Kerala High Court
Pramod S/O. Kolathappully Subramanian vs C.K. Velayudhan on 16 February, 2005
Author: K.Hema
Bench: K.Hema
IN THE HIGH COURT OF KERALA AT ERNAKULAM
Crl MC No. 7614 of 2002
1. PRAMOD S/O. KOLATHAPPULLY SUBRAMANIAN
... Petitioner
Vs
1. C.K. VELAYUDHAN, ASSISTANT EXECUTIVE
... Respondent
2. P.J. ROY, PURATHUR HOUSE,
3. STATE OF KERALA, REPRESENTED BY
For Petitioner :SRI.K.G.BALASUBRAMANIAN
For Respondent :SRI.S.CHANDRASENAN
The Hon'ble MRS. Justice K.HEMA
Dated : 16/02/2005
O R D E R
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K.HEMA, J.@@ jAAAAAAAAAA
-----------------------------------@@ jEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE CRL.M.C.No.7614 of 2002@@ jEEEEEEEEEEEEEEEEEEEEEEEE
----------------------------------@@ jEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE Dated this the 15th July, 2005@@ jEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE O R D E R@@ EjEEEEEEEEE ((HDR 0 # CRL.MC.7614/02 )) .HE 1 What are the minimum requirements to be satisfied before a court issues process to a company, firm, an association of individuals or a person who are arrayed as an `accused' for offence under section 138 of the Negotiable Instruments Act( the Act, for short)? Under what circumstances, persons referred to in section 141 of the Act be proceeded against, for offence under section 138 of the Act? Can a person who does not issue any cheque and who does not even maintain an account be held guilty of offence under section 138 of the Act? These are the important questions which I shall decide in this case.
2. Respondent-Assistant Executive Engineer, a government official filed a complaint before Chief Judicial Magistrate's Court alleging offence alleged against a registered society and its President under section 138 of the Act. The society represented by its secretary is described as first accused and its President who is alleged to be the person in charge of and responsible for the conduct of the business of the society is arrayed as the second accused.
3. As per the complaint, Rs. 39,619/- was allegedly due from `the accused' to the government on account of hiring combined harvest machine `controlled by the complainant'. Towards discharge of the said debt or liability, second accused allegedly signed and issued the cheque for and on behalf of the society, personally undertaking to discharge the liability of the society. The cheque when presented for encashment was dishonoured for the reason, `funds insufficient'. Notices were issued to both accused but they did not send any reply. Thereafter, complying with the formalities under the Act, a complaint was filed against them and the case was taken on file and process was issued to petitioner, as secretary of first accused-society. He seeks to quash the proceedings initiated against him.
4. Learned counsel appearing for petitioner submitted that petitioner cannot be proceeded against for offence under section 138 of the Act, since there is nothing on record to show that the dishonored cheque was drawn by petitioner on his account. It is also submitted that records will not reveal prima facie that petitioner was in charge of and responsible for the conduct of the business of first-accused society and hence he cannot be proceeded under Sectin 141, for offence under section 138 will lie against the petitioner, is the argument.
5. While proceeding to consider the question whether petitioner can be proceeded for offence under section 138 of the Act or not, several questions pop up before me. To give an answer, a reading of section 138 and section 141 of the Act is absolutely necessary. I shall therefore extract the relevent portions of those provisions which are necessary for the disposal of this case, as hereunder:
.SP 1 "S. 138: Dishonour of cheque for insufficiency,@@ i etc. of funds in the account-- Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both:"
Section 141 reads as follows:
"S. 141. Offences by companies.--(1) If the@@ i person committing an offence under section 138 is 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 offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this@@ i sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence:
Provided further that where a person is@@ i nominated as Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.
(2) Notwithstanding anything contained in@@ i sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation.--For the purposes of this section,--
(a) "company" means any body corporate and includes a firm or other association of individuals; and
(b)"director", in relation to a firm, means a partner in the firm."
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6. On a plain reading of the above provisions, it appears that Section 138 of the Act refers to `offence by a person' whereas section 141 deals with `offences by companies'. From the introductory wordings in section 141 of the Act (ie., `if the "person" committing an offence under section 138 is a company"), it is further discernible that a `person' referred to in section 138 of the Act can be a `company' also. A "company" means, any body corporate and includes a firm or other association of individuals also, as per Explanation to section 141 of the Act. Thus, a joint reading of section 138 and section 141 shows that an offence under section 138 of the Act can be deemed to have committed by a person, a company, firm or association of individuals.
7. Certain other persons also can be deemed to be guilty of offence under secton 138 of the Act, by virtue of the provision contained in Section 141 of the Act. Such persons include "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 described in section 141 of the Act. Section 141 further provides that a director/partner, manager, secretary or other officer of the "company" can also be deemed to be guilty of offence under section 138, if such offence has been committed by a "company" and if it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any such person. ( Both these catagory of persons falling under section 141 will, hereinafter be referred to as `person'/persons referred to in section 141' also, in the appropriate context).
8. But, when can the persons referred to in section 141 be held liable for offence under section 138 of the Act? This probe is an interesting one. It unfurls, on a close reading of section 141 of the Act, that to hold such person guilty of offence under section 138 of the Act, he need not commit offence under section 138 of the Act by himself. He need not draw any cheque. He need not maintain any account with any banker. He need not order to pay any amount to any person. The dishonoured cheque need not be the one which is issued by him. In short, he need not do any act attracting offence under section 138 of the Act. Still, such a person referred to in section 141 can be held guilty of offence under section 138 of the Act. But, how? Under what circumstances?
9. From a reading of section 141 of the Act, it is clear that to hold a person guilty of offence under section 138 by virtue of section 141 of the Act, the first and foremost requirement to be established is commission of the offence by another person ie., a company, firm or association of individuals. Unless and until it is established that such juristic person commits offence under section 138 of the Act, no person referred to in section 141 of the Act can be proceeded against, summoned, prosecuted or convicted for offence under section 138. In other words, commission of offence under section 138 of the Act by a juristic person is an inevitable legal pre-requisite or the condition percedent to proceed against a person referred to under section 141 of the act and to hold him guily of the said offence.
10. It is thus clear that a person referred to in section 141 of the Act can be prosecuted and convicted for an offence committed by another person. Such a situation is rare and not quite common in criminal law. A court must, therefore, bestow exceptional care and caution while dealing with cases involving persons covered by section 141. The court must be doubly alert in every step taken by it in such cases. The court must@@ CCCCCCCCCCCCCCC be conscious that it gets jurisdiction to convict such a@@ CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC person only by reason of a fantasy of law or a myth of@@ CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC law contained in section 141 of the Act and not because@@ CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC he commits the offence by himself. It is also worthy to@@ CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC remember that even offence under section 138 of the Act@@ CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC is created by a fiction of law, as the language of the@@ CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC section indicates it. Offence under section 138 is a@@ CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC "deemed offence". If all these facts are borne in mind,@@ CCCCCCCCCCCCCCCCC no court can afford to be careless or negligent while invoking section 141 of the Act to proceed against a person.
11. Now, I shall examine the next question. When can a juristic person be said to have committed an offence under section 138 of the Act? Section 138 reveals that to constitute an offence under section 138 of the Act against a `person', certain specific factors are to be established. Among those factors, the most inevitable are the following, viz., 1) that the cheque in respect of which offence under the section is committed is drawn by the accused himself 2) that the account on which the cheque is so drawn is maintained by the accused himself 3) that such cheque is drawn for payment of any amount of money to another person from out such account of the accused. These are the three minimum requirements to establish offence under section 138 of the Act against a `person'.
12. I have already held that a `person' referred to in section 138 of the Act includes a company, firm or association of individuals also. So, in the case of such juristic person also, it must be established that the cheque in respect of which offence under section 138 of the Act is committed is drawn by such juristic person. (The said cheque must necessarily be signed by the person who is legally competent to sign it on behalf of the "company"). As the second requirement, the court must be satisfied that the account on which such cheque is so drawn is maintained by such juristic person with any banker. As the third requirement, it must also be established that the cheque so drawn is for payment of any amount of money to another person, from out of the account maintained by such juristic person.
13. But on the facts of the case, there is nothing on record to show that neither petitioner nor Society had drawn the relevant cheque in this case. Nobody has a case that petitioner had maintained even an account with any banker. Nobody has a case that he had ordered any amount of money to be paid to any other person from out of his account and that he had acted in terms of section 138 of the Act. Hence, petitioner has no personal liability for offence under section 138 of the Act. But, can he be deemed to be guilty of the said offence by virtue of section 141 of the Act?
14. The records in this case will not reveal that commission of offence under section 138 of the Act by the society also. The relevent cheque in this case is not drawn by the society and that it is signed "on behalf of" the society. The account on which such cheque is drawn is not maintained by the society with any banker. The payment ordered as per the cheque is not from out of the account maintained by the society. Thus, none of the tree basic requirements of section 138 of the Act are established against the society and hence first accused-society cannot be deemed to have committed offence under the said section. In the above circumstances, secretary of the society cannot be proceeded against for the offence, under section 141.
15. It is also pertinent to note that there is no allegation in the complaint that petitioner was in charge of and responsible for the conduct of the business of the society at the time of commission of offence. The allegations in the complaint also do not reveal that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of petitioner, as the secretary of the society. In the above circumstances, even if it is inferred, hypothetically, that the society committed the offence, petitioner cannot be proceeded against under section 141 of the Act, since requirements of the said provision are not made out.
16. In this context, I shall also refer to what the Supreme Court held in Monaben K. Shah v. State of@@ AAAAAAAAAAAAAAAAAAAAAAAAAAAAA Gujarat (2004(3) KLT 428 (SC). Referring to application@@ AAAAAAA of section 141 of the Act it was held therein that a verbatim reproduction of the wordings of the said section is not required and a hypertechnical approach should not be adopted in construing a complaint so as to quash the same. But, in my view, this dictum will apply, only if it is established, prima facie, that offence under section 138 of the Act is made out against the jurstic person and not otherwise. In the case at hand, no offence is prima facie made out against first accused-society and hence petitioner cannot be proceeded under section 141 of the Act, even if there is verbatim reproduction of the said section in the complaint.
17. The allegations in the complaint and documents produced along with it disclose that the cheque involved in this case is drawn by the second accused who is styled as President of the society. It is evident from records that the cheque was signed and issued by the second accused in his personal capacity, on his own behalf, and not on behalf of the society. The account on which the cheque is drawn also is maintained by the second accused himself. Petitioner produced a letter issued from the bank showing that the relevent account is the personal account maintained by second accused. Genuineness of the said document is not under dispute. In such circumstances also, petitioner is not liable for offence under section 138 of the Act.
18. Learned Government Pleader however pointed out that as per the allegations in the complaint, the dishonoured cheque was issued for the discharge of a debt or liability of the society. But for this reason alone, society cannot be held guilty of offence under section
138. Even if the cheque issued was for clearing off the liability of the society, unless it is established that the dishonoured cheque is drawn by the society on an account maintained by the society itself, neither the society nor its secretary can be proceeded against for offence under section 138 of the Act.
19. Learned counsel for petitioner placed relied upon the decision of the High Court of Andra Pradesh in B.S.K. Prasad v. M/s.Laxmi Vessels & another (2005(1)@@ AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA KLJ (NOC) 7 (AP) in which it is held that "as per Section 138 of the Act the drawer of a dishonoured cheque only is liable for punishment". He also cited K.Seetharam Reddy@@ AAAAAAAAAAAAAAAAA v. K. Radhika Rani (2002 Vol 112 Company Cases 204 (AP)@@ AAAAAAAAAAAAAAAAAAAA in support of his arguments. It is held in the said decision that "Section 138 of the Negotiable Instruments Act, 1881, leaves no doubt that the person who has drawn the cheque on his account is alone liable in the event the cheque drawn by him is dishonoured". In the light of the above dictum also, I find that neither first accused-society nor petitioner, as secretary of the society can be proceeded against for offence under section 138 of the Act.
20. But, despite all these, trial court issued summons to petitioner. The mere description on the cause-title of the complaint appears to be the sole persuading factor which propelled learned Magistrate to summon petitioner. There was no other ground to proceed against the petitioner. Needless to say, a criminal court will not get any jurisdiction to proceed against a person at the mere sight of the details on the docket-sheet or the cause-title. No court shall act upon the sole tag, label or the badge veiled on the cause-title. No court shall be carried away by the prints and dots on the veil of cause-title. The court is bound to unveil the complaint, feel the texure of its contents and test the criminality. Criminality lies not on how a person is christened at the cause-title, but how he acts, as per the contents of the complaint.
21. But, trial court acted in haste by the prints on the cause-title. It cannot be justified. I shall therefore hurry to undo the illegality. All proceedings initiated against petitioner on the basis of the complaint in the present case are hereby quashed. Learned magistrate is directed to drop all further proceedings against petitioner.
Petition is allowed.
K.HEMA, JUDGE@@ AAAAAAAAAAAAA vgs.@@ AAAA