Case Note & Summary
The petitioners, Suresh Motwani (Chairman) and Kishore Motwani (Director) of Sun Earth Ceramics Ltd., challenged the issuance of process against them in two complaints filed by Devidas Thawani under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. The complaints alleged that the company had accepted deposits of Rs.30,00,000 and Rs.15,00,000 from the complainant, and issued cheques dated 29.3.2002 which were dishonoured. After statutory notice, the complainant filed complaints, and the learned Magistrate issued process on 13.6.2002. The petitioners argued that the complaints did not contain specific averments that they were in charge of and responsible for the day-to-day management of the company, as required for vicarious liability under Section 141. They relied on several Supreme Court judgments including SMS Pharmaceuticals Ltd. v. Neeta Bhalla and National Small Scale Industries v. Harmeetsingh Paintal. The High Court, per Justice K.U. Chandiwala, dismissed the petitions. The court held that the complaints did contain the necessary averments that the petitioners were in charge and responsible for the conduct of the business. The court noted that at the stage of issuance of process, the court is only to see whether a prima facie case is made out, and the truth of the allegations is to be decided at trial. The court also observed that the petitioners had not disputed their positions as Chairman and Director. The petitions were dismissed, and the process was upheld.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Vicarious Liability of Directors - Sections 138 and 141 - The court considered whether directors can be held liable for cheque dishonour without specific averments in the complaint. The complaint stated that the petitioners were in charge and responsible for the conduct of the business. The court held that such averments are sufficient to issue process, and the truth of those averments is to be tested at trial. (Paras 3-6)
B) Criminal Procedure Code - Issuance of Process - Section 204 - The court examined the scope of inquiry at the stage of issuance of process. It held that at that stage, the court need only see whether a prima facie case is made out, and the defence of the accused cannot be considered. (Para 6)
Issue of Consideration
Whether the issuance of process against the petitioners, who were Chairman and Director of the company, for offences under Sections 138 and 141 of the Negotiable Instruments Act, 1881, was valid in the absence of specific averments regarding their role in the day-to-day management of the company.
Final Decision
The High Court dismissed both criminal writ petitions, upholding the issuance of process against the petitioners.
Law Points
- Vicarious liability of directors under Section 141 NI Act
- Issuance of process under Section 138 NI Act
- Requirement of specific averments in complaint for director liability
Case Details
2012 LawText (BOM) (08) 182
Criminal Writ Petition No.2002 of 2011 and Criminal Writ Petition No.2003 of 2011
Mr. Ghanshyam Upadhyay /b. M/s. Law Juris for Petitioners, Mr. C.K. Mani for Respondent no.1, Mrs. V.R. Bhonsale, APP for State-Respondent no.2
Suresh Motwani and Kishore Motwani
Devidas Thawani and The State of Maharashtra
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Criminal writ petitions challenging issuance of process under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.
Remedy Sought
Quashing of the order dated 13.6.2002 issuing process against the petitioners.
Filing Reason
The petitioners, being Chairman and Director of the company, were summoned in complaints for dishonour of cheques issued by the company.
Previous Decisions
The learned Magistrate issued process on 13.6.2002. The High Court had earlier directed parties to attempt settlement, which failed.
Issues
Whether the complaint contained sufficient averments to attract vicarious liability of the petitioners under Section 141 of the Negotiable Instruments Act, 1881.
Whether the issuance of process was justified at the prima facie stage.
Submissions/Arguments
Petitioners argued that the complaint did not disclose that they were in charge of and responsible for the day-to-day management of the company, as required by Section 141.
Petitioners relied on Supreme Court judgments including SMS Pharmaceuticals Ltd. v. Neeta Bhalla and National Small Scale Industries v. Harmeetsingh Paintal.
Respondent argued that the complaint contained necessary averments and the truth of those averments is to be tested at trial.
Ratio Decidendi
For the purpose of issuing process under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the complaint contains an averment that the accused directors were in charge of and responsible for the conduct of the business of the company. The truth of such averment is to be decided at trial, not at the stage of issuance of process.
Judgment Excerpts
The petitioners questioned issuance of process for offence under Section 138 and 141 of the Negotiable Instruments Act.
The complaint does not disclose offence in terms of Section 138 read with Section 141 of the Negotiable Instruments Act fixing liability of the Directors.
The petition and the submission of the learned Counsel for petitioners indicate that respondent no.1 (complainant) as an investor/depositor with Sun Earth Ceramics Ltd. has paid Rs.30,00,000/- and Rs.15,00,000/- as deposits subject of two writ petitions.
Procedural History
The complainant filed two complaints under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881, against Sun Earth Ceramics Ltd. and its directors, including the petitioners. The learned Magistrate issued process on 13.6.2002. The petitioners filed criminal writ petitions before the High Court challenging the issuance of process. The High Court initially directed parties to attempt settlement, which failed. Thereafter, the court heard the petitions and dismissed them on 17.8.2012.
Acts & Sections
- Negotiable Instruments Act, 1881: 138, 141
