Full Judgment Text
2024 INSC 566
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NOS. 3176-3177 OF 2024
(Arising out of Special Leave Petition (Crl.) Nos. 452-53 of 2018)
NATIONAL HOUSING BANK …APPELLANT
VERSUS
BHERUDAN DUGAR HOUSING
FINANCE LTD. & ORS. ETC. …RESPONDENTS
J U D G M E N T
ABHAY S. OKA, J.
FACTS
1. The appellant filed a complaint under Section 200 of
the Code of Criminal Procedure, 1973, alleging the
commission of an offence of violating the provisions in
Section 29A of the National Housing Bank Act, 1987 (for
short, the ‘1987 Act’). The learned Magistrate took
cognizance of the complaint for the offence under Section
29A (i) read with Section 50 and punishable under Section
49 (2A) of the 1987 Act. Section 49(2A) provides for a
Signature Not Verified
minimum sentence of one year, which may extend to five
Digitally signed by
ASHISH KONDLE
Date: 2024.08.01
17:53:10 IST
Reason:
years. For convenience, we will refer to the parties as per
Criminal Appeal @ SLP(Crl.) 452-53 of 2018 Page 1 of 9
their status before the Trial Court. The first accused is a
company. The second accused was described in the
complaint as the Managing Director of the first accused
company, and the other five accused were described as the
Directors. By the impugned judgment, the High Court has
proceeded to quash the complaint in its entirety. The High
Court held that the requirements of sub-Section (1) of
Section 50 of the 1987 Act are similar to the requirements
incorporated in Section 141 of the Negotiable Instruments
Act, 1881 (for short, ‘the NI Act’), which were not complied
with by the complainant.
SUBMISSIONS
2. The learned counsel appearing for the appellant has
taken us through the averments made in the complaint
and the provisions of the said Act of 1987. He submitted
that on a plain reading of the complaint, a violation of the
provisions in Section 29A (i) of the 1987 Act was made out.
Therefore, there was no reason to quash the complaint.
Inviting our attention to the complaint, he pointed out that
the second accused was described as the Managing
Director of the first respondent and, therefore, he was in
charge of and was responsible to the first respondent
company for the conduct of the company's business. He
submitted that there were sufficient averments for
implicating the other accused.
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3. The learned counsel appearing for the accused
supported the impugned judgment and submitted that
averments as required by sub-Section (1) of Section 50 of
the 1987 Act have not been incorporated in the complaint.
REASONS
4. Section 50 of the 1987 Act reads thus:
“
50. Offences by Companies.—(1)
Where an offence has been
committed by 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:
Provided that nothing contained in this
sub-section shall render any such
person liable to any punishment
provided in this Act, if he proves that the
offence was committed without his
knowledge or that he had exercised all
due diligence to prevent the commission
of such offence.
(2) Notwithstanding anything contained
in sub-section (1), where an offence
under this Act has been committed by a
company and it is proved that the
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offence has been committed with the
consent 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.
Explanation .—For the purposes of this
section—
( a ) “company” means any body
corporate and includes a firm or other
association of individuals; and
( b ) “director”, in relation to a firm,
means a partner in the firm. ”
(emphasis added)
There is no dispute that sub-Section (1) of Section 50 is
pari materia with Section 141 of the NI Act.
5. Paragraph 9 of the complaint contains relevant
averments on which reliance was placed by the learned
counsel for the complainant. Paragraph 9 reads thus:
“ The complainant submits that the
Accused No. 1 herein is a Limited
Company, having its registered Office at
Nos. 73/1A, Jermiah Road, Vepery,
Chennai-600007. It was incorporated
on 17-12-1996 as a Limited Company
under the Companies Act, 1956 and
obtained Certificate for commencement
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of Business on 22.01.1997 from the
Additional registrar of Companies,
Tamilnadu. The Xerox Copy of the
Memorandum and Articles of
Association of the Accused Company is
filed herewith. Accused No. 2 is the
Managing Director and the Accused 3 to
7 are the Directors of the First Accused
Company and they are conducting the
business of the company and are
associated with the common aspect of
their said business and are also
responsible for the Management of the
First Accused Company. They are also
looking after the day today affairs of the
First Accused Company and they are
jointly and severally responsible for the
conduct or for omission regarding the
conduct of the business of the First
Accused Company. ”
6. Hence, there were no assertions made that the
second to seventh accused, at the time of the commission
of the offence, were in charge of, and responsible to the
first accused company for the conduct of its business.
Unless assertions, as required by sub-Section (1) of
Section 50, are made, vicarious liability of the Directors of
the first accused company is not attracted.
7. A Bench of three Hon’ble Judges of this Court had
an occasion to interpret Section 141 of NI Act in the case
of S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and
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1
Anr. In Paragraph 1, the points for determination were
framed which read thus:
“ This matter arises from a reference
made by a two-Judge Bench of this
Court for determination of the following
questions by a larger Bench:
“( a ) Whether for purposes of Section
141 of the Negotiable Instruments Act,
1881, it is sufficient if the substance of
the allegation read as a whole fulfil the
requirements of the said section and it
is not necessary to specifically state in
the complaint that the person accused
was in charge of, or responsible for, the
conduct of the business of the company.
( b ) Whether a director of a company
would be deemed to be in charge of, and
responsible to, the company for conduct
of the business of the company and,
therefore, deemed to be guilty of the
offence unless he proves to the contrary.
( c ) Even if it is held that specific
averments are necessary, whether in
the absence of such averments the
signatory of the cheque and or the
managing directors or joint managing
director who admittedly would be in
charge of the company and responsible
1
(2005) 8 SCC 89
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to the company for conduct of its
business could be proceeded against. ”
The conclusions are in paragraph 19, which reads thus:
“19. In view of the above discussion,
our answers to the questions posed in
the reference are as under:
(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
being made in a complaint, the
requirements of Section 141 cannot
be said to be satisfied.
(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 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.”
(emphasis added)
8. Hence, in the absence of the averments as
contemplated by sub-section (1) of Section 50 of the 1984
Act in the complaint, the Trial Court could not have taken
cognizance of the offence against the third to seventh
accused, who are allegedly the directors of the first
accused company. However, the second accused being the
Managing Director, would be in charge of the company
and responsible to the company for its business.
Therefore, there was no justification for quashing the
complaint against the second accused. The first
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respondent is a company. No reasons have been assigned
to quash the complaint against the first accused.
9. Hence, the appeals partly succeed, and we pass the
following order:
(a) The impugned order is modified, and it is directed
that complaint C.C. No. 4331 of 2010 filed in the
Court of the Judicial Magistrate, Egmore at
Chennai shall stand quashed as against the third
to seventh accused shown therein. However, the
complaint shall proceed according to the law
against the first and second accused.
(b) The Appeals are partly allowed on the above
terms.
……………………..J.
(Abhay S. Oka)
……………………..J.
(Augustine George Masih)
New Delhi;
August 01, 2024.
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