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 minimum sentence of one year, which may extend to five years. For convenience, we will refer to the parties as per 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.
Reasons
4. Section 50 of the 1987 Act reads thus:
“………”
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 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 anr [(2005) 8 SCC 89]. In Paragraph 1, the points for determination were framed which read thus:
“19. …”
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 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.
Party
NATIONAL HOUSING BANK …APPELLANT VERSUS BHERUDAN DUGAR HOUSING FINANCE LTD. & ORS. ETC. …RESPONDENTS – CRIMINAL APPEAL NOS. 3176-3177 OF 2024 (Arising out of Special Leave Petition (Crl.) Nos. 452-53 of 2018) – August 01, 2024 – 2024 INSC 566
