Every director is not automatically, vicariously liable for the offence committed by the company

IN THE HIGH COURT OF DELHI AT NEW DELHI
SUBJECT : CODE OF CRIMINAL PROCEDURE
RESERVED ON : 8th OCTOBER, 2013
DECIDED ON : 2nd DECEMBER, 2013
CRL.M.C. 838/2013 & CRL.M.A. 2711/2013

RAVINDER SINGH & ORS. …. Petitioners
Through : Mr.Jasmeet Singh, Advocate.

versus

BIGUR FINANCE LTD. ….Respondent
Through : Mr.Khalid Arshad, Advocate.

CORAM:
HON’BLE MR. JUSTICE S.P.GARG

S.P.GARG, J.

1. Petition under Section 482 Cr.P.C. has been preferred by the petitioners
for quashing of the summoning order dated 10.12.2012 and consequent
proceedings in Complaint Case No. 422/2001. The petition is contested by
the respondents. Counsel for the petitioners urged that they had paid `
52,65,000/- to the respondent by way of six drafts after settlement of all their
disputes. Petitioner No.1 (Ravinder Singh) had instituted a suit being
CS(OS) No. 343/2012 against Paramjit Singh, Director of the respondent to
claim ` 50,55,000/- paid in excess. After a series of negotiation, the parties
arrived at figure ` 52,65,000/- on the basis of various factors involved in the
loan transaction and the process of reconciliation of accounts. The
complainant settled the amount for ` 52,65,000/- and it was paid on
13.02.2012 before presentation of the cheques. Despite receiving the settled
amount in full and final satisfaction of all the claims, the respondent
presented the cheques in the bank and instituted proceedings under Sections
138 Negotiable Instruments Act which cannot be sustained. Petitioner No.2
was at no point of time In-charge of the affairs of the company and was not liable to be prosecuted under Section 138 Negotiable Instruments Act.
Counsel relied upon ‘Alliance Infrastructure Project Pvt. Ltd. & Ors. vs.
Vinay Mittal’, 2010 (2) Crimes 672. Respondent’s counsel urged that no
such payment as alleged was made pursuant to any settlement. The
petitioners are liable to pay ` 57,35,000/- towards the three cheques issued
by them.

2. It is not disputed that loan agreement dated 07.10.2010 was executed with
the respondent and ` 1,00,00,000/- was taken as loan on behalf of the
petitioner No.3 through petitioner No.1, its director. It is also not in dispute
that three cheques for a sum of ` 1,10,00,000/- were given to the respondent
which on presentation were dishonoured. Payment of ` 52,65,000/- is
admitted. It further reveals that prior to the payment of ` 52,65,000/-, the
respondent had already presented the cheques in question which were
dishonoured. Legal notice dated 27.02.2012 was served upon the petitioners
to make the payment of the total amount of three cheques within fifteen
days. Six demand drafts of various dates amounting to ` 52,65,000/- were
given on 01.03.2012. Allegedly, the petitioners did not pay the balance
amount of ` 57,35,000/- despite promise. It prompted the respondent to
institute proceedings under Section 138 Negotiable Instruments Act. The
cause of action to file proceedings under Section 138 Negotiable Instruments
Act had arisen in favour of the respondent prior to making of payment of `
52,65,000/- when the cheques in question were dishonoured for ‘insufficient
funds’. The citation is not applicable to the facts and circumstances of the
case as in the said case, after receiving partial payment, the complainant had
presented the cheques for the whole of the amount mentioned in the cheques.
The petitioners have not placed on record any cogent document to infer if
payment ` 52,65,000/- was in full and final settlement of all the claims. It is
a matter to be adjudicated during trial and disputed question of facts cannot
be resolved in the proceedings under Section 482 Cr.P.C. It would be
primarily and essentially within the domain of the Criminal Court to arrive
at on its own conclusion on appreciation of entire evidence.

3. Loan agreement was executed on behalf of the petitioner No. 3 by
petitioner No.1 (its director). The cheques in question were issued by
petitioner No.1, who is the signatory of the cheques. No specific role in
obtaining the loan and issuance of the cheques has been attributed to the
petitioner No.2 in the complaint case. There are no averments in the
complaint showing consent or connivance on his part. It is not averred as to
how petitioner No.2 being director in the company was in-charge and responsible to the company for the conduct of its business and how he was
liable for non-payment of the cheque amount. Petitioner No.2, simply by
being a director in the company, was not supposed to discharge day-to-day
functions on behalf of the company. There is no universal rule that a director
of a company is in-charge of its everyday affairs. Every director is not
automatically, vicariously liable for the offence committed by the company
– only the director / in-charge and responsible to the company for the
conduct of the business at the material time when offence was committed
would be liable. In the instant case, there are no specific allegations in the
complaint as to role played by petitioner No.2 in the transaction.

4. In the light of above discussion, petition filed by the petitioners is partly
allowed and proceedings against the petitioner No.2 (Manjit Singh) are
quashed. Trial Court shall proceed as per law against the petitioners No.1 &
3.

5. The petition stands disposed of accordingly. Pending application also
stands disposed of being infructuous.

Sd/-
(S.P.GARG)
JUDGE
DECEMBER 02, 2013

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