* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on : 18.03.2024
% Pronounced on : 30.04.2024
+ CRL.M.C. 2126/2023, CRL.M.A. 8067/2023
CRL.M.C. 2127/2023, CRL.M.A. 8069/2023
CRL.M.C. 2128/2023, CRL.M.A. 8071/2023
CRL.M.C. 2129/2023, CRL.M.A. 8073/2023
CRL.M.C. 2130/2023, CRL.M.A. 8075/2023
CRL.M.C. 2131/2023, CRL.M.A. 8077/2023
CRL.M.C. 2132/2023, CRL.M.A. 8079/2023
RASHMI GOYAL ..... Petitioner
Through: Ms. Shilpa Sharma, Advocate.
versus
M/S MAHALAXMI FABRICS ..... Respondent
Through: Mr. Vishwendra Verma and Ms.
Shivali, Advocates.
CORAM:
HON'BLE MR. JUSTICE MANOJ KUMAR OHRI
JUDGMENT
1. By way of present petitions filed under Section 482 Cr.P.C., the
petitioner seeks quashing of criminal complaints instituted under Section
138 read with Section 141 of the Negotiable Instruments Act (hereinafter,
) as well as the summoning order dated 28.01.2020 passed in all
‘NI Act’
these criminal complaints (hereinafter, ).
‘subject complaints’
2. Considering that the criminal complaints arise out of the same
transactions involving the same parties and since common arguments have
been addressed from both the said, the present matters are taken up for
CRL. M.C. Nos. 2126, 2127, 2128, 2129, 2130, 2131, 2132
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Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:01.05.2024
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consideration together and disposed of vide this common judgement.
3. Pithily put, the facts of the case, as discernible from the complaints,
are that the respondent company M/s Mahalaxmi Fabrics is engaged in the
business of manufacturing jeans. It is alleged that the petitioner
Men’s
alongwith certain other individuals (arrayed as accused Nos.2 to 6/accused
persons in the said complaints) approached the respondent, on behalf of the
accused company/City Life Retails Pvt. Ltd., requesting the respondent to
supply mens jeans to the accused company as per its requirement. At the
same time, an assurance was given that payments under the bills would be
made without delay. On the said assurance, respondent supplied the goods
from time to time and raised bills qua each transaction, which were duly
received and acknowledged by the accused persons.
Subsequently, in order to discharge their liability under the bills
raised, certain cheques of varied amount ( ) were issued
‘subject cheques’
during July-September, 2019. Upon presentation, the subject cheques were
dishonoured and consequently, distinct demand notices qua each of the
subject cheques were issued. Upon failure to repay the amount, the present
criminal complaints came to be filed.
4. As per the material placed on record, the petitioner is sought to be
made vicariously liable for the offence under Section 138 NI Act, by
describing her as a Director of the accused company and that it was upon her
assurance that the goods were provided. Further, she had also assured that
the subject cheques would be duly encashed. Thus, upon their dishonour, the
petitioner becomes vicariously liable in terms of Section 141 NI Act.
5. Learned counsel for the petitioner submits that the petitioner has been
wrongly implicated in the present matters inasmuch as she was never a
CRL. M.C. Nos. 2126, 2127, 2128, 2129, 2130, 2131, 2132
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of 2023 Page 2 of 10
Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:01.05.2024
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Director in the accused company. It has been stated that she had been
appointed as a Company Secretary in the accused company w.e.f.
05.01.2019. Reference in this regard has been made to the letter of
appointment dated 15.12.2017, letter of consent issued by the petitioner
dated 30.12.2018, extract of the meeting of the Board of Directors of the
accused company dated 05.01.2019 as well as Form No. DIR-12. A
cumulative reading of the same would show that the petitioner was
appointed as a Company Secretary. It is further argued that the petitioner
had duly resigned from the position of Company Secretary vide letter dated
14.10.2019 addressed to the Board of Directors of the accused company and
reference in this regard has also been made to Form No. DIR-12.
6. Even otherwise, it has been argued that the petitioner cannot be roped
in the said complaint cases based upon the principles of vicarious liability
under Section 141 inasmuch as the necessary averments in terms of the said
provision have not been made in the complaints. Concededly, the petitioner
is neither the authorized signatory of the accused company nor has she
signed the subject cheques. Further, the demand notice statedly issued by the
respondent was never received by the petitioner. Lastly, it is submitted that
the summoning order has been passed in a mechanical manner and without
due consideration of the facts of the case.
7. Learned counsel for the respondent, on the other hand, has disputed
the authenticity of certain documents relied upon by the petitioner. It is
further argued that even if the said documents are taken at their face value,
they raise certain issues that require trial and due appreciation of the
evidence led by the parties. This Court, in its jurisdiction under Section 482
Cr.P.C. cannot adjudicate upon such ‘triable issues’ inasmuch as the same
CRL. M.C. Nos. 2126, 2127, 2128, 2129, 2130, 2131, 2132
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Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:01.05.2024
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Further, the
would amount to holding of a ‘mini trial’, which is unwarranted.
presumption against the petitioner under Sections 118(a) and 139 of NI Act
can only be rebutted by adducing evidence. In this regard, reference is made
to the decisions in State of U.P. v. Akhil Sharda & Ors. 1 and Rajeshbhai
2
Muljibhai Patel & Ors. v. State of Gujarat & Anr.
8. It is further stated that the necessary averments have been made qua
the petitioner inasmuch as the complaints clearly state that the petitioner
alongwith the other accused persons had approached the respondent
regarding supply of goods and had provided assurance of due payment of
the bills raised. Further, at the time of issuance of the subject cheques, the
petitioner alongwith the other accused persons had assured that the same
would be duly encashed. Insofar as the receipt of legal notice is concerned, it
is stated that the demand notice had been duly served, which is evidenced
from the postal documents.
9. Since the entire matter hinges on the aspect of vicarious liability of
the petitioner in terms of Section 141 NI Act, it is deemed apposite that the
same is reproduced for easy reference:-
141. Offences by companies. (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…
(2) Notwithstanding anything contained in sub-section (1), where
any offence under this Act has been committed by a company and
it is proved that the offence has been committed with the consent
1 2022 SCC OnLine SC 820
2 (2020) 3 SCC 794
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Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:01.05.2024
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or connivance of, or is attributable to, any neglect on the part of,
any director, manager, secretary or other officer of the company,
such director, manager, secretary or other officer shall also be
deemed to be guilty of that offence and shall be liable to be
proceeded against and punished accordingly.”
10. Further, since the petitioner has contended that she was a Company
Secretary in the accused company, it is also essential to deal with the
position of Company Secretary in a company. Section 2(24) of the
Company S
Companies Act, 2013 provides that ‘ ecretary’ means any
individuals defined as such in Section 2(1)(c) of the Companies Secretaries
Act, 1980, which itself defined him/her as
“a person who is a member of the
. While no specific definition of Company Secretary has been
Institute”
provided, however Section 2(51) of the Companies Act, which deals with
‘Key Managerial Personnel’ mentions company secretary as one such
personnel. Section 204 of the Companies Act provides for the functions of
-
‘Company Secretary’. The said section reads as under:
205. Functions of company secretary-
“
(1) The functions of the company secretary shall include, (a) to
—
report to the Board about compliance with the provisions of this
Act, the rules made thereunder and other laws applicable to the
company; (b) to ensure that the company complies with the
applicable secretarial standards; (c) to discharge such other
duties as may be prescribed…
(2) The provisions contained in section 204 and section 205 shall
not affect the duties and functions of the Board of Directors,
chairperson of the company, managing director or whole-time
director under this Act, or any other law for the time being in
force.”
11. Further, as per the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014, the duties of the Company Secretary
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Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:01.05.2024
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have been provided as under:-
• Provide Directors of the company guidance as they may require, with
regard to their duties, responsibilities and powers;
• Facilitate the convening of meetings and attend Board, committee and
general meetings and maintain minutes of the meetings;
• Obtain approval from the Board, general meeting, the government,
and such other authorities as required under the provisions of the Act;
• Represent before various regulators, and other authorities under the
Act in connection with discharge of various duties under the Act;
• Assist Board in the conduct of affairs of the company
• Assist and advise the Board in ensuring good corporate governance
and in complying with the corporate governance requirements and
best practices; and
• Discharge such other duties as may be specified under the Act or rules
12. From the discussion above, it can be culled out that the Company
Secretary
is a ‘key managerial personnel’ who performs secretarial functions
on behalf of the Company to ensure that the secretarial compliances are
made by the Company. The statutory role that a Company Secretary
performs does not include “conducting the business of the Company” of the
kind envisaged in Section 141, for such an individual to be made vicariously
liable.
13. A Coordinate Bench of this Court in Madan Aggarwal v. State 3
observed that:-
“xxx
3 2006 SCC OnLine Del 121
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Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:01.05.2024
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9… In my view, the role of the Company Secretary is
distinguishable and he is a mere employee of the company. He
was neither a Director nor signatory to the cheque. The duties of
the Company Secretary are well defined. The Court in that
matter opined that since employing Company Secretary is
compulsory and he has mainly to act upon the policy and
resolutions of the company he, therefore, has no active role
regarding the demand of financial assistance and issue of
cheque. I am also of the view that the Company Secretary has no
active role in the passing of resolutions and the policy decisions
of the company for seeking financial assistance or issuing
cheques and he is rather an outsider and mere employee of the
company.
xxx”
14. Concededly, the factum of transaction between the accused
persons/company and respondent, the issuance of the subject cheques as
well as their dishonour are not disputed. The only point of contention in the
present matters relate to the exact role of the petitioner in the accused
company and her consequent liability for the offence under Section 138 NI
Act. While the petitioner has been arrayed as an accused in the
aforementioned criminal complaints, it has been argued on behalf of the
petitioner that she was a Company Secretary in the accused company. In
support of her contention, she has presented various documents, including
Form No.DIR-12. The respondent, in its reply, has in a manner admitted to
the position of the petitioner being a Company Secretary, however, it
continues to contend that she is liable owing to the assurances advanced by
accused persons qua the payment of bills raised as well as encashment of the
subject cheques. Noticeably, such averments are missing from the complaint
filed under NI Act.
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of 2023 Page 7 of 10
Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:01.05.2024
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15. Thus, indisputably, it can be observed that the petitioner was
employed in the company as a Company Secretary. Once the same is
established, the question that arises for consideration is whether the
petitioner can be made vicariously liable in terms of Section 141 NI Act. A
perusal of the subject complaints would show that nowhere in the said
complaints has the respondent averred that the petitioner was in-charge of,
and responsible for the conduct of the business of the company. The word
-
‘in charge of a business’ has been interpreted to mean a person having
4
overall control of the day-to-day business of the company. In the ordinary
course of business, it cannot be said that the petitioner, who was acting as a
Company Secretary, would be in-charge of the day-to-day affairs of the
company, as required in terms of Section 141(1). Thus, the petitioner cannot
be vicariously liable in terms of Section 141(1).
Insofar as Section 141(2) is concerned, for the petitioner to be made
liable in terms of the said provision, it needs to be shown that there was
consent, connivance or neglect on her part, in the issuance as well as the
dishonour of the subject cheques. A reading of the above-mentioned extract
would show that the petitioner (arrayed as accused No.6 in the subject
complaints) has been impleaded based upon sweeping allegations and bald
averments, stating therein that based upon the assurances provided by the
accused persons, respondent supplied the goods as well as accepted the
subject cheques in discharge of the liability. Even if the said averments are
taken at their face value, they do not appear to be adequate inasmuch as
these averments do not particularly address/show the
4 Girdhari Lal Gupta v. B.H. Mehta, (1971) 3 SCC 189
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Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:01.05.2024
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consent/connivance/neglect on the part of the petitioner in issuance or
dishonour of the cheque.
16. In S.P. Mani and Mohan Dairy v. Dr. Snehlatha Elangovan 5 , while
dealing with the distinction between Section 141(1) and 141(2) as well as
the requisite evidence in their regard, the Supreme Court observed:-
“xxx
28. While the essential element for implicating a person under
sub-section (1) is his or her being in charge of and responsible to
the company in the conduct of its business at the time of
commission of the offence, the emphasis in sub-section (2) is
upon the holding of an office and consent, connivance or
negligence of such officer irrespective of his or her being or not
being actually in charge of and responsible to the company in the
conduct of its business. Thus, the important and distinguishing
feature in sub-section (1) is the control of a responsible person
over the affairs of the company rather than his holding of an
office or his designation, while the liability under sub-section (2)
arises out of holing an officer and consent, connivance or
neglect.
xxx
30. As for the requisite evidence, the burden upon the
prosecution would be discharged under sub-section (1) when a
person is proved to be in charge of and responsible to the
company in the conduct of its business and would shift upon the
accused to prove that he was ignorant or diligent, if that be his
defence; whereas under sub-section (2) the prosecution would be
required to allege and prove the consent, connivance or neglect
and holding of the officer by the accused. There is nothing to
suggest that the same person cannot be made to fact the
prosecution either under sub-section (1) or sub-section (2) or
both.
xxx”
5 (2023) 10 SCC 685
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Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:01.05.2024
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17. In view of the facts of the present case including the fact that the
petitioner was employed as a Company Secretary in the accused company as
well as the position of law w.r.t Section 141 NI Act and the application of
the same to the subject complaints as extracted above, it can be observed
that the subject complaints are bereft of the adequate averments against the
petitioner alleging the Petitioner’s involvement in the conduct of the
business of the Company beyond her statutory role as a Company Secretary,
more particularly, in relation to the transaction pursuant to which cheque in
question was issued. Neither, is there any averment that the offence has been
committed with the consent or connivance of is attributable to any neglect
on the part of the Petitioner, so as to potentially make her liable under Sub-
section (2) of Section 141.
18. There is no cavil with the proposition of law stated in the decisions
cited by the respondent but in the absence of appropriate and adequate
averments against the petitioner, and the fact that Petitioner’s impleadment
can only be in her capacity as a Company Secretary, the continuation of
proceedings against the petitioners would be nothing but an abuse of the
process of law.
19. Consequently, the present petitions are allowed and the criminal
complaints filed under Section 138 read with Section 141 NI Act are
quashed qua the petitioner. As a necessary sequitur, the summoning orders
dated 28.01.2020 issued in the said criminal complaints are also set aside.
Pending applications are disposed of as infructuous.
MANOJ KUMAR OHRI
(JUDGE)
APRIL 30, 2024/ga
CRL. M.C. Nos. 2126, 2127, 2128, 2129, 2130, 2131, 2132
Signature Not Verified
of 2023 Page 10 of 10
Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:01.05.2024
20:48:21