Tamil Nadu News Print & Papers Ltd. vs D.Karunakar .

NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL No(s). 1846-1847 OF 2008

TAMIL NADU NEWS PRINT & PAPERS LTD. Appellant(s)

VERSUS

D.KARUNAKAR & ORS. Respondent(s)

J U D G M E N T

ANIL R. DAVE, J.

1. In these appeals, the order dated 12th April, 2007,

passed by the High Court of judicature at Madras in Crl.

O.P.Nos. 1222 & 4098 of 2007 and Crl. M.P. No. 1 of 2007,

has been challenged.

2. By virtue of the impugned order, the High Court has

allowed the petitions filed under the provisions of Section

482 of the Code of Criminal Procedure, whereby proceedings

in pursuance of C.C. No. 3022 of 2000 on the file of

Signature Not Verified learned IX Metropolitan Magistrate, Saidpet, Chennai in Digitally signed by Jayant Kumar Arora Date: 2015.08.17 14:45:21 IST respect of some of the accused have been quashed. Reason: 2

3. The facts giving rise to the present appeals, in a

nutshell, are as under :-

The appellant is a company manufacturing news prints

and papers. It had business dealings with M/s Manito

Electronics Pvt. Ltd., Accused No.1, a company of which

Accused Nos. 2 to 9 were the Directors. Though, all the

accused had not filed quashing petitions, the High Court

has quashed the proceedings in respect of all the accused,

other than Accused No. 1, which is the company and Accused

No. 2, who was the Managing Director of the company, who

had issued the cheque.

A cheuqe for Rs.57,68,524/- (Fifty Seven Lakhs Sixty

Eight Thousand Five Hundred and Twenty Four) had been

issued on behalf of Accused No. 1 company by Accused No. 2,

the Managing Director to the appellant company. As the

cheque had not been honoured and in spite of a statutory

notice issued, no amount in respect of the said cheque had

been paid to the present appellant, a complaint, being CC

No. 3022 of 2000 had been filed in the Court of IX

Metropolitan Magistrate, Saidpet, Chennai.

4. The present respondents had filed two petitions under

Section 482 of the Code of Criminal Procedure for quashing

the said complaint, which the High Court has allowed to the

limited extent, as stated hereinabove. 3

5. The present appellant, in whose favour the cheque had

been issued by Accused No. 2, on behalf of Accused no.1

company, has been aggrieved by the order whereby the

proceedings have been quashed in part by the High Court and

therefore, the present appeals have been filed by the

complainant.

6. Though served, no one has appeared on behalf of the

respondents. It appears from the record that notice issued

to Accused no.1 company was refused and whereabouts of all

the Directors could not be known. In these circumstances,

a paper publication was effected yet none has appeared for

the respondents.

7. It has been submitted by the learned counsel appearing

for the appellant that the High Court was not right in

quashing the proceedings in part so far as Accused Nos.3 to

10 are concerned. He has referred to Section 141(1) of the

Negotiable Instruments Act, 1881 (hereinafter referred to

as, “the Act”), which reads as under :-

“141(1) If the person committing an offence under Section 138 is 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 :

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Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence :

Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.” (Emphasis supplied)

8. It has been submitted by the learned counsel for the

appellant that in the complaint, an averment has been made

to the effect that all the accused were Directors and

incharge of day-to-day business of Accused No. 1 – company

and therefore, they are liable to be punished under the

provisions of Section 138 of the Act.

9. It has been further submitted by the learned counsel

for the appellant that the High Court is not right when it

has observed in paragraph 7 of the impugned order that “the

complainant has not whispered a word about the position held

by the petitioners herein and there is not even a single

statement to the effect that the petitioners are the

Directors and as such they are in charge of the day to day 5

business of A1, the Company. It is merely stated that A3 to

A9 are involved and in charge of the business of A1, the

Company.”

10. The learned counsel has drawn our attention to the

Judgment delivered by this Court in the case of S.M.S.

Pharmaceuticals Ltd. Vs. Neeta Bhalla and Another reported

in (2005) 8 SCC 89. Paragraph 19(a) of the Judgment reads

as under :-

“19(a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint........”

11. The learned counsel has also submitted that, in fact,

an averment had been made in the complaint that Accused

Nos. 2 to 9 were Directors and were in day to day

management of the accused company. In spite of the

aforesaid fact, the High Court has made the aforesaid

observation that there was no such averment made against

Accused Nos. 3 to 10. According to him, the said view of

the High Court is not correct and therefore, this criminal

appeal deserves to be allowed.

12. We have carefully gone through the impugned order

passed by the High Court and the complaint filed on behalf 6

of the appellant.

13. Upon perusal of the complaint, we find that an averment

has been made to the effect that Accused Nos. 3 to 10 were,

in fact, in-charge of the day-to-day business of Accused

No. 1 – company.

14. It is an admitted position that simply because someone

is a Director in a company, he cannot be held responsible

in respect of a cheque issued on behalf of the company, but

if the concerned Director is in-charge of and is

responsible to the company for its conduct of business, he

can be held to be guilty of the offence under Section 138

of the Act and therefore, the High Court ought not to have

quashed the proceedings against such directors.

15. In our opinion, the High Court has committed an error

by making an observation that not a single statement was

made in the complaint to the effect that Accused Nos. 3 to

10 were in-charge of the day-to-day business of Accused No.

1 – company.

16. It is also pertinent to note that on behalf of the

accused company notice was refused and whereabouts of all

the Directors are not known. Notices served upon them in

normal course could not be served and therefore, by way of

substituted service, a paper publication was made and an

affidavit giving details about the publication has been 7

placed on record of this Court. In spite of the said fact,

no body has appeared on behalf of the respondents. This

fact also indicates the intention of the accused.

17. For the reasons stated hereinabove, in our opinion, as

there was an allegation to the effect that Accused Nos. 2

to 10 were involved in day-to-day business of Accused No. 1

– company, we see no reason for sparing them by the High

Court.

18. In these circumstances, the impugned order passed by

the High Court is set aside and the Criminal Appeals are

allowed.

19. It is also directed that the proceedings shall commence

as soon as possible so that they can come to an end at an

early date.

20. The Registry is directed to send an intimation of this

order to IX Metropolitan Magistrate, Saidpet, Chennai.

Record and proceedings, if sent to this Court, be returned

forthwith.

.......................J. [ ANIL R. DAVE ]

.......................J. [ AMITAVA ROY ]

New Delhi;

August 06, 2015.

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ITEM NO.101 COURT NO.3 SECTION IIA

S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS

Criminal Appeal No(s). 1846-1847/2008

TAMIL NADU NEWS PRINT & PAPERS LTD. Appellant(s)

VERSUS

D.KARUNAKAR & ORS. Respondent(s)

(with office report)

Date : 06/08/2015 These appeals were called on for hearing today.

CORAM : HON'BLE MR. JUSTICE ANIL R. DAVE HON'BLE MR. JUSTICE AMITAVA ROY

For Appellant(s) Mr. K. K. Mani, Adv.

Ms. T. Archana, Adv.

For Respondent(s) None present

UPON hearing counsel the Court made the following O R D E R

The Criminal Appeals are allowed in terms of the signed

non-reportable Judgment.

(Jayant Kumar Arora) (Sneh Bala Mehra) Sr. P.A. Assistant Registrar

(Signed non-reportable Judgment is placed on the file)