Trichur Cotton Mills Ltd. and Another Vs. Devarasetty Cotton and Another - Court Judgment

Excerpt:
criminal - complaint - sections 138 and 141 of negotiable instruments act, 1881 - petitioners sought to be prosecuted for offence under section 138 in pursuance of complaint - no specific allegations in complaint to effect that second petitioner is incharge of and responsible for business of company - not a valid ground to escape liability under section 141 - courts to have initial presumption of liability - second petitioner entitled to produce evidence against presumption. - all india services act, 1951.sections 8 & 11 & a.p. buildings (lease, rent and eviction) control rules, 1961, rule 5: [v.v.s. rao, g. yethirajulu & g. bhavani prasad, jj] refusal by landlord to receive rent - deposit of rent in court - held, a tenant has the option to take recourse to section 8 in case of refusal or evasion by landlord to receive rent and if landlord were to not name a bank or refuse even the money order of rent, the tenant can deposit the rent in accordance with sub-rules (1) to (3) of rule 5. the notice to person entitled to rent and proper maintenance of accounts of such deposits under sub-rules (4) and (5) of rule 5 are solely dependent on compliance with sub-rule (3) by the tenant. the payment or deposit of rent under section 11 read with sub-rule (6) of rule 5 arises only in respect of a tenant who did not take recourse to section 8 or section 9 before an application for eviction has been made against him in respect of any rent in arrears by date of that application, whereas in respect of rent that becomes subsequently due since date of application for eviction, the tenant is bound to pay or deposit regularly until termination of proceedings in order to enable him to contest the application. any violation of section 11(1) to (3) and sub-rule (6) of rule 5 makes the tenant liable for the adverse consequences under sub-section (4) of section 11. thus, the provisions of section 11 and sub-rule (6) of rule 5 are intended only to ensure the payment and deposit of rent including arrears during pendency and till termination of proceedings for eviction. the forfeiture of right of tenant to contest in case of default is to protect the rights and interests of landlord pending such an application for eviction, but not to confer any right on tenant to plead that all defaults committed by him prior to application for eviction can never be considered wilful, if he were to deposit all arrears of rent due within fifteen days under rule 5(6) read with sub-section (1) of section 11. the object and effect of section 11 and sub-rules (1) to (5) to rule 5, the former being for protection of landlord during pendency of eviction proceedings and the later being for protection of tenant to avoid any liability for eviction on ground of wilful default. consequently, while taking recourse to section 8 by tenant is optional, once that option is exercised, compliance with sub-rules (1) to (5) of rule 5 becomes mandatory in the sense that any non-compliance with prescribed procedure will positively indicate the wilful nature of default committed in paying or tendering rent as prescribed. while deposit of rent in terms of provisions of act and the rules amounts to valid tender of rent to landlord, the failure to comply with rule 5 (3) requiring delivery of a copy of the challan for deposit of rent in office of controller or appellate authority, as the case may be, so as to enable controller or appellate authority to cause maintenance of proper accounts under sub-rule (5) and give notice of deposit to person amounts to wilful default in making valid payment or lawful tender of the rent by the tenant to the landlord. thus, where a tenant obtains an order to deposit rent, same shall be deposited at least by the last day of the month following that for which rent is payable and rent challan shall be delivered in the office of controller within a reasonable time so that rent controller can take necessary action for service of notice of deposit under sub-rule (4) of rule 5 of the rules within seven days of such delivery. in the absence of compliance in so depositing rent and delivering challan in the office of controller, tenant shall be deemed to have committed wilful default.order1. this petition under section 482 cr.pc seeks to quash the proceedings in cc no.136 of 2000 on the file of the judicial first class magistrate, jammalamadugu, in which the petitioners herein are sought to be prosecuted for offence under section 138 of negotiable instruments act.2. the contention of the learned counsel for the petitioners is that inasmuch as the offence is said to have been committed by the 1st petitioner-company, there are no sufficient allegations in thecomplaint to fasten the criminal liability on the 2nd petitioner (a2) to bring the matter within the purview of section 141 of the said act. as there is no specific allegation in the complaint that the 2nd petitioner is incharge of and responsible to the business of the company, it is argued that in the absence of such an allegation, criminal liability cannot be attributed to the 2nd petitioner for the offence said to have been committed by the company, accused no.1 herein.3. it is true that there is no specific allegation in the complaint that a2 is incharge of and responsible to the business of the company and admittedly the cheque itself was issued by accused nos.3 and 4 and not by a2 (2nd petitioner herein). whether a person connected with a firm was incharge of and responsible to the affairs of the company is a question of fact. the learned counsel for the petitioners, however, contends that absence of specific allegation that the 2nd petitioner was incharge of and responsible to the company for the conduct of business of the company as contemplated under section 141 is fatal to the maintenance of the complaint and the proceedings, under these circumstances, have to be quashed. in support of his contention, he relies on the judgment of this court reported in g.l. modi and another v. xedd finance and investments pvt. ltd., : 1998(4)ald365 . the learned counsel more particularly relies on the observation in para 13 of the said judgment, which is extracted below:'in the instant case, admittedly the cheques were issued by the managing director of the 1st accused-company and in both the complaints, there are no specific allegation that these petitioners were incharge and responsible for the conduct of the business of the company at the time of alleged commission ofoffence. it is common knowledge that in a company or firm there may be sleeping partners or directors who arc admitted for the benefits only and they are not taken any interest or participate in the day-to-day business of the firm or company and they cannot be made liable for the offences committed by the managing partner or managing director. there may be civil liability on their part, but they should not be presented for criminal offences. hence, the proceedings against these petitioners are liable to be quashed.'4. these observations would indicate that in that case the directors other than the managing director were sought to be prosecuted in respect of bouncing of a cheque issued by the managing directors. coupled with this, there were no allegations that the said director were incharge of and responsible to the company for the business of the company. thus, the judgment rests on the footing that the prosecution in respect of persons, who were described as mere directors, the complaint could not be maintained in the absence of specific allegation that they were incharge of and responsible to the company for the business of the company. in the case on hand, the 2nd petitioner (a2) has been specifically described as the managing director of the company. in fact, it is not disputed that he is the managing director of the company. prima facie, a managing director of the company by nature of the very designation is presumed to be incharge of and responsible to the company for the business of the company. the principle and the basis of the decision in the judgment cited by the learned counsel is not applicable to this case inasmuch as the accused sought to be prosecuted in that case were mere directors and were not described as managing directors. when a managing director is sought to be prosecuted, in view ofpresumption arising from his status of managing director, absence of specific allegation as contemplated under section 141 cannot be considered significant. where a person is designated as managing director of a company, it is implicit that he is incharge of and responsible to the company for its business affairs. it is necessary to make a distinction between the managing director and other directors. in respect of other directors, they may or may not be incharge of and responsible to the company of the business affairs. some directors may be incharge of and responsible to the business of the company, some may be merely sleeping directors.5. thus, the proceedings against the 2nd petitioner cannot be quashed on the ground of absence of specific allegation as contemplated under section 141 of the said act for the reason that he is shown to be the managing director of the company, which raises an initial presumption that he is incharge of and responsible to the business of the company. however, as stated above, it is a question of fact and it is open to the 2nd petitioner to show that he was really not incharge of and responsible to the company for its business.6. as far as the 1st petitioner is concerned, the learned counsel for the petitioners fairly concedes that the 1st petitioner being a company, he does not press for quashing of the proceedings.7. under these circumstances, there are no grounds for quashing the proceedings under section 482 cr.pc. the petition is, accordingly, dismissed.8. the learned counsel for the petitioners, however, submits that the 1st petitioner company is located in kerala and the 2nd petitioner is also a resident ofkerala and that if he is required to attend the court every day, it may cause hardship to the petitioners. it is open to the petitioners to move an application before the magistrate for dispensing with personal attendance of the petitioners and for seeking permission to be represented by some other person or their advocate. on such application being filed, the learned magistrate shall allow the same with appropriate conditions that he deems proper.

Judgment:
ORDER

1. This petition under Section 482 Cr.PC seeks to quash the proceedings in CC No.136 of 2000 on the file of the Judicial First Class Magistrate, Jammalamadugu, in which the petitioners herein are sought to be prosecuted for offence under Section 138 of Negotiable Instruments Act.

2. The contention of the learned Counsel for the petitioners is that inasmuch as the offence is said to have been committed by the 1st petitioner-Company, there are no sufficient allegations in thecomplaint to fasten the criminal liability on the 2nd petitioner (A2) to bring the matter within the purview of Section 141 of the said Act. As there is no specific allegation in the complaint that the 2nd petitioner is incharge of and responsible to the business of the Company, it is argued that in the absence of such an allegation, criminal liability cannot be attributed to the 2nd petitioner for the offence said to have been committed by the Company, accused No.1 herein.

3. It is true that there is no specific allegation in the complaint that A2 is incharge of and responsible to the business of the Company and admittedly the cheque itself was issued by accused Nos.3 and 4 and not by A2 (2nd petitioner herein). Whether a person connected with a firm was incharge of and responsible to the affairs of the Company is a question of fact. The learned Counsel for the petitioners, however, contends that absence of specific allegation that the 2nd petitioner was incharge of and responsible to the Company for the conduct of business of the Company as contemplated under Section 141 is fatal to the maintenance of the complaint and the proceedings, under these circumstances, have to be quashed. In support of his contention, he relies on the Judgment of this Court reported in G.L. Modi and Another v. XEDD Finance and Investments Pvt. Ltd., : 1998(4)ALD365 . The learned Counsel more particularly relies on the observation in Para 13 of the said judgment, which is extracted below:

'In the instant case, admittedly the cheques were issued by the Managing Director of the 1st accused-company and in both the complaints, there are no specific allegation that these petitioners were incharge and responsible for the conduct of the business of the company at the time of alleged commission ofoffence. It is common knowledge that in a company or firm there may be sleeping partners or Directors who arc admitted for the benefits only and they are not taken any interest or participate in the day-to-day business of the firm or company and they cannot be made liable for the offences committed by the Managing Partner or Managing Director. There may be civil liability on their part, but they should not be presented for criminal offences. Hence, the proceedings against these petitioners are liable to be quashed.'

4. These observations would indicate that in that case the Directors other than the Managing Director were sought to be prosecuted in respect of bouncing of a cheque issued by the Managing Directors. Coupled with this, there were no allegations that the said Director were incharge of and responsible to the Company for the business of the Company. Thus, the Judgment rests on the footing that the prosecution in respect of persons, who were described as mere Directors, the complaint could not be maintained in the absence of specific allegation that they were incharge of and responsible to the Company for the business of the Company. In the case on hand, the 2nd petitioner (A2) has been specifically described as the Managing Director of the Company. In fact, it is not disputed that he is the Managing Director of the Company. Prima facie, a Managing Director of the Company by nature of the very designation is presumed to be incharge of and responsible to the Company for the business of the Company. The principle and the basis of the decision in the judgment cited by the learned Counsel is not applicable to this case inasmuch as the accused sought to be prosecuted in that case were mere Directors and were not described as Managing Directors. When a Managing Director is sought to be prosecuted, in view ofpresumption arising from his status of Managing Director, absence of specific allegation as contemplated under Section 141 cannot be considered significant. Where a person is designated as Managing Director of a Company, it is implicit that he is incharge of and responsible to the Company for its business affairs. It is necessary to make a distinction between the Managing Director and other Directors. In respect of other Directors, they may or may not be incharge of and responsible to the Company of the business affairs. Some Directors may be incharge of and responsible to the business of the company, some may be merely sleeping Directors.

5. Thus, the proceedings against the 2nd petitioner cannot be quashed on the ground of absence of specific allegation as contemplated under Section 141 of the said Act for the reason that he is shown to be the Managing Director of the Company, which raises an initial presumption that he is incharge of and responsible to the business of the Company. However, as stated above, it is a question of fact and it is open to the 2nd petitioner to show that he was really not incharge of and responsible to the Company for its business.

6. As far as the 1st petitioner is concerned, the learned Counsel for the petitioners fairly concedes that the 1st petitioner being a Company, he does not press for quashing of the proceedings.

7. Under these circumstances, there are no grounds for quashing the proceedings under Section 482 Cr.PC. The petition is, accordingly, dismissed.

8. The learned Counsel for the petitioners, however, submits that the 1st petitioner Company is located in Kerala and the 2nd petitioner is also a resident ofKerala and that if he is required to attend the Court every day, it may cause hardship to the petitioners. It is open to the petitioners to move an application before the Magistrate for dispensing with personal attendance of the petitioners and for seeking permission to be represented by some other person or their advocate. On such application being filed, the learned Magistrate shall allow the same with appropriate conditions that he deems proper.