The Supreme Court bench comprising Justices Indira Banerjee and J.K. Maheshwari on Monday was hearing an Appeal on the inherent powers of the High Court under section 482 of the Cr.P.C. in the case of dishonour of cheque and held that Every person connected with the company does not fall within the ambit of Section 141 of the Negotiable Instruments Act, 1881.
Section 482 of the Cr.P.C. protects the inherent power of the High Court to make such orders as may be necessary to give effect to any order under the Cr.P.C or to prevent abuse of the process of any Court or otherwise secure the ends of justice. While it is true that inherent jurisdiction under Section 482 should be exercised sparingly, carefully and with caution and only when such exercise is justified by the tests specially laid down in the Section, the Court duty bound to exercise its jurisdiction under Section 482 of the Cr.P.C. when the exercise of such power is justified by the tests laid down in the said Section. Jurisdiction under Section 482 of the Cr.P.C. must be exercised if the interest of justice so requires, the Bench observed.
The Supreme Court bench noted, that there can be no doubt that in deciding a Criminal Revisional Application under Section 482 of the Cr.P.C. for quashing a proceeding under Section 138/141 of the NI Act, the laudable object of preventing bouncing of cheques and sustaining the credibility of commercial transactions resulting in enactment of the said Sections has to be borne in mind. The provisions of Section 138/141 of the NI Act create a statutory presumption of dishonesty on the part of the signatory of the cheque, and when the cheque is issued on behalf of a company, also those persons in charge of or responsibility for the company or the business of the company. Every person connected with the company does not fall within the ambit of Section 141 of the Negotiable Instruments Act, 1881.
The SC Bench noted, that the High Court rightly held that when a complaint was filed against the Director of a company, a specific averment that such person was in charge of and responsible for the conduct of the business of the company was an essential requirement of Section 141 of the NI Act. The High Court also rightly held that merely being a Director of the company is not sufficient to make the person liable under Section 141 of the NI Act. The requirement of Section 141 of the NI Act was that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company. This has to be averred as a fact.
The High Court also rightly held that the Managing Director or Joint Managing Director would admittedly be in charge of the company and responsible to the company for the conduct of its business 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 the business of the company and they get covered under Section 141 of the NI Act. A signatory of a cheque is clearly liable under Section 138/141 of the NI Act.
The Supreme Court bench observed that the High Court, however, failed to appreciate that none of these Appellants was Managing Director or Joint Managing Director of the Accused Company, nor they were signatories of the cheque which was dishonoured.
A Director of a company who was not in charge or responsible for the conduct of the business of the company at the relevant time, will not be liable under those provisions. The liability under Section 138/141 of the NI Act 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. It would be a travesty of justice to drag Directors, who may not even be connected with the issuance of a cheque or dishonour thereof. The materials on record clearly show that these Appellants were independent, non-executive Directors of the company. A non-Executive Director is not involved in the day-to-day affairs of the company or in the running of its business. Such Director is in no way responsible for the day-to-day running of the Accused Company, the Bench observed.
The Supreme Court was of the considered view, that the High Court erred in law in not exercising its jurisdiction under Section 482 of the Cr.P.C in the facts and circumstances of this case to grant relief to the Appellants.
For the reasons discussed above, the appeal was allowed. The judgment and order of the High Court were set aside.
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