N. RANGACHARI versus BHARAT SANCHAR NIGAM LTD.

Citation: [2007] 5 S.C.R. 329 · Decided: 19-04-2007 · Supreme Court of India · Bench: TARUN CHATTERJEE · Disposal: Dismissed

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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jf 
N. RANGACHARI 
A 
v. 
SHARA TSAN CHAR NIGAM LTD. 
APRIL 19, 2007 
[TARUN CHATTERJEE AND P.K. BALASUBRAMANY AN, JJ.] 
B 
Negotiable Instruments Act, 1881-ss. 141 & 138: 
Dishonour of cheques issued by company-Complaint under s. 138 of c 
the Act-Prosecution sought against Appellant alleging that he was Director 
of the company at the relevant time-Appellant filed petition u/s. 482 Cr PC 
seeking quashing of the complaint-He contended that he was only an 
Honorary Chairman; that he had anyway effectively resigned before issuance 
of the cheques in question and hence was not liable-Held: Burden was on 
Appellant to show that he was not liable to be convicted-Any restriction D 
on his power or existence of any special circumstance that made him not 
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liable was peculiarly within his knowledge and it was for him to establish 
the same at the trial-Complaint in question contained adequate averments 
to justifY initiation of proceedings against Appellant-Hence, High Court 
justified in declining to quash the complaint-Code of Criminal Procedure, 
1973-s.482. 
E 
Two cheques issued by a company purportedly in discharge of a pre-
existing liability based on business transaction were dishonoured for in 
sufficiency of funds. The payments not having been made, complaint was filed 
_.,, 
under Section 138 of the Negotiable Instruments Act, 1881 against the F 
.A 
accused-company as also Appellant and another person who were alleged to 
the Directors of the accused-company and incharge of its affairs at the 
relevant time. 
Appellant filed petition before High Court under Section 482, CrPC 
seeking quashing of the complaint insofar as it related to him on the ground G 
that he was only a nominated Chairman holding honorary post who w.as never 
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assigned with any financial or business activities of the company and never 
constituted a signing authority and that he had effectively resigned before 
issuance of the cheques in question, and hence was not liable. He contended 
329 
H 
330 
SUPREME COURT REPORTS 
[2007] 5 S.C.R. 
A that the complaint did not contain adequate averments against him and hence 
r, 
was liable to be quashed. 
High Court held that the defences sought to be put forward by the 
Appellant had to be established at the trial. Taking the view that the complaint 
B 
disclosed adequate material for proceeding against the Appellant in terms of 
Section 138 read with Section 141 of the Negotiable Instruments Act, the 
High Court dismissed the petition under Section 482, CrPC. Hence the present 
appeal 
Dismissing the appeal, the Court 
c 
HELD: 1.1. Section 141 of the Negotiable Instruments Act provides that 
if the person committing an offence under Section 138 of the Act was 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 
D offence and shall be liable to be proceeded against and punished accordingly. 
In fact, Section 141 !teems sm:h persons to be guilty of such offence, liable to 
be procet>ded against and punished for the offence, leaving it to the person 
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concerned, to prove that the offence was C()mmitted by the company without 
his knowledge or that he has exercised due diligence to prevent the 
commission of the offence. Sub-section (2) of Section 141 also roped in 
E Directors, Managers, Secretaries or other officers of the company, if it was 
proved that the offence was committed with their consent or connivance. 
[Para 12] (338-F-GJ 
1.2. A Company, though a legal entity, cannot act by itself but can only 
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act through its directors. Normally, the Board of Directors act for and ou 
behalf of the company. This is clear from Section 291 of the Companies Act 
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which provides that subject to the provisions of that Act, the Board of Directors 
of a Company shall be entitled to exercise all such powers and to do all such 
acts and things as the Company is authorized to exercise and do. 
[Para 13) (339-BJ 
G 
1.3. A person in the commercial world having a transaction with a 
company is entitled to presume that the directors of the company are incharge 
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of the affairs of the company. If any restrictions on their powers are placed by 
the memorandum or articles of the company, it is for the directors toestablish 
it at the trial. It is in that context that Section 141 of the Negotiable 
H Instruments Act pr

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