M/S ABG SHIPYARD LTD. IS COMP ANY REGISTERED UNDER the Companies Act, 1956. On being approached by the authorities of the company, a short term loan facility for a sum of Rs. 200 crores was granted by Standard Chartered Bank (the appellant-Bank) to the company on 28.4.2012. As averred in the complaint, the company executed an indemnity in favour of the appellant-bank and agreed to repay the amount in three installments; one on 15.12.2012, the second on 15.1.2013 and the last on 15.2.2013. The company issued three cheques, one dated 15.12.2012 for Rs. 66,67,00,000/-, and the two others dated 15.1.2013 and 15.2.2013 for Rs. 66,67,00,000/- and Rs. 66,66,00,000/- respectively towards the repayment of the liability. As per the dates mentioned in the cheques, they were presented before the bank but due to “insufficient funds” and “account blocked” the cheques were dishonoured. The appellant-bank issued requisite statutory notice for each cheque. As no response was given by the respondents, the appellant filed three complaints, being C.C. No. 451/SS of 2013, C.C. No. 843/SS of 2013 and C.C. No. 1145/SS of 2013 under Section 138 of the Act before the Metropolitan Magistrate, 23rd Court at Esplanade, Mumbai who took cognizance and issued summons against all the accused persons.
The respondent nos. 2 to 4 herein, being grieved by the orders issuing summons preferred three revision petitions, that is Revision Application Nos. 1123 to 1125 of 2014 before the City Civil& Sessions Court, Mumbai and the revisional court after due deliberation did not perceive any merit in the said challenge and dismissed the revision petitions.
The dismissal order constrained the respondents to prefer criminal writ petitions bearing Criminal Writ Petition Nos. 1482 to 1484 of 2015, before the High Court of Judicature at Bombay and the learned Single Judge by the order impugned allowed the writ petitions preferred by accused nos. 4 and 5 holding that the complainant had averred the said respondent to be responsible without making any specific assertion in the complaint about their role. As mentioned earlier, the High Court dismissed the writ petition preferred by the respondent no. 4.
On a perusal of the impugned order, it transpires that the learned Single Judge of the High Court has quashed the summons singularly on the ground that there are no allegations against the successful writ petitioners connecting them with the affairs of the Company.
Against the judgement of the High Court special leave petition was filed. The Supreme Court accepted the appeal, set aside the order passed by the High Court. Learned Magistrate was directed to proceed with the complaint cases in accordance with law.
The operative part of the judgement read as under :
The averments, as we find, clearly meet the requisite test. It is apt to mention here that there are seven accused persons. Accused No. 1 is the Company, accused Nos. 2 and 3 are the Chairman and Managing Director respectively and accused Nos. 6 and 7 were signatory to the cheques. As far as the accused Nos. 4 and 5 were concerned, they were whole-time Directors and the assertion is that they were in charge of day to day business of the Company and all of them had with active connivance, mischievously and intentionally issued the cheques in question.
Thus, considering the totality of assertions made in the complaint and also taking note of the averments put forth relating to the respondent Nos. 2 and 3 herein that they are whole-time Director and Executive Director and they were in charge of day to day affairs of the Company , we ar e of the considered opinion that the High Court has fallen into grave error by coming to the conclusion that there are no specific averments in the complaint for issuance of summons against the said accused persons. We unhesitatingly hold so as the asseverations made in the complaint meet the test laid down in Gunmala Sales Pvt. Ltd. (supra). TTTTTTT
On a perusal of the aforesaid provision, it is clear as crystal that if the person who commits an offence under Section 138 of the Act is a company, the company as well as other person in charge of or responsible to the company for the conduct of the business of the company at the time of commission of the offence is deemed to be guilty of the offence. Thus, it creates a constructive liability on the persons responsible for the conduct of the business of the company.
At one point of time, an issue had arisen before this Court, whether a complaint could be held to be maintainable without making the company a party. The said controversy has been put to rest by a three- Judge Bench decision in Aneeta Hada v. Godfather Travels and Tours Private Limited [2012 (5) SCC 661] wherein it has been held that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. It has been further held therein that there cannot be any vicarious liability unless there is a prosecution against the company. In the case at hand, the company has been arrayed as the accused No. 1 along with the Chairman and other Directors.
Authorities relied upon : 2003 (115) Comp Cas 321 (Mad), 2003 (115) Comp Cas 957 (Del) 2002 (108) Comp Cas 687 (AP), 2000 (107) Comp Cas 107 (AP), 1999 (96) Comp Cas 106 (AP).
Reference : Supreme Court. Standard Chartered Bank v. State of Maharashtra and Others Etc., criminal appeal nos. 271-273 of 2016 (from the Judgement and Order dated 13.10.2015 of the High Court of Judicature at Bombay in Criminal Writ Petition Nos. 1482, 1483 & 1484 of 2015).