Grounds for making Directors of Company Liable u/s 141 of NI Act

S.M.S. Pharmaceuticals Ltd. Vs :Neeta Bhalla and Anr.

Supreme Court
 AIR 2005 SC 3512

Reference made by two judge bench 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 fulfill the requirements of the said section and it is not necessary to specifically state in the complaint that the persons 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 of Joint Managing Director who admittedly would be in charge of the company and responsible to the company for conduct of its business could be proceeded against."

 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 question posed in sub-para (b) has to be in 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 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.

(c) The answer to question (c ) has to be in 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 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 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.

"To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a persons can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a Company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That respondent tails within parameters of Section 141 has to be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within Section 141 he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of Section 141. Even a non director can be liable under Section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial."

Act may be declared unconstitutional with passage of time

Malpe Vishwanath Acharya and Ors.

Vs.

State of Maharashtra and Anr.

Supreme Court, 3 judge

AIR1998SC602

A legislation which, when enacted, was justified on considerations of necessity and expediency may, with the passage of time, become arbitrary and unreasonable in changing circumstances.

There is considerable judicial authority in support of the submission of learned counsel for the appellants that with the passage of time a legislation which was justified when enacted may become arbitrary and unreasonable with the change in circumstances. In the State of Madhya Pradesh v. Bhopal Sugar Industries,

MANU/SC/0099/1964 : [1964]52ITR443(SC) dealing with a question whether geographical classification due to historical reasons would be valid this Court at page 853 observed as follows :

"Differential treatment arising out of the application of the laws so continued in different regions of the same reorganised, State, did not therefore immediately attract the clause of the Constitution prohibiting discrimination. But by the passage of time, considerations of necessity and expediency would be obliterated, and the grounds which justified classification of geographical regions for historical reason may cease to be valid. A purely temporary provision which because of compelling forces justified differential treatment when the Reorganisation Act was enacted cannot obviously be permitted to assume permanency, so as to perpetuate that treatment without a rational basis to support it after the initial expediency and necessity have disappeared.

Issues regarding BRTS Corridor in Bhopal & Indore

CIVIL APPEAL NO. 11307 OF 2016 [Arising out of SLP [C] No.30998 of 2010]

Ravindra Ramchandra Waghmare …. Appellant Vs. Indore Municipal Corporation & Ors. ….Respondents

http://supremecourtofindia.nic.in/FileServer/2016-11-29_1480419496.pdf

Courts cannot legislate and act beyond the lis

State of Uttar Pradesh Vs Subhash Chandra Jaiswal and Others
CIVIL APPEAL NO.11381OF 2016 (Arising out of S.L.P.(C) No.26961 of 2016)

Supreme Court judgement. (http://supremecourtofindia.nic.in/FileServer/2016-12-08_1481196550.pdf)

"A court cannot take steps for framing a policy. As is evincible, the directions issued by the High Court and the queries made by it related to various spheres which, we are constrained to think, the High Court should not have gone into. It had a very limited lis before it. Be it stated, the directions may definitely show some anxiety on the part of the learned Judges, but it is to be remembered that directions are not issued solely out of concern. They have to be founded on certain legally justifiable principles that have roots in the laws of the country. "

"A Judge should not perceive a situation in a generalised manner. He ought not to wear a pair of spectacles so that he can see what he intends to see. There has to be a set of facts to express an opinion and that too, within the parameters of law.

"Having noted the aforesaid submissions, it is necessary to state that it is expected that the High Courts while dealing with the lis are expected to focus on the process of adjudication and decide the matter. The concept, what is thought of or experienced cannot be ingrained or engrafted into an order solely because such a thought has struck the adjudicator. It must flow from the factual base and based on law. To elaborate, there cannot be general comments on the investigation or for that matter, issuance of host of directions for constituting separate specialized cadre managed by officials or to require an affidavit to befiled whether sanctioned strength of police is adequate or not to maintain law and order or involvement of judicial officers or directions in the like manner. To say the least, some of the directions issued are not permissible and all of them are totally unrelated to the case before the High Court. We are constrained to say that the High Court should have been well advised to restrict the adjudicatory process that pertained to the controversy that was before it."

Courts cannot grant relief not prayed for

Cases:
Bharat Amratlal Kothari vs Dosukhan Samadkhan Sindhi, AIR 2010 SC 475,

Krishna Priya Vs University of Lucknow (1984) 1 SCC 307
Courts cannot, ignoring and keeping aside the norms and principles governing grant of relief, grant relief not even prayed for by the party.

Om Prakash vs Ram Kumar (1991) 1 SCC 441: A party cannot be granted a relief which is not claimed, if the circumstances of the case are such that the granting of such  relief would result in serious prejudice to the interested party.

General Motors (India) Pvt ltd Vs Ashok Ramnik Lal Tolat (2015) 1 SCC 429: The order of the NCDRC in granting punitive damages to the complainant therein was set aside on the ground that such relief was neither sought in the complaint nor before the state commission.

Sahara India Commercial corporation ltd vs Mukamala Natraja Rao IV (2014) CPJ 172 (NC): A direction to hand over maintenance and control over the common facilities was held to be beyond the relief sought in the pleadings of the complaint.

The Computeronics International Limitrd vs Infinite Computer Solu Pvt Ltd & Ors 2007 (34) PTC 189 (Del) & K.P.M. Aboodbucker vs K. Kunhamoo AIR 1985 Mad 587:

Where no relief could be granted to a party in the main suit itself, it is not permissible to grant any interim relief, to be operative till the disposal of the matter.

Principles of Anticipatory Bail

Case: Bhadresh Bipinbhai Seth Vs State of Gujarat & Anr.
Supreme Court
Criminal Appeal Nos. 1134-1135 of 2015.

Also discussed: Gurbaksh Singh Sibbia vs State of Punjab (1980) 2 SCC 565

Compromise should be reduced to writing

Case: Bakshi Dev Raj Vs Sudhir Kumar
Court Supreme Court
Citation: (2011)8SCC679

Also discussed the scope of "dismissed as withdrawn"

Review of Order before High Court after dismissal of SLP

Case: Bakshi Dev Raj Vs Sudhir Kumar
Court Supreme Court
Citation: (2011)8SCC679

Factual Scenario: Order of the High Court is challenged before the Supreme Court in an SLP. SLP is dismissed by the SC. Thereafter, party can file a review of the impugned Order before the High Court. Order 41 Rule 1 provides that one of the condition for review is that an appeal is provided by the Act but no appeal has been preferred. Dismissal of SLP comes under no appeal has been preferred, as SLP is the front gate of the Appeal and until and unless leave is granted for appeal, dismissal of SLP will not be construed for res-judicata.

Summary procedure

Order 37 of the Code of Civil Procedure lays down the nature of disputes in which summary suit can be filed.  It also provides for the summary procedure.

In summary procedure firstly, plaint is filed then notice is issued. After the defendant enters appearance the plaintiff has to file application for summons for judgment. After which the defendant will file leave to defend. If the plaintiff proves that defendant does not have sufficient means than judgment will be granted then and there by rejecting leave to defend. But if the defendant furnishes proof in the leave to defend and if it/he agrees to deposit the claimed amount before court then leave to defend will be granted.

Listing of Cases before ITAT, Delhi

If the demand of tax is less than 50 Lakh Rupees then the matter is listed before a bench of only judicial member. The bench is called SME. SME bench assembles immediately after regular bench finishes up its matter for the day.

If the demand of tax is more than 50 lakh Rupees then the matter is listed before a bench of two members.

Listing of an appeal before an ITAT after filing it with the registry may take more than a year. For example: an appeal filed in June, 2015 was not listed until December 2016 as the bench were hearing appeals of July 2014. In such case an early hearing application can be filed which gets listed before the Head of Department of ITAT and a relief for stay on demand can be prayed, failing which delay in listing may result in increase in demand of tax including the interest and penalty.

Additional evidence in appellate jurisdiction

An application can be filed under order 41 Rule 27 to lead additional evidence in an appeal by stating the reasons for inability to lead the evidence before the lower court.

Appeal before DRAT

An appeal is filed before DRAT against the securitisation proceedings under section 18 of the SARFAESI Act, 2002.

An appeal before DRAT can be filed only after the deposit of 50% of the total amount due. However, DRAT if feels it necessary only after recording reasons can reduce it to 25% but not beyond that.

Original application before DRT

When an application is filed under section 19 of the RDDBFI Act, 1993 following court fee is required to be paid:
¶when amount of debt due is 10 lacs - Rs 12000
¶when amount of debt due is more than 10 lacs- Rs 12000 plus Rs 1000 each on every one lakh rupees subject to a maximum of Rs. 1,50,000/-

WC Appeal

Secrion 30 of the Employees Compensation Act, 1923

An appeal can be filed against the order of Labour Commissioner only if a substantial question of law is involved.

An appeal under section 30 can be filed only after getting the certificate from the commissioner showing the deposit of the entire awarded amount with the commissioner.

Second appeal

Punjab state power corporation vs punjab state electricity regulatory commission (SC), CA 4510 of 2006

In a second appeal court cannot go into fact finding unless there is a prima facie error committed by the courts below.

Section 100 CPC

Per incuriam

Per incuriam- a judgment which is bad in law and cannot be considered as a precedent as it has not referred the existing principles while deciding any issue.

Union of India vs S.K. Kapoor (SC)
CA no. 5341 of 2006

-Prior judgment of co-ordinate bench is   binding upon the bench while deciding that particular issue.
-if a judgment of a co-ordinate bench is not referred by the subsequent bench while deciding a particular issue of law then that judgment will become per incuriam.

Reply filing in NGT

• Reply to be filed with a CD
• Applicant/appellant + All remaining Respondents to be served 
• Proof of service to be attached (Format available at filing counter)
• If matter is listed day after then the last filing will be allowed till tomorrow 12 noon

Conditions of granting of Leave in SLP

Case: Raj Duggal Vs Ramesh Kumar Bansal
Supreme Court
CA No. 4358 of 1990
1991 Supp (1) SCC 191

In what conditions leave can be granted.

Serving of Notice in Winding up Petition

Case: Alliance Credit and Investments Pvt Ltd Vs Khaitan Hostombe Spinels Ltd.
Allahabad High Court,
Company Petition No. 42 of 1995
Date: 24.05.1996

Notice to be served only at the registered address of the company. If notice not served then the pleadings of the petition should show, with sufficient means, that the company was unable to pay its debt. 

Winding up petition Vs Arbitration

Case: Ritika Pvt Ltd Vs Omaxe Construction Ltd. DHC. Company Petition No. 441/2009

Winding up is a discretionary remedy.

Section 100A of the Civil Procedure Code

Section 100A of the CPC prohibits a third appeal to a civil suit when the parties approach the High Court. The recourse to a third appeal is accessed to through Letters Patent Appeal of a High Court which provides for appeal to a division bench against the Order/decree of a single judge. 

Initially the section was applicable to writ proceedings also where an appeal against the Order of a single judge to a division bench was prohibited, however by a later amendment the section was amended to exclude writ proceedings.

More to follow...

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