024.03.15 17:24:07 IST

2225 & 3255 of 2019, whereby the High Court rejected the prayer Reason:

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for quashing of C.C. Nos. 3151 & 3150 of 2017, on the file of

learned XVIII Metropolitan Magistrate, Saidapet, Chennai (now

transferred to the learned Metropolitan Magistrate, Fast Track

Court-III, Saidapet, Chennai), in connection with the offence

punishable under Section 138 read with Section 142 of the

Negotiable Instruments Act, 1881 (hereinafter referred to as “the

N.I. Act”).

3. The facts, in brief, giving rise to the present appeals are as

follows:

3.1 M/s. Bharti Airtel Limited (hereinafter referred to as,

“complainant” or “respondent”), is a company engaged in the

business of providing telecommunication services, under a

license issued by the Government of India, in various telecom

circles in India.

3.2 One M/s. Fibtel Telecom Solutions (India) Private Limited

(hereinafter referred to as, “Fibtel Telecom Solutions” or

“Company”), a company registered with the Telecom Regulatory

Authority of India (TRAI) as a telemarketer, had approached the

2 respondent intending to obtain telecom resources for the purpose

of transactional communication and requested the complainant

for allotment of telecom resources for the said purpose. One

Manju Sukumaran Lalitha is the Director & Authorized Signatory

of Fibtel Telecom Solutions and one Susela Padmavathy Amma,

the appellant herein, is the Director of Fibtel Telecom Solutions.

3.3 Based on the representation made by Fibtel Telecom

Solutions, the respondent had agreed to provide the required

services, whereupon the parties entered into a Service

Agreement, vide which Fibtel Telecom Solutions had to pay Rs.

14,00,000/- as fixed monthly recurring charges to the

respondent. It is the thus the case of the respondent that Fibtel

Telecom Solutions owes a sum of Rs. 2,55,08,309/-, in lieu of the

service provided to it by the respondent.

3.4 However, the grievance of the respondent is that in-spite of

regular follow-ups and reminders, Fibtel Telecom Solutions failed

and neglected to clear the respondent’s dues. Only thereafter,

upon repeated demands made by the respondent, Fibtel Telecom

3 Solutions furnished five post-dated cheques to the complainant,

on 17th June 2016, details of which are as given below:

Sr. No. Cheque No. Cheque Dated Cheque Amount

1 414199 25.06.2016 Rs. 25,00,000/-

2 414196 31.08.2016 Rs. 50,00,000/-

3 414204 31.08.2016 Rs. 80,00,000/-

4 414195 31.07.2016 Rs. 45,00,000/-

5 414205 30.09.2016 Rs. 80,00,000/-

3.5 On deposit of the cheque mentioned at Sr. No. 1 in the table,

bearing cheque no. 414199 and dated 25th June 2016, by the

respondent, the said cheque was returned to it unpaid with

reason “payment stopped by drawer”. Aggrieved thereby, the

respondent issued a legal notice to Fibtel Telecom Solutions, on

receipt of which & following an oral agreement between them, a

payment schedule was agreed to and a cheque for an amount of

Rs. 25,00,000/- drawn by Fibtel Telecom Solutions was

honoured by it. However, when the complainant deposited the

4 remaining four cheques as mentioned at Sr. No. 2 to 5 in the

table, the same were returned to it unpaid with reason “payment

stopped by drawer”. Details of deposit & return of cheques are as

given below:

Cheque Cheque Cheque Legal Reply No. Presented Returned Notice On On

414196 23.09.2016 26.09.2016 13.10.2016 12.11.2016

414204 23.09.2016 26.09.2016 13.10.2016 12.11.2016

414195 25.10.2016 26.10.2016 09.11.2016 No reply

414205 17.10.2016 18.10.2016 10.11.2016 29.11.2016

3.6 Accordingly, the respondent filed two complaints under

Section 190(i)(a) of the Code of Criminal Procedure, 1973 (“CrPC”

for short) for offences punishable under Section 138 & 142 of the

N.I. Act, being C.C. No. 3151 of 2017 dated 30th November, 2016

and C.C. No. 3150 of 2017 dated 23rd December, 2016, before the

learned XVIII Metropolitan Magistrate, Saidapet, Chennai.

5 3.7 Both the complaints have been filed against three accused

persons namely, Fibtel Telecom Solutions, arrayed as Accused

No. 1; Manju Sukumaran Lalitha, arrayed as Accused No. 2 &

Susela Padmavathy Amma, the appellant herein, arrayed as

Accused No. 3.

3.8 Accused No. 3, who is a female senior citizen and the

Director of Fibtel Telecom Solutions, filed Crl. O.P. No. 3470 of

2019 against C.C. No. 3151 of 2017 & Crl. O.P. No. 5767 of 2019

against C.C. No. 3150 of 2017, before the High Court under

Section 482 of the CrPC for quashing of the criminal complaints

qua her.

3.9 Vide impugned judgment and order, dated 26th April, 2022,

the High Court dismissed Crl. O.P. Nos. 3470 & 5767 of 2019

and Crl. M.P. Nos. 2224, 2225 & 3255 of 2019, but directed the

concerned trial court to dispose of the case within a period of

three months.

6 3.10 Aggrieved by the rejection of the petition for quashing of

criminal complaints, the appellant herein filed the present

appeal.

3.11 Vide order dated 12th December 2022, this Court had issued

notice and stay of further proceedings qua the appellant was

granted.

4. We have heard Shri Manoj V. George, learned counsel for

the appellant and Shri Lakshmeesh S. Kamath, learned counsel

appearing for the respondent.

5. Shri Manoj V. George, learned counsel for the appellant

submitted that the appellant is an aged-lady and was not

involved in the day-to-day affairs of the Company. It is submitted

that even in the complaint there are no averments that the

appellant was in-charge of day-to-day affairs of the Company. It

is further submitted that the appellant was also not a signatory

to the cheque in question. It was only the accused No.2 who was

the signatory to the cheque. It is, therefore, submitted that the

High Court has grossly erred in not allowing the petition for

7 quashing of criminal complaints qua the appellant. Learned

counsel relied on the judgments of this Court in the cases of N.K.

Wahi vs. Shekhar Singh and others1, S.M.S.

Pharmaceuticals Ltd. vs Neeta Bhalla and another2 Ashoke

Mal Bafna vs. Upper India Steel Manufacturing and

Engineering Company Limited3, Krishi Utpadan Mandi

Samiti and others vs Pilibhit Pantnagar Beej Ltd. and

another4 and Laxmi Dyechem vs. State of Gujarat and

others5 in support of his submissions.

6. Shri Lakshmeesh S. Kamath, learned counsel for the

respondent, on the contrary, submitted that the learned judge of

the High Court has rightly, after considering the material on

record, dismissed the petition for quashing of criminal

complaints qua the appellant. It is submitted that the grounds

raised are the defense of the accused and it can only be raised at

1 (2007) 9 SCC 481 2 (2005) 8 SCC 89 3 (2018) 14 SCC 202 4 (2004) 1 SCC 391 5 (2012) 13 SCC 375

8 the stage of the trial. It is, therefore, submitted that no

interference is warranted in the present appeal.

7. In the case of State of Haryana vs. Brij Lal Mittal and

others6, 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:

“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 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

6 (1998) 5 SCC 343

9 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 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.”

8. 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 was also responsible to the company for

the conduct of its business.

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

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,

10 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. …..”

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10. It was held that merely because a person is a director of a

company, it is not necessary that he is aware about the day-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 charge of 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.

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11. In the case of Pooja Ravinder Devidasani vs. State of

Maharashtra and another7 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 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

7 (2014) 16 SCC 1

13 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.

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.

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

21. In Sabitha Ramamurthy v. R.B.S. Channabasavaradhya [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

15 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 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.”

12. It could thus clearly be seen that this Court has held that

merely reproducing the words of the section without a clear

16 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.

13. A similar view has previously been taken by this Court in

the case of K.K. Ahuja vs. V.K. Vora and another8.

14. In the case of State of NCT of Delhi through Prosecuting

Officer, Insecticides, Government of NCT, Delhi vs. Rajiv

Khurana9, 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 business of the company and how and in what manner he is responsible or liable.”

8 (2009) 10 SCC 48 9 (2010) 11 SCC 469

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15. 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 commission of an offence will be liable for criminal action. (See Pooja Ravinder Devidasani v. State of Maharashtra [Pooja Ravinder Devidasani v. State of Maharashtra, (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 Director showing as to how and in what manner

18 the Director was responsible for the conduct of the business of the Company.”

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

Lalankumar Singh and others vs. State of Maharashtra10 to

which one of us (B.R. Gavai, J.) was a party.

17. In the light of this settled legal position, let us examine the

averments made in the complaints.

18. It will be relevant to refer to para 16 of the complaint bearing

No. CC 3151/2017 filed by the respondent before the Court of

XVIII Metropolitan Magistrate, Saidapet, Chennai dated 30th

November 2016, which reads thus:

“16. The Complainant states that the Accused has an intention of cheating the Complainant. The 2nd and 3rd Accused herein has no intention to pay the dues that they owe to the Complainant. Instead, making the complainant believe that the same would be paid and through which trying to push the liability to future. It is also pertinent to note that the 2nd and 3rd of the Accused herein are the Directors, promoters of the 1st Accused being the Company. The 2nd of the Accused herein is the authorized signatory, who is in-charge

10 2022 SCC OnLine SC 1383

19 of and responsible for the day to day affairs of the Company, the 1st Accused.”

19. It can thus be seen that the only allegation against the

present appellant is that the present appellant and the accused

No.2 had no intention to pay the dues that they owe to the

complainant. It is stated that the 2nd accused and the 3rd accused

(appellant herein) are the Directors, promoters of the 1st accused

being the Company. It is further averred that the 2nd accused is

the authorized signatory, who is in-charge of and responsible for

the day-to-day affairs of the Company, i.e., the 1st accused.

20. It can thus be clearly seen that there is no averment to the

effect that the present appellant is in-charge of and responsible

for the day-to-day affairs of the Company. It is also not the case

of the respondent that the appellant is either the Managing

Director or the Joint Managing Director of the Company.

21. It can thus clearly be seen that the averments made are not

sufficient to invoke the provisions of Section 141 of the N.I. Act

qua the appellant.

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22. In the result, we find that the present appeals deserve to be

allowed. It is ordered accordingly. The judgment and order

passed by the High Court dated 26th April, 2022 is quashed and

set aside. The proceedings in CC Nos. 3151 and 3150 of 2017 on

the file of learned XVIII Metropolitan Magistrate, Saidapet,

Chennai (now transferred to the learned Metropolitan Magistrate,

Fast Track Court-III, Saidapet, Chennai) in connection with the

offence punishable under Section 138 read with Section 142 of

the N.I. Act are quashed and set aside qua the present appellant.

…….........................J. [B.R. GAVAI]

…….........................J. [SANDEEP MEHTA] NEW DELHI;

MARCH 15, 2024

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