Allowed

Rajendra Bandaji Patil v. the Chikodi Mahila Co-Op Credcit Society Ltd.

Karnataka HC23 Feb 2021CRL.P/101191/2018

Case brief

AI extract

What is this about?

This court allowed a criminal petition under Section 482 Cr.P.C. to quash proceedings under Section 138 NI Act. Quashing was ordered because the complaint failed to specifically aver that petitioners were in charge of the society's administration or were signatories to the dishonoured cheque, per Section 141 NI Act and S.M.S. Pharmaceuticals precedent.

What did the court decide?

The entire proceedings pending in CC No.460/2016 against petitioners in C.C.No.460/2016 for offence under Section 138 of N.I.Act are quashed.

Rajendra Bandaji Patil Vs the Chikodi Mahila Co-Op… — Cheque Dishonour | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH

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DATED THIS THE 23^RD DAY OF FEBRUARY 2021

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BEFORE

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THE HON’BLE MR. JUSTICE P. KRISHNA BHAT

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CRL.P. NO.101191 OF 2018

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BETWEEN:

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1 . RAJENDRA BANDAJI PATIL

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AGE: 55 YEARS, OCC: BUSINESS, R/O. DATT NAGAR, VISHRAM BHAG, SANGALI, STATE MAHARASHTRA

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2 . ARUN BANDUJI HAWALDAR

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AGE: 59 YEARS, OCC: BUSINESS, R/O. BHAAT GADDI, MUDHOL, DISTRICT BAGALKOTE,

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3 . MANJUNATH THIMAPPA DESAI AGE: 30 YEARS, OCC: BUSINESS, R/O. AKKISAGAR, TQ: SAVADATTI, DISTRICT BELAGAVI.

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…PETITIONERS (By SRI. K L PATIL, ADVOCATE)

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AND

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THE CHIKODI MAHILA CO-OP CREDCIT SOCIETY LTD., CHIKODI, REP. BY MAHADEV MUTTEPPA GADAKARI,

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AGE: 28 YEARS, OCC: SERVICE, R/O: CHIKODI, TQ: CHIKODI, DIST: BELAGAVI

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…RESPONDENT

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(BY SRI. NEELENDRA D. GUNDE, ADVOCATE.)

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THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF CR.P.C., PRAYING TO QUASH THE ENTIRE PROCEEDINGS PENDING ON THE FILE OF PRL. CIVIL JUDGE AND JMFC COURT, CHIKODI IN C.C.NO.460/2016 REGISTERED FOR THE OFFENCES PUNISHABLE U/SEC.138 OF N.I. ACT, IN SO FAR THESE PETITIONERS ARE CONCERNED.

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THIS PETITION COMING ON FOR ADMISSION THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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The petitioners in this petition filed under Section 482 of Cr.P.C. pray for quashing of all further proceedings in C.C.No.460/2016 for offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (for short hereinafter referred to as the N.I. Act.), on the file of the learned Principal Civil Judge and JMFC, Chikodi.

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The respondent filed a complaint under Section 138 of the N.I. Act before the Principal Civil Judge and JMFC, Gokak, in PCR No.125/2015 against Sri. Shivasagar

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Multipurpose Souhard Sahakari Ltd., Udapudi, Ramdurg Taluk, Belgaum District and several others. The present petitioners are accused Nos. 3, 4 and 7 in the said complaint. The court below recorded the sworn statement on behalf of the complainant and after scrutiny of the records, took cognizance of the offence punishable under Section 138 of N.I. Act against all the accused named in the complaint.

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The short point urged before me by the learned counsel for the petitioners is that, admittedly the account on which the cheque in question was issued, was maintained by Sri. Shivasagar Multipurpose Souhard Sahakari Ltd., Udapudi, which is a registered Souhard Sahakari society and the present petitioners are not in charge of the day to day administration of the society and they are not signatories to the cheque in question. He, therefore, submitted that they cannot be prosecuted for dishonour of a cheque issued by accused No.1.

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Learned counsel Sri. Neelendra Gunde

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appearing for the respondent – complainant, however submits that petitioner No.1 had given an undertaking to pay all the dues of the Society to the complainant and he had also given an indemnity bond in that behalf and therefore, this petition is liable to be dismissed.

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There is no dispute about the fact that the account on which the cheque was drawn and which is the basis for filing of the complaint under Section 138 of N.I. Act is maintained by accused No.1 which is Sri. Shivasagar Multipurpose Souhard Sahakari Ltd. – a Society registered under The Karnataka Souharda Sahakari Act, 1997. There is no averment in the complaint that these petitioners are either in charge of the affairs or administration of the said Society or that they are signatories to the cheque in question. The legal position is well settled in view of Section 141 of N.I. Act as well as the construction placed on the same by the Hon’ble Supreme Court in S.M.S. Pharmaceuticals Ltd.

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vs. Neeta Bhalla and others , (2005) 8 SCC 89 . In paras 18 and 19 of the above decision it is held as follows:

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“18. To sum up, there is 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 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 spelled 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 spelled 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

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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.

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In view of the above discussion, our answers to the questions posed in the reference are as under :

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(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. Without this averment

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being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.

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(b) The answer to the question posed in sub-para (b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases.

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(c) The answer to Question (c) has to be in the affirmative. The question notes that the managing director or joint managing director would be

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admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141.”

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The above view has been reiterated by the Hon’ble Supreme Court, time and again, and recently in AIR 2020 Supreme Court 3890, Shailendra Swarup vs. Deputy Director, Enforcement Directorate . In that

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view of the matter, in so far as the present petitioners are

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concerned, the complaint filed under Section 138 of N.I.Act is wholly misconceived on account of lack of averments in the complaint that they are either in charge

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of the affairs or the administration of the Society concerned, or that they are signatories to the cheque.

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Hence, the following :

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The above petition is allowed.

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The entire proceedings pending on the file of the Principal Civil Judge and JMFC, Chikodi, in CC No.460/2016 registered for the offence punishable under Section 138 of N.I.Act, in so far as these petitioners are concerned is quashed.

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Sd/JUDGE

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Mgn/-

Rajendra Bandaji Patil v. the Chikodi Mahila Co-Op Credcit Society Ltd.

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Rajendra Bandaji Patil v. the Chikodi Mahila Co-Op Credcit Society Ltd.

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