Gujarat High Court
Krishna Trading Company vs State Of Gujarat & on 12 January, 2017
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
R/CR.MA/12365/2015 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 12365 of 2015
With
CRIMINAL MISC.APPLICATION NO. 12369 of 2015
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE J.B.PARDIWALA
==========================================================
1 Whether Reporters of Local Papers may be allowed to see the judgment ? YES 2 To be referred to the Reporter or not ?
YES
3 Whether their Lordships wish to see the fair copy of the
judgment ? NO
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or NO any order made thereunder ?
========================================================== KRISHNA TRADING COMPANY, PROPRIETORSHIP FIRM &
1....Applicant(s) Versus STATE OF GUJARAT & 1....Respondent(s) ========================================================== Appearance:
MR SAMIR J DAVE, ADVOCATE for the Applicant(s) No. 1 - 2 MR CHETAN K PANDYA, ADVOCATE for the Respondent(s) No. 2 MS SHRUTI PATHAK, APP for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA Date : 12/01/2017 ORAL COMMON JUDGMENT Page 1 of 35 HC-NIC Page 1 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT 1 Since a common question of law has been raised, the parties are also same and the issue being interrelated, both the captioned applications were heard together and are being disposed of by this common judgment and order.
2 Rule returnable forthwith. Ms. Pathak, the learned Additional Public Prosecutor waives service of notice of rule for and on behalf of the respondent No.1 - State of Gujarat and Mr. Chetan Pandya, the learned counsel waives service of notice of rule for and on behalf of the respondent No.2 - original complainant.
3 By these two applications under Section 482 of the Code of Criminal Procedure, 1973, the applicants seek to invoke the inherent powers of this Court, praying for quashing of the proceedings of the Criminal Cases Nos.313 of 2015 and 314 of 2015 respectively pending in the Court of the learned Additional Chief Metropolitan Magistrate, Negotiable Instruments Act, Court No.30, Ahmedabad.
4 The facts of this case may be summarised as under:
4.1 The applicant No.1 is a proprietary concern of which the applicant No.2 is the proprietor.
4.2 It is the case of the respondent No.2 - original complainant that the applicant No.2 is known to him. The original accused No.3 shown in the complaint is the Power of Attorney of the applicant No.2 herein. The Power of Attorney is none other than the son of the applicant No.2 herein. It is the case of the complainant that since he had good relations with the family of the applicant No.2 and as the applicant No.2 was in need of finance for the business of the proprietary concern, the applicant No.2 had borrowed an amount of Rs.5,00,000/ (Rupees Five Lac only) Page 2 of 35 HC-NIC Page 2 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT from the complainant with the promise to repay the said amount as and when demanded by the complainant. The complainant lended Rs.5,00,000/ to the applicants herein. It is the case of the complainant that thereafter, on demand, the Power of Attorney holder issued two cheque duly signed by him drawn on the account maintained by the proprietary concern dated 11th December 2014 for the amount of Rs.5,00,000/ bearing cheque No.207502 and cheque No.207501 for the amount of Rs.8,00,000/ (Rupees Eight Lac only) drawn on the Sardar Vallabhbhai Sahkari Bank Limited, Vasna Branch, Ahmedabad. The complainant presented the cheque issued by the Power of Attorney of the applicant No.2 herein in his account, but the same came to be dishonoured on the ground that the account was closed. On receipt of such intimation from the Bank, the complainant issued Notice to the applicants herein including the Power of Attorney. As the applicants herein failed to make good the amount to the complainant, the complainant was left with no other option, but to file two private complaints in the Court of the learned Metropolitan Magistrate for the offence punishable under Section 138 of the Negotiable Instruments Act, which culminated in the Criminal Cases No.314 of 2015 and 313 of 2015 respectively.
5 The applicants seek to quash the proceedings of the two criminal cases on various grounds.
6 Mr. Samir J. Dave, the learned counsel appearing for the applicants submitted that indisputably, the two cheques in question have not been signed by the applicant No.2. Although the applicant No.2 is the proprietor of the proprietary concern, yet, for the purpose of business, she had executed a special Power of Attorney in favour of her son, namely, Pulkit Harigopal Bhatiya for the purpose of operating the Page 3 of 35 HC-NIC Page 3 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT Bank account and drawing cheques for the purpose of business. Mr. Dave pointed out that the special Power of Attorney is dated 10th May 2013. Mr. Dave submitted that the son of the applicant No.2 severed off all the relations with the family. Many disputes cropped up between the members of the family. In such circumstances, the applicant No.2 revoked the special Power of Attorney issued in favour of her son by a Deed of Cancellation dated 30th July 2014. Mr. Dave pointed out that the cheques were drawn on 11th December 2014 i.e. much after the special Power of Attorney was cancelled by the mother. Mr. Dave further submitted that a Public Notice was also issued in this regard in a local newspaper in vernacular dated 13th June 2015.
7 According to the learned counsel, the applicant No.2 cannot be held liable or responsible for the dishonour of the cheques, more particularly, when the cheques were issued duly signed by the Power of Attorney much after the power was revoked.
8 According to the learned counsel, it is only the drawer of the cheque, who can be held responsible for the dishonour. The complaint against the son of the applicant No.2 herein as the drawer of the cheques is maintainable, but not against the proprietor.
9 In such circumstances referred to above, Mr. Dave prays that there being merit in both the applications, the proceedings may be quashed so far as the applicants are concerned.
10 On the other hand, both the applications have been vehemently opposed by Mr. Chetan Pandya, the learned counsel appearing for the respondent No.2 - original complainant. The principal contention of Mr. Pandya is that the applicant No.2 being the proprietor and the principal, having authorised her son to issue the cheques for a legally enforceable debt, is liable for the offence punishable under Section 138 of the Page 4 of 35 HC-NIC Page 4 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT Negotiable Instruments Act.
11 Mr. Pandya, at the very outset, disputed the documents in the nature of revocation of the special Power of Attorney and Public Notice on record. He would submit that by placing reliance on such documents, the applicant cannot be discharged of her liability. The documents on which the reliance is being placed, will be looked into by the trial Court.
According to him, the defence of an accused at this stage based on the documentary evidence cannot be considered by the Court in exercise of the inherent powers under Section 482 of the Cr.P.C., more particularly, when such documents are in dispute and not admitted.
12 Mr. Pandya submitted that when the applicant No.2 herein had permitted her son i.e. the original accused No.3 to act as an authorised signatory, she is bound by the Act, and as such, she is also liable. He would submit that the mandate - giver cannot shrug off the claim of demand of the complainant under the pretense or defence that he or she owes no liability under the N.I. Act. He would submit that a principal is always bound by the act of his or her attorney so long as the attorney does not exceed his right.
13 However, Mr. Pandya, the learned counsel appearing for the respondent No.2 has an interesting argument to canvass. According to him, although his client has arraigned the Power of Attorney as the accused No.3 in the complaint, yet no liability could be fastened on the mandate holder for the dishonour of cheques punishable under Section 138 of the N.I. Act. Thus, according to Mr. Pandya, it is only the applicant No.2, being the proprietor, is liable for the dishonour of the cheques, because the cheques issued by the Power of Attorney were drawn on the account maintained by the proprietor.
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14 In such circumstances referred to above, Mr. Pandya prays that
there being no merit in both the applications, they be rejected.
15 Having heard the learned counsel appearing for the parties and having considered the materials on record, the following question of law falls for my consideration:
"Whether the principal, who has issued an authority to operate the account to the Power of Attorney holder, can be liable to be proceeded against and punished for the offence punishable under Section 138 of the N.I. Act, caused by the dishonour of the cheque, for the account being closed and issued by the Power of Attorney Holder?"
16 Before adverting to the rival submissions canvassed on either side, let me look into the views expressed by the different High Courts.
17 In the case of G. Rukkumani vs. K. Rajendran reported in 2001 Criminal Law Journal 3120, a learned Single Judge of the Madras High Court took the view that the mandate - giver cannot escape the liability under the Negotiable Instruments Act on the ground that the cheque was not drawn by him, but the same was drawn by the Power of Attorney or the mandate holder. I may quote the relevant observations made by the learned Single Judge as under:
"4. The question is how far the act of authorized signatory would bind the petitioner. It is settled law that the drawer of the cheque is primarily liable if the cheque bounced. Some difficulty would arise when a complaint is preferred against a third person who is not a drawer of the cheque, but he is in some way connected with the issuance of the cheque. The petitioner admits that the second accusedher son is her authorized signatory.
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Reference to Law Lexicon by P. Ramanatha Aiyar, 1997 Edition would go to show what is authorized signatory, which reads : "Authorise To empower; to give right or authority to act. To endow with authority or effective legal power, warrant or right. To permit a thing to be done in the future. It has a mandatory effect or meaning, implying a direction to act."
It is evident that the second accused, namely, the son of the petitioner has been given authority, a mandate, to sign on behalf of the petitioner. In other words, the petitioner is the principal and her son is the agent.
5. The learned Counsel for the petitioner submitted that the petitioner who is not the drawer of the cheque would not come within the purview of Section 138 of the Negotiable Instruments Act, because it would apply only to a drawer. In support of such contention, the learned Counsel has cited the decision rendered by Sudesh Kumar Sharma v. K. S. Selvamani, 1994 1 Mad LW (Cri) 337. That was a case where a complaint was preferred against the father and son alleging that the father was the proprietor of the concern and the son was an authorized signatory, that the cheque was drawn by the son and it was dishonoured. When a question arose whether the father is criminally liable, the noble Judge held that the drawer of the cheque was the second accusedson and the first accusedfather was the proprietor of the concern for whose liability, his sonthe second accused has issued the cheque and so, criminal liability cannot be fastened on the first accused. The learned Judge had observed:
"so I am clear of the view that the first accused cannot be made liable for an offence under Section 138 of the Negotiable Instruments Act". The learned Judge did not go into the question whether an agent can bind the principal i.e. whether an authorized signatory can bind the mandategiver.
6. The learned Counsel for the respondent cited a decision rendered by the Calcutta High Court in Sova Mukherjee v. Rajiv Mehra, 1997 Current Criminal Reports 313. That was a decision rendered on identical facts. In that case, the learned Judge pointed out that when a general power is given, it applies to everything in which the grantor is interested, that but when a special power is given, it applies to specific matter, such as the power to sign cheques, to make transfers, to receive money, to present documents for registration, etc. Under such circumstances, the mandategiver cannot shrug off the claim of demand of the opposite party under the pretence that he or she owes no liability under the Negotiable Instruments Act, when the cheque was issued to discharge the partial liability. The learned Judge has pointed out that a principal is always bound by the act or his or her attorney so long as the attorney does not exceed his right. The view of the learned Judge, is that the principal cannot plead that she will be only bearing the fruit, but not Page 7 of 35 HC-NIC Page 7 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT the burden of the act of her agent.
7. Offence under Section 138 of the Negotiable Instruments Act is a statutory offence. Section 138 of the Negotiable Instruments Act excludes mens rea , by creating strict liability. It does not say that there should be a direct nexus between the person who commits the act and the offence. But, from the words, 'such person shall be deemed to have committed an offence' giving room for a deeming provision would show that not only the principal or direct offender, an indirect offender who has allowed room for perpetuation of the offence, is also liable. Section 140 of the Negotiable Instruments Act in clear terms excludes the defence that the drawer had no reason to believe when he issued a cheque that it may be dishonoured on presentment for the reasons stated in Section 138 of the Negotiable Instruments Act. The exclusion of mens rea as a necessary ingredient of an offence under Section 138 of the Negotiable Instruments Act is very explicit. Therefore, when the petitioner herein had permitted the second accused to act as an authorized signatory, she is bound by the act and as such she is also liable. In the decision, Sudesh Kumar Sharma and another v. K. S. Selvamani, etc. cited supra, Pratap Singh, J. appears to be of the view that offence under Section 138 of the Negotiable Instruments Act requires essential ingredient of mens rea and, therefore, the proprietor who was not the drawer was not liable. When it is made clear that the petitioner had given mandate to her son to sign cheques, she is bound by the acts committed by the mandateholder and therefore, she is also liable. In my considered opinion, the view expressed by the Calcutta High Court in Sova Mukherjee v. Rajiv Mehra cited supra is more acceptable than the views expressed by Pratap Singh, J. in Sudesh Kumar Sharma and another v. K. S. Selvamani, etc. etc. In that view of the matter, I hold that the petitioner cannot seek to quash the proceedings against her. This Criminal Original Petition is, therefore, dismissed. Consequently, Cri. M.P. Nos. 4216 and 4217 of 2000 are also dismissed."
18 In the case of Sova Mukherjee vs. Rajiv Mehra reported in 1996(3) AICLR 588, a learned Single Judge of the Calcutta High Court took the view that when a cheque is issued by the constituted attorney, the principal is responsible for the dishonour of such cheque and the principal cannot be absolved of the liability on the ground that he or she was not the drawer of the cheque. The relevant observations are as under:
"7. The claim has been studiously refuted by the learned Counsel for the Page 8 of 35 HC-NIC Page 8 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT respondent on the ground that the cheque when issued by a constituted Attorney could not absolve the revisionist Nos. 1 and 2 either from the liability. It becomes, in the state of materials, a collective legal liability which cannot be shrived at the expense of that view. The cheque, when issued by the constituted Attorney, the revisionist No. 2, cannot relieve the revisionist No. 1 of legal liability as she was not the drawer of the cheque. This is absolutely a feeble plea as the cheque was issued under the authority of the accused No. 1. A constituted Attorney by his acts and deeds can bind the principle. It means, a person appointed by another to do something for him. Therefore, a constituted Attorney when duly appointed under a document authorising the person to whom it is given to act in all respects as the grantor of the power, in relation to the matter specified in the document. When the power is general, it applies to every thing in which the grantor in interested. But when it is special, it applies to specific matter, such as the power to sign cheques, to make transfers, to receive money, to present documents for registration etc. Thus, the cheque issued by the constituted Attorney, the revisionist No,2 in partial discharge of the debt deemed to have been issued under the authority of the revisionist No. 1, who might be a lady. The revisionist cannot shrugg off the claim of demand of the respondent opposite parties under the pretence that the revisionist No. 1 owes no liability under the Negotiable Instruments Act, when the cheque was issued to discharge the partial liability is patent. A principle is always bound by the act of his or her Attorney so long the Attorney does not exceed his right. There is no scanty material on record which could be attested with ability that the attorney acted behind his power. There is no slender material to prove prima facie that the constituted Attorney participated in illegal execution. Thus, the cheque, since issued by the revisionist No. 2, cannot exonerate the revisionist No. 1 from the offence complained of. She will only bear the fruit but not the burden for the act of his or her agent is an argument is founded.
8. Returning to examine the offence in question, prima fade, it is undisputed that a cheque when issued by a person under authority in respect of an account maintained by the principle with the bank for payment of any amount of money to another person out of the said account for the discharge of debt in whole or in part or other liabilities is returned by bank with the endorsement that it exceeded arrangement it amounts to dishonour within the meaning of Section 138 of the N.I. Act. On issuance of the notice by the payee or the holder in due course after dishonour to the drawer demanding payment within 15 days from the date of receipt of such notice, If he does not pay the same, the, statutory presumption of dishonest intention subject to any other liability stands satisfied. Once the cheque has been drawn and issued to the payee in discharge of debt and the payee has presented the cheque to the bank for encashment and the cheque, since dishonoured, could attribute to any liability. It is an idle plea that the cheque issued by the constituted Attorney will put a lid on the liability of the principle as in the instant Page 9 of 35 HC-NIC Page 9 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT case. The apex Court in Electronics Trade & Technology Development Corporation Limited, Secunderabad v. Indian Technologists & Engineers Electronics Private Limited and Ors., 1996 C Cr Lr 83 held the effect of a cheque being dishonoured after its presentation to the bank and the liabilities occurred therefrom."
19 In the case of Mohammed Samdani Basha vs. Syed Issac Basha reported in 2006 Criminal Law Journal 1586, a learned Single Judge of the Karnataka High Court, relying upon Sova Mukherjee (supra), took the view that the principal is liable for the acts of his or her agent. The relevant observations are as under:
"12. The second contention put forward is that the cheques were not issued by the petitioner but, on the other hand, they were issued by his authorised signatory and, therefore, the petitioner is not liable. It is further alleged in the petitions that the respondent and the authorised signatory are the husband and wife and hence, they have colluded in order to deceive the petitioner. As regards this contention is concerned, the learned counsel for the respondent has produced at Annexure4, the authorisation given by the petitioner to Sayeeda Begum, his sister, and it reads as under :
"Dear Sir, I hereby authorise you to honour all the cheques drawn on my account with you by Mrs. Sayeeda Begum whose specimen signature is given below notwithstanding that such cheques may create an overdraft or increase it to any extent.
Mrs. Sayeeda Begum is also hereby authorised by me to make, draw and endorse and accept and otherwise sign any bills of exchange, promissory notes or other negotiable instruments, discount the same with your Bank or otherwise and also to endorse cheques or other negotiable instruments of any kind. This authority shall continue in force until I revoke it by a notice in writing delivered to you by me.
Yours faithfully, Sd/"
It is thus clear from the above document that Sayeeda Begum was the authorised signatory on behalf of the petitioner and, therefore, the cheques signed by her are given to the respondent and, on the said cheques being Page 10 of 35 HC-NIC Page 10 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT dishonoured, the petitioner herein, as the principal, is liable for the acts of his agent. In this regard, the position in law is that, when the cheque is issued by a drawee on behalf of the principal, the principal cannot escape from his liability on a claim made by the affected person..."
13 Therefore, there is no merit in the second contention advanced. Moreover, in the absence of the petitioner placing any material to show that the above said authorisation was revoked before the cheques in question were issued, there is no substance in the submission made that the authorised signatory had retired and, therefore, no liability is there on the petitioner."
20 In the case of N. Gopalan s/o Natarajan, Authorised Signatory, Darshini Fabrics vs. K. Udhayakumar reported in 2011(1) Crimes (HC) 611, a learned Single Judge of the Madras High Court took the view that a mandate holder is not liable for the dishonour of the cheque and it is only the principal who can be held liable. The relevant observations are as under;
"6. Admittedly, the cheque in question was not drawn on an account maintained by the petitioner herein in a bank. On the other hand, the cheque in question was drawn on an account maintained by the wife of the petitioner, who is running a proprietary concern in the name and style of 'M/s.Darshini Fabrics'. The wife of the petitioner has been arrayed as accused No.1 in the above said criminal case. There is no whisper on the part of the petitioner to the effect that the launching of prosecution against his wife is incompetent. On the other hand, the petitioner has contended that he cannot be prosecuted for the dishonour of the cheque issued by him as an authorised signatory on behalf of his wife. On the other hand, an attempt was made to show that the petitioner having signed and issued the cheque on behalf of the proprietary concern of which his wife is the proprietrix can be prosecuted for an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 r/w Section 142 of the said Act, as he can be construed to be a person responsible for the conduct of the business of the said proprietary concern.
7. Section 141 of the Negotiable Instruments Act, 1881 deals with offences committed by the companies. It also says that when an offence under Section 138 of the Negotiable Instruments Act, 1881 is committed by a company, every person in charge of and was responsible to the company for the conduct of the business at the time of commission of the said offence as well as the company shall be deemed to be guilty of the offence.
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However, in the explanation, the term "company" is defined to be any body corporate including a firm or other association of individuals. Explanation
(b) says a "director", in relation to a firm, means a partner of the firm.
8. A careful reading of Section 141 and the explanations will show that a proprietary concern shall not be covered by the definition of company. This aspect was dealt with by the Hon'ble Supreme Court in Raghu Lakshminarayanan vs. Fine Tubes reported in (2007)5 Supreme Court Cases 103 and the Hon'ble Supreme Court has chosen to express the very same view. Therefore, it is quite clear that the petitioner cannot be prosecuted as a person responsible for the conduct of the business of the proprietary concern run by his wife.
9. However, an attempt was made on the part of the respondent to show that the petitioner himself had borrowed the amount and issued the cheque and hence he shall be liable for prosecution and punishment for the offence under Section 138 of the Negotiable Instruments Act. If at all the petitioner herein is sought to be prosecuted as the prime offender having issued the cheque for the amount borrowed by him, this court does not understand the rational in prosecuting his wife (A1) along with the petitioner herein for the very same act. Even assuming that the petitioner owed some amount or liability towards the respondent and in discharge of the debt/liability he issued the cheque, the same will not be enough to sustain a prosecution against the petitioner as the drawer alone can be prosecuted for an offence under Section 138 of the Negotiable Instruments Act. This has been held so in two previous cases by this court in R.Ravi Chadran v. C.Subramanian alias C.S.Maniam Mandate Holder of M/s.Southern Biologicals, Coimbatore reported in (2006)1 M.L.J. (Crl.) 68 and in Surendra Mal Mehta and another vs. M/s. Gillette India Limited, represented by its Power of Attorney Agent, Vijay Malhotra reported in 2006 (2) TLT 178. Almost in similar circumstances, the authorised signatory/mandate holder, who issued the cheques were sought to be prosecuted in those cases and this court held that such prosecution could not be maintained and quashed the proceedings against such mandate holders/authorised signatories.
10. To prosecute a person for an offence under Section 138 of the Negotiable Instruments Act, the cheque should have been issued by him on an account maintained by him with a banker. The opening words of Section 138 of the Negotiable Instruments Act reads as follows: "Where any cheque drawn by a person on an account maintained by him with a banker......."
Only he who issued the cheque drawn on an account maintained by them can be prosecuted for an offence under Section 138 of the Page 12 of 35 HC-NIC Page 12 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT Negotiable Instruments Act. In this case, admittedly the cheque was not drawn on an account maintained by the petitioner herein and the same was drawn on an account maintained by the wife of the petitioner in the name of the proprietary concern run by her. The judgments of the Apex court and this court cited above squarely apply to the facts of the case on hand."
21 In the case of Ravi Chandran vs. Subramanian reported in 2006 Civil Court Cases 78 : 2006 (2) Current Civil Cases 263, a learned Single Judge of the Madras High Court took the view that a mandate holder is not the drawer in the real sense though he may be the authorised signatory, but it is the principal, who can be held liable, for the offence punishable under Section 138 of the N.I. Act. The relevant observations are as under:
"8. It is the case of the prosecution, that M/s. Southern Biologicals probably a proprietary concern, had borrowed a sum of Rs. 90,000 from the complainant on 4.7.1994 and evidencing the same, a Xerox copy of the promissory note is marked and no reason is assigned for not producing the original. In the absence of original, it is not known, how the Xerox copy was admitted as secondary evidence. Only in order to discharge the liability said to have been incurred by the respondent under Ex. P1, it is said that the cheque was issued on 19.3.1997, which is exhibited as Ex, P
2. Ex. P2 cheque was drawn by M/s Southern Bilogicals. though the accused had signed in the cheque as mandate holder. Therefore, one thing is clear that the liability was incurred only by M/s. Southern Bilogicals and therefore, the Proprietor of that Company or firm must be held responsible. After all, the accused whether he is known as C. Subramanian or C.S. Maniam, as the case may be, cannot be held personally responsible. Unfortunately, when this defence was raised by the accused before the Trial Court, the Trial Court has given a finding as if the nonjoinder of M/s. Southern Biologicals will not affect the case of the prosecution. In this context, we have to see the provisions of the Negotiable Instruments Act (hereinafter called 'the Act').
9. Section 138 of the Act is clear that the person liable to answer this penal provision is only the person, who had drawn the cheque, which could be seen from the opening words "where any cheque drawn by a person on an account maintained by him....." thereby indicating, the person liable to be dealt with under Section 138 of the Negotiable Instruments Act or the person answerable under Section 138 of the Act Page 13 of 35 HC-NIC Page 13 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT must be the person, who had drawn the cheque and who is having the account, in which account the cheque was drawn and not others. In this case, as seen from the materials available on record, the cheque was drawn by M/s Southern Biologicals. The account holder is M/s. Southern Biologicals. The accused respondent is only a mandate holder, who was competent and authorised to sign on behalf of the account holder or on behalf of the drawer. Therefore, the mandate holder certainly will not come within the meaning of a person "cheque drawn by a person" or "on an account maintained by him". This being the position, the complaint ought to have been filed against the owner, or proprietor of M/s. Southern Bilogicals, who was maintaining the account, who had drawn the cheque, though it was signed by the mandate holder. In this context, we have to further see, who is the mandate holder, what is his duty.
10. "Mandate" means in the commercial circle as per the law lexicon:
A mandate is a contract by which a lawful business is committed to the management of another, and by him undertaken to be performed without reward.
It is also further seen from the said definition, a mandate is an act by which one person gives power to another to transact for him and in his name, one or several affairs. From the above definition, it is crystal clear that the role of the mandate holder is limited. In the sense, obeying the mandate or any of the member and in this way alone, the accused in this case had signed in the cheque as mandate holder and therefore, as such, he cannot be held responsible for the nonpayment or the amount.
11. In view of the specific provisions available under Section 135 of the Act, the mandate holder is not the drawer in the real sense, as it should be understood for the purpose of Section 138 of the Act and it is also an admitted position, that the mandate holder is not the account holder, though he is the authorized signatory on behalf of the account holder.
Unfortunately the Trial Court without going into the details, placing reliance upon some decision, in my opinion, has committed an error in concluding, that the case is not bad for nonjoinder of the owner or M/s. Southern Biological firm or company, as the case may be. For the foregoing reasons, it is clear that the case has not been filed against the account holder in whose account the cheque was drawn. In this view, the finding of the Trial Court in this regard is liable to be set aside and it should be held that the case itself is not maintainable, which would follow, no question of conviction shall arise.
12. The learned Counsel for the appellant fairly brought to my notice a decision of this Court in G. Rukkumani v. K. Rajendran2001 Crl. LJ. 3120, wherein also it is held that the mandate giver cannot be let off on Page 14 of 35 HC-NIC Page 14 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT the ground that he had not signed in the cheque concluding there was no liability under the Negotiable Instruments Act, when it is shown the cheque was issued to discharge the liability. In the case involved in the above decision, the mandate holder as well as the account holder were shown as accused in an offence coming under Section 138 of the Negotiable Instruments Act. In that case, the person, who had given the mandate to the person, who had signed in the cheque, claimed that since he has not signed in the cheque, he is not liable to answer the claim and in this way, she sought discharge from the case. While considering the above said facts, as well as considering the decision relied on by the Trial Court, this Court has correctly come to the conclusion, "the mandategiver cannot shrug off the claim of the demand of the opposite party under the Negotiable Instruments Act, when the cheque was issued to discharge the partial liability", which principle is squarely applicable to the present case also. In this case, if the mandate giver viz., the account holder had been arrayed as accused, then there might have been, a chance for convicting that person, considering the liability as well as the fact that the issuance of the cheque by the mandate holder for the discharge of the said liability and this kind of chance was also not given by the complainant to the Court. In this view, the case must fail."
22 In the case of Surendra Mal Mehta and Deepak Mehta vs. Gillette India Limited reported in 2006 (133) Company Cases 412, a learned Single Judge of the Madras High Court took the view that the mandate holder is not liable under Section 138 of the N.I. Act, but the principal is liable. The relevant observations are as under:
"12. In the latest judgment in Ravi Chandran, R. v. C. Subramanian (2006) 1 MLJ (Crl.) 68, this Court had an occasion to consider whether the mandate holder who issued the cheque on behalf of the account holder is liable to answer the criminal liability under Section 138 of the Negotiable Instruments Act and hold that such a mandate holder is not accountable to the proceedings under Section 138 of the Negotiable Instruments Act.
13. Admittedly in this case, the first petitioner who is the father of the second petitioner was the mandate holder to issue cheque on behalf of the second petitioner. The account is in the name of the second petitioner only.
Therefore the first petitioner cannot be prosecuted under Section 138 of the Negotiable Instruments Act."
Page 15 of 35 HC-NIC Page 15 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT 23 In the case of J. Ramaraj vs. Iliyaz Khan reported in 2007
Criminal Law Journal 902 , a learned Single Judge of the Karnataka High Court has explained the contract of agency. The learned Judge, while discussing Section 222 of the Indian Contract Act visavis Section 138 of the N.I. Act, held as under:
"12. In so far as discharge of initial burden on the part of the complainant is concerned, he has specifically stated as to supply of potatoes on various dates but, the details of the same has not been furnished which is the only grouse according to the petitioner. But, according to practice, as a Commission Agent when the complainant used to supply the goods through the possession of the farmers, on commission basis and if it is kept in cold storage and supplied to the accused directly as noted by the learned Magistrate, there would not be any record available in the APMC for having supplied the potatoes to the petitioner. If really the petitioner was serious, he would have sought the complainant to produce the records in this regard and the account books maintained by him nor has he himself produced any account books maintained by him in this regard. It appears as an alternative defence, petitioner has tried to shift the burden stating that it is the company which is the principal and the petitioner is only a commission agent and relying upon S. 28 of the Negotiable Instruments Act, contended that the principal is liable and not the commission agent. In this regard, the petitioner has also sought the assistance of various provisions under the Negotiable Instruments Act to stand by his contention that primarily the principal is liable and not the agent. Even as per S. 141 of the Negotiable Instruments Act, the petitioner being an agent who had transacted the business on behalf of the company and much less he is signatory to the cheque renders himself liable and shall be liable to be proceeded against. It is well settled that company alone or the personin charge of business of company alone or both can be prosecuted for offence under S. 138 of the Negotiable Instruments Act.
13. In so far as contract of agency is concerned, might be the principal is liable for the act of the agent. Section 222 of the Indian Contract Act, 1872 provides that the agent can be indemnified against consequences of all lawful acts and for which the principal is liable. If the agent wants to take the shelter that it is the principal who is liable and not the agent and of course, for his acts or breach committed by him, the principal would be liable, but it does not necessarily convey the meaning that primarily the principal alone could be proceeded with and not against the agent. Moreover, there are certain obligations cast upon the agent as duties towards the principal. As is well settled, the principal is liable for all lawful acts of the agent. Similarly, the agent is bound to render proper accounts to his principal and to communicate to the principal and he has Page 16 of 35 HC-NIC Page 16 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT to use all reasonable diligence in doing so. It appears, nowhere the petitioner has placed any material nor brought to the notice of the complainant that the transaction is directly between the company and the complainant and that the petitioner has got nothing to do with the transactions. Even if it is taken as a fact that petitioner has acted as an agent of the company of the principal, then necessarily the issuance of notice to this petitioner by the complainant and failure on the part of this petitioner to reply to the same or not intimating the complainant the fact that the primary liability is on the principal for the amount due if any, will estop the petitioner from taking up such a contention that he is not liable and rather the principal is liable. If really the petitioner has acted on behalf of the principal as an agent, as a matter of indemnification, ultimately it is for the petitioner to step into the shoes of the complainant to recover the amount from the principal."
"15. It is seen, in respect of three cheques issued, the trial Court has only convicted and sentenced the petitioner to pay the amount of the cheque and a fine of Rs. 3,000/ each and to undergo simple imprisonment for one year in each of these cases. The transaction is of the year 2001 and now we are in the fag end of 2006. From a perusal of the impugned order passed by the Courts below and also on hearing the arguments advanced by the counsel for the respective parties and on going through the ratio laid down in various decisions cited by the petitioner'scounsel, I am of the view that those decisions are of no help to the petitioner. Even S. 28 of the Negotiable Instruments Act clearly lays down the liability of the maker of the instrument. In the case on hand, the drawer of the cheque is not the principal, the petitioner has drawn the cheque and that part cannot be disputed. As rightly noted by both the Courts below, no element of coercion is established by the petitioner against the complainant nor is it even brought to the notice of the complainant that he is only acting as an agent on behalf of the company. No such endorsement is being made by him nor replied in the legal notice issued in this regard.
16. In the ratio laid down in AIR 1992 Mad 183 M. Mahadevan Pillai v. Smt. Vedavalli Ammal, the Madras High Court has held thus :
Knowledge of agency to other party does not free the agent from liability, if he does not disclose on the instrument that he signed as an agent. The principle is that unless the maker has clearly affixed his signature to the instrument as agent or on account of or on behalf of a principal whose name is disclosed or, unless those he has signed unconditionally, he has unequivocally and clearly disclaimed in some portion of the document his own responsibility and mentions the name of the person really liable, he cannot escape liability.
Further, S. 28 of the Negotiable Instruments Act reads thus :
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Liability of agent signing : An agent who signs his name to a promissory note, bill of exchange or cheque without indicating thereon that he signs as agent, or that he does not intend thereby to incur personal responsibility, is liable personally on the instrument, except to those who induced him to sign upon the belief that the principal only would be held liable.
17. The above ratio as well as the legal position makes it clear that the agent will be liable in the absence of any such endorsement being made and also when he fails to establish that he has been induced to sign the cheques on the assurance that the complainant will only proceed against the principal and not against the petitioneragent. The finding of both the Courts below that the petitioner did not discharge his responsibility by way of rebuttal evidence cannot be faulted with."
24 Thus, in all the above referred decisions, the view taken is that the principal is liable for dishonour of the cheque under Section 138 of the N.I. Act even if the drawer of the cheque is the constituted Power of Attorney or the authorised signatory. With due respect to the views expressed in the various decisions referred to above, I am unable to subscribe to such a view. I am of the view that it is only the mandate holder, who has drawn the cheque, can be held liable under Section 138 of the N.I. Act and not the principal. I shall assign my reasons for taking such a view.
25 At the outset, I may state that there was no reason for the complainant to make the proprietary concern as the accused No.1 and the proprietor as the accused No.2. The law is wellsettled that a proprietary concern is synonymous to the proprietor. The concept of vicarious liability was introduced in the penal statutes, like the Negotiable Instruments Act to make the Directors, Partners or other persons, incharge of and control of the business of the company or otherwise responsible for its affairs; the company itself being a juristic person. A juristic person can be a Company within the meaning of the provisions of the Companies Act, 1956 or a partnership within the Page 18 of 35 HC-NIC Page 18 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT meaning of the provisions of the Indian Partnership Act, 1932 or an association of persons which ordinarily would mean a body of persons which is not incorporated under any statute. A proprietary concern, however, stands absolutely on a different footing. A person may carry on business in the name of a business concern, but he being proprietor thereof, would be solely responsible for the conduct of its affairs. A proprietary concern is not a Company. Company in terms of the explanation appended to Section 141 of the Negotiable Instruments Act, means any bodycorporate and includes a firm or other association of individuals. Director has been defined to mean in relation to a firm, a partner in the firm. Thus, whereas in relation to a Company, incorporated and registered under the Companies Act, 1956 or any other statute, a person as a Director must come within the purview of the said description, so far as a firm is concerned, the same would carry the same meaning as contained in the Indian Partnership Act. [See: Raghu Lakshminarayanan vs. M/s. Fine Tubes, 2007 Criminal Law Journal 2436].
26 The distinction between partnership firm and a proprietary concern is wellknown. It is evident from Order XXX, Rule 1 and Order XXX Rule 10 of the Code of Civil Procedure. The question came up for consideration also before the Supreme Court in M/s. Ashok Transport Agency vs. Awadhesh Kumar and another reported in [(1998) 5 SCC 567] wherein the Supreme Court stated the law in the following terms: "6. A partnership firm differs from a proprietary concern owned by an individual. A partnership is governed by the provisions of the Indian Partnership Act, 1932. Though a partnership is not a juristic person but Order XXX, Rule 1, CPC enables the partners of a partnership firm to sue or to be sued in the name of the firm. A proprietary concern is only the business name in which the proprietor of the business carries on the business. A suit by or against a proprietary concern is by or against the proprietor of the business. In the event of the death of the proprietor of a proprietary concern, it is the legal representatives of the proprietor who alone can sue or be sued in respect of the dealings of the proprietary Page 19 of 35 HC-NIC Page 19 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT business. The provisions of Rule 10 of Order XXX, which make applicable the provisions of Order XXX to a proprietary concern enable the proprietor of a proprietary business to be sued in the business names of his proprietary concern. The real party who is being sued is the proprietor of the said business. The said provision does not have the effect of converting the proprietary business into a partnership firm. The provisions of Rule 4 of Order XXX have no application to such a suit as by virtue of Order XXX, Rule 10 the other provisions of Order XXX are applicable to a suit against the proprietor of proprietary business "in so far as the nature of such case permits." This means that only those provisions of Order XXX can be made applicable to proprietary concern which can be so made applicable keeping in view the nature of the case."
27 Thus, one aspect is very clear that the applicant No.2 herein, being the proprietor, cannot be held vicariously liable for the dishonour of the cheques drawn by her Power of Attorney or authorised signatory with the aid of Section 141 of the N.I. Act.
28 I propose to examine the issue considering the following:
(1) Who is responsible and liable to be proceeded for the dishonour of the cheque for the commission of the offence punishable under Section 138 of the N.I. Act?
(2) In the case at hand, who had drawn and issued the cheque?
(3) What amounts to drawing a cheque?
(4) Who could be said to be the maker of a cheque?
29 It is useful to refer to Section 138 of the N.I. Act, which reads as
under:
"138. Dishonour of cheque for insufficiency, 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 Page 20 of 35 HC-NIC Page 20 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT 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 arrangement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless
(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice.
Explanation. For the purposes of this section, "debt or other liability"
means a legally enforceable debt or other liability".
30 In order to constitute an offence under Section 138 of the N.I. Act, the Supreme Court, in Jugesh Sehgal vs. Shamsher Singh Gogi, (2009) 14 SCC 683 : (AIR 2009 SC (Supp) 2022), noted the following ingredients which are required to be fulfilled:
"(i) a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account;
(ii) the cheque should have been issued for the discharge, in whole or in part, of any debt or other liability;
(iii) that cheque has been presented to the bank within a period of six Page 21 of 35 HC-NIC Page 21 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT months from the date on which it is drawn or within the period of its validity whichever is earlier;
(iv) that cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of the 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 the bank;
(v) the payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;
(vi) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice.
Being cumulative, it is only when all the aforementioned ingredients are satisfied that the person who had drawn the cheque can be deemed to have committed an offence under Section 138 of the Act."
31 Section 140 of the N.I. Act reads as under:
"140. Defence which may not be allowed in any prosecution under section 138. It shall not be a defence in a prosecution for an offence under section 138 that the drawer had no reason to believe when he issued the cheque that the cheque may be dishonoured on presentment for the reasons stated in that section."
A person drawing a cheque cannot take up the defence that when he drew the cheque he had no idea that his credit balance in the account was insufficient. In fact this section provides what may be termed as 'Checks and Balances' and in fact the very purpose of the Act would have been frustrated if the section was not there. This section simply means that a drawer of a cheque has knowledge of his account. He cannot take a defence in a trial under section 138 of the Negotiable Instruments Act that he had no reason to believe when he issued the cheque that it will be dishonoured.
The use of the word 'shall' shows the mandatory nature of the provision.
The Banking Laws Committee observed as under:
Page 22 of 35HC-NIC Page 22 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT "It may, sometimes, happen that a person may draw against certain uncleared items and in some very rare cases, the dishonour may be due to some inadvertent mistake of the bank in arriving at the balance available to meet the cheque. Though the general presumption (i.e. issue of a bad cheque should be prima facie of bad faith and an allowance of grace period for immediate subsequent corrective action may lead to the displacement of such inference), could be raised in all cases, it operates only until the contrary is shown and in such circumstances the above would be considered as leading to a contrary inference."
It further observed that bona fide cases will not suffer. We can say that 'mens rea' has been excluded.
Mens rea is an essential ingredient of a criminal offence. A statute can, however, exclude mens rea as in the present section. Even otherwise the nature of mens rea that would be implied in a statute creating an offence depends on the object of the Act and the provisions thereof.
32 I should also refer to the provisions of Section 2 of the Powers of Attorney Act, 1882. The said section runs as under:
"2. Execution under power of attorney : The donee of a powerof attorney may, if he thinks fit, execute or do any instrument or thing in and with his own name and signature and his own seal, where sealing is required, by the authority of the donor of the power; and every instrument and thing so executed and done, shall be as effectual in law as if it had been executed or done by the donee of the power in the name, and with the signature and seal, of the donor thereof."
If the above provision of subsection (2) is considered, then it would be quite clear that in view of the provisions of the said section, an act committed by the holder of the power of attorney would be presumed to be an act committed by the person who gives power of attorney.
33 In the case of Hasma vs. Ibrahim, reported in 1994 (1) Bank Commercial Law Reporter 159, His Lordship, K. T. Thomas, (as he then Page 23 of 35 HC-NIC Page 23 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT was) has observed in paras 7 and 8 as under for holding that the power of attorney holder of a payee can lodge a complaint under Section 142 of the Act:
"7. In considering the question involved here legal position regarding the right of a person to appoint another as his agent to be understood at least in a general manner. According to the Law of England "every person who is suit jurist has a right to appoint an agent for any purpose whatever and that he can do so when he is exercising a statutory right no less than when he is exercising any other right" vide Jackson and Co. v. Napper, (1986) 35 Ch. D 162 at page 172. This was recognised as a common law right. Blackburn, J. has stated in Queen v. Justices of Kent (1873) 8 QB 305 that "at common law, when a person authorises another to sign for him, the signature of the person so signing in the signature of the person authorising it." The Supreme Court has declared in a decision that the law in India is also the same vide Revulu Subbarao v. I. T. Commr., AIR 1956 SC 604 Venkatarama Ayyar, J. in the said decision has observed that the said rule is subject to certain well known exceptions such as, when the act to be performed is personal in character, or when the act to be performed is annexed to a public office, or to an office involving any fiduciary obligation. "But apart from such exception, the law is well settled that whatever a person can do himself, he can do through an agent"
observed the learned Judge in the said decision. The above can thus be regarded as the legal position regarding the right to appoint an agent.
8. "Power of attorney" is the instrument by which a person is authorised to act as the agent of the person granting it (vide Black's Law Dictionary). In Stroud's Judicial Dictionary, power of attorney is described as "an authority whereby one is set in the turns, stead, or place of another to act for him." Stone, C. J. has adopted the said definition as effective and acceptable in Ramdeo v. Lalu Natha, AIR 1937 Nag 65. Section 2 of the Power of Attorney Act, 1882 empowers the donee of the power of attorney to do anything "in and with his own name and signature" by the authority of the donor of the power. The section declares that everything so done "shall be as effectual in law as if it had been. . . . . . .done by the donee of the power in the name and with the signature. . . . .of the donor thereof"
(short of the words which are not necessary in this context). In the light of such declaration, the legal position is that the power of attorney holder can do everything empowered by the donor and all such acts done by the donee shall have legal recognition and acceptance as though such acts were done by the donor himself."
34 In S.K. Alagh vs. State of Uttar Pradesh and others, (2008) 5 SCC 662 : (AIR 2008 SC 1731 : 2008 AIR SCW 2389), the Supreme Page 24 of 35 HC-NIC Page 24 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT Court held:
"19. ..... If and when a statute contemplates creation of such a legal fiction, it provides specifically therefor. In absence of any provision laid down under the statute, a Director of a Company or an employee cannot be held to be vicariously liable for any offence committed by the Company itself. (See Sabitha Ramamurthy v. R.B.S. Channabasavaradhya (2006) 10 SCC 581 : (AIR 2006 SC 3086 : 2006 AIR SCW 4582))"
35 In Sham Sunder and others vs. State of Haryana, (1989) 4 SCC 630 : (AIR 1989 SC 1982), the Supreme Court held as under:
"9. The penal provision must be strictly construed in the first place. Secondly, there is no vicarious liability in criminal law unless the statute takes that also within its fold. Section 10 does not provide for such liability. It does not make all the partners liable for the offence whether they do business or not."
36 The Supreme Court in the case of Mrs. Aparna A. Shah vs. M/s. Sheth Developers Pvt. Ltd and another reported in AIR 2013 SC 3210 took the view that under Section 138 of the N.I. Act, it is only the drawer of the cheque who can be proceeded. In the case before the Supreme Court, the husband had drawn the cheque on account jointly maintained with his wife. The Supreme Court held that in case of issuance of a cheque from joint account, a joint account holder cannot be prosecuted unless the cheque has been signed by each and every person who has a joint account holder. The following was observed by the Supreme Court as contained in para 23:
"We also hold that under Section 138 of the N.I. Act, in case of issuance of cheque from joint accounts, a joint account holder cannot be prosecuted unless the cheque has been signed by each and every person who is a joint account holder. The said principle is an exception to Section 141 of the N.I. Act which would have no application in the case on hand. The proceedings filed under Section 138 cannot be used as an arm twisting tactics to recover the amount allegedly due from the appellant. It cannot Page 25 of 35 HC-NIC Page 25 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT be said that the complainant has no remedy against the appellant but certainly not under Section 138. The culpability attached to dishonour of a cheque can, in no case "except in case of Section 141 of the N.I. Act" be extended to those on whose behalf the cheque is issued. This Court reiterates that it is only the drawer of the cheque who can be made an accused in any proceeding under Section 138 of the Act. Even the High Court has specifically recorded the stand of the appellant that she was not the signatory of the cheque but rejected the contention that the amount was not due and payable by her solely on the ground that the trial is in progress. It is to be noted that only after issuance of process, a person can approach the High Court seeking quashing of the same on various grounds available to him. Accordingly, the High Court was clearly wrong in holding that the prayer of the appellant cannot even be considered. Further, the High Court itself has directed the Magistrate to carry out the process of admission/denial of documents. In such circumstances, it cannot be concluded that the trial is in advanced stage."
37 Section 7 of the N.I. Act explains the term "drawer" as the maker of a bill of exchange or cheque. Who could be said to be the maker of a cheque? In Iyer's Judicial Dictionary, 11th Edition, 1995, "maker" means "the person who signs promissory note; by making it he engages that he will pay it according to its tenor, and is precluded from denying to a holder in due course, the existence of the payee and his then capacity to endorse".
38 In Black's Law Dictionary, the "maker" is defined as "someone who signs a promissory note".
39 In Black's Law Dictionary, 7th Edition, 1990, to "draw" means to create and sign (a draft). Draw a cheque to purchase goods. "Drawer" means someone who directs a person or entity usually a bank to pay a sum of money stated in an instrument. Eg: A person who writes a cheque: a person who signs or is identified in a draft as person ordering payment.
40 I have to my advantage a judgment rendered by a learned Single
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Judge of the Kerala High Court in the case of Mrs. Jayaprabha Harikumaran Thampi vs. State of Kerala and another [Criminal Revision Petition No.898 of 2010 decided on 3rd December 2014] deciding the very same issue with which I am concerned. I find the reasonings adopted by the learned Judge quite commendable and I propose to take the very same view as expressed by His Lordship.
41 In view of the above statutory analysis with the aid of dictionary meaning, it can be held that the maker of cheque is a person who orders payment and signs the cheque. It follows that the drawer of a cheque is the person who orders payment and signs it. In this analysis, a cheque is said to have been completed or made as soon as the person orders payment and signs the cheque. This is the process by which the drawer makes the cheque. It is only the 'drawer' of a cheque who can be held liable for an offence under Section 138 of the N.I. Act. If that be so, the Power of Attorney Holder, who ordered payment and signed the cheque, is primarily held liable to be proceeded against for the commission of the offence under Section 138 of the N.I. Act, caused by the drawing and issuing of the cheque, when there is no sufficient fund in the account.
42 In the instant case, the Power of Attorney Holder had ordered payment, signed and issued the cheques. It is true that the power of attorney holder has signed and issued the cheque under the authority granted by the principal. Then, the court is further required to see, can the principal be held either constructively or vicariously liable for the act done by the Power of Attorney Holder. According to Section 2(n) of the Cr.P.C., an offence means any act or omission made punishable under any law for the time being in force. It is only the man who commits a crime must be liable for it. At this juncture, it is significant to note that unlike Indian Penal Code, there is no enabling provisions akin to Page 27 of 35 HC-NIC Page 27 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT Sections 34 to 38, 107, 149, 120B etc. under the Negotiable Instruments Act so as to rope in the person who caused the commission of the offence by sharing of mind or abetting or conspiring to do an act that constitutes an offence. According to the statutory mandate under Section 138 of the N.I. Act, a person who has drawn and issued the cheque is liable to be proceeded against for the offence under Section 138 of the N.I. Act. In the absence of enabling provisions, the person who has caused the offence cannot be held constructively liable for the offence under Section 138 of the N.I. Act.
43 Coming to vicarious liability, in criminal law unlike in the law of torts, a master is not held liable for the act of his servant or agent on the principle of respondent superior. But the Indian Penal Code makes a departure from general rule under a few provisions like Sections 154 to
156. The doctrine of vicarious liability is more frequently invoked under the special enactment. Under such special enactments, a master can be held criminally liable for the violation of the provisions contained in that Acts provided that his agent or servant, during the course of employment or engagement, committed such act, and the statute imposes such vicarious liability.
44 Let us examine the N.I. Act which is also a special enactment contemplating the law relating to promissory note, bills of exchange and cheque. Significantly, Section 141 which deals with the offence committed by the company is the only provision which fastens the liability over the persons other than the person who has drawn and signed the cheque for the commission of the offence under Section 138 of the N.I. Act. There, the person responsible to the company for the conduct of the business of the company and the officers and other functionaries of the company as well as the company shall also be liable Page 28 of 35 HC-NIC Page 28 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT to be proceeded against; but such a proposition cannot be imported to the commission of the offence by the Power of Attorney Holder while acting under the power of attorney granted by the principal, in the absence of statutory provision, enabling to fasten the liability on the principal also.
45 To sum up, the principles of vicarious criminal liability cannot be attributive upon the principal, who has granted power of attorney in favour of the Power of Attorney Holder for the commission of the offence under Section 138 of the N.I. Act, caused by the dishonour of the cheque for want of sufficient fund, drawn and issued by the Power of Attorney Holder. The Power of Attorney Holder cannot escape from his penal liability by saying that he signed the cheque only under authority given by the principal and not in his individual capacity.
46 This finding is supported by Section 26 of the N.I. Act that reads as follows:
"Every person capable of contracting, according to law to which he is subject, may bind himself and be bound by the making, drawing, acceptance, endorsement, delivery and negotiation of a promissory note, bill of exchange or cheque".
47 The above view is further supported by a logical analysis also. The power of attorney has been granted to operate the account only. That means, the attorney has power to draw and issue the cheque wherever it is necessary, in accordance with law. The drawal and issuance of the cheque does not constitute the offence under Sec.138 of the N.I. Act, unless the cheque has been dishonoured for want of sufficient fund and thereafter the drawer does not pay the cheque amount, in spite of the Page 29 of 35 HC-NIC Page 29 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT statutory notice demanding cheque amount. Therefore, the drawer of a cheque is not expected to draw and issue a cheque, unless it is made sure that there is sufficient fund in the account to honour the cheque. It follows that the authority granted to the PowerofAttorney Holder can never be presumed to be a power or authority to issue a cheque when there is no fund in the account. In short, the authority granted by the principal can never be extended to the extent of drawing and issuing the cheque when there is no sufficient fund in the account. Therefore, in my view, the legal analysis held above is also supported by a logical conclusion, in the absence of specific provisions imposing strict liability, on the principal also, in the Act.
48 The learned counsel for the 1st respondent cited the decision in Mohammed Samdani Basha vs. Syed Issac Basha [2006 KHC 1383] and strenuously contended that the principal is always liable for the act done by the Attorney and he is responsible for the penal liability also. Going by the above decision, it is seen that the learned Judge relying on another decision of the Calcutta High Court in Sova Mukherjee vs. Rajiv Mehra [1997 (1) CCR (313)(Cal)], held that a principal, who has a general power of attorney is always bound by the act of Attorney including penal liability when the power is general. So the principal is liable to be proceeded against for the penal liability also. For the reasons analysed above, in view of the statutory mandate under Section 138 of the N.I. Act, and absence of enabling provisions, I am unable to accept the above view of the Calcutta High Court, which is having a persuasive value only. I am of the considered opinion that the penal liability for the act done by the Power of Attorney Holder cannot be imported to the principle, unless the act specifically provides so, in view of the liability imposed on the drawer of the cheque only under Section 138 of the N.I. Act. [See: Mrs. Jayaprabha Harikumaran Thampi (supra)] Page 30 of 35 HC-NIC Page 30 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT 49 A learned Single Judge of this Court in the case of Navinchandra Dharamshibhai Doshi vs. Natvarlal and Company reported in 2001(3) G.L.H. 399 took the view that the Power of Attorney or the mandate holder is responsible and liable to be proceeded for the dishonour of the cheque under Section 138 of the N.I. Act. I may quote the observations of the learned Judge:
"8.1 On reading Section 138 of the Act, not the only drawer of the cheque can be held responsible for bouncing of the cheque but that person who has drawn a cheque must have issued that cheque on an account maintained by him with the banker for payment of any amount of money to another person from out of that account for the discharge in whole or in part for any debt or other liability. Under the circumstances, the Court has not to ascertain only who is a drawer of cheque. The Court is further required to see as to whether that person who draws a cheque, had issued a cheque on an account maintained by him with the banker. Thus, looking to Section 138 of the Act, it is necessary to know as to what is meant by drawer. Section 7 of the Act defines that the maker of a bill of exchange or cheque is called the 'drawer' and the person thereby directed to pay is called the 'drawee'. In view of this definition of Section 7 of the Act, it is therefore, required to know as to what is meant by maker of cheque. Shri Mankad, learned A.P.P. has placed reliance on a definition of a maker given in Book titled "Iyer's Judicial Dictionary, 11th Edition, 1995." As per definition of "maker" on Page 726 of said book "maker" means the person who signs promissory note; by making it he engages that he will pay it according to its tenor, and is precluded from denying to a holder in due course, the existence of the payee and his then capacity to endorse'. Shri Mankad has also placed reliance on definitions of "draw" and "drawer"
given in Book titled "Black's Law Dictionary, 7th Edition of 1990". As per definition of "to draw" means to create and sign (a draft). As per definition of "drawer" given on Page 510 drawer means "one who directs a person or entity usu. a bank to pay a sum of money stated in an instrument for example a person who writes check, the maker of a note or draft." The drawer of a cheque (check) is a person who signs it. The person who creates or executes a draft. Thus, maker of a cheque is a person who signed the cheque.
9. Shri D. F. Amin, learned Advocate for the revisionpetitioner has argued that in this case "M. N. Shroff" is a drawer because it is the case of the complainant that accused No. 1 who is admittedly wife of accused No. 2 is a proprietor or owner of the said business which she carries in name of "M. Page 31 of 35 HC-NIC Page 31 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT N. Shroff". If arguments of Shri Amin are accepted then as per his arguments if rubber stamp impression of 'M. N. Shroff with endorsement authority is affixed on cheque, then the said cheque can be said to have been made by accused No. 1 even if signature is not there in between endorsement of "For M. N. Shroff and Authority. Looking to definition of maker of the document, the document can be said to have been completed or made as soon as the person signs that document, and therefore, here in this case as soon as accused No. 2 put his signature just above endorsement "Authority" and just below endorsement " For M. N. Shroff"
cheque was made, and therefore, to my mind accused No. 2 made a cheque in question, and therefore, he is a drawer of a cheque in a question within the meaning of Section 7 of the Act, and therefore, the arguments advanced by Shri Amin cannot be accepted.
10. It is interesting to note that during the course of arguments Shri Amin was asked to produce documents available from the Bank to show as how the account in name of "M. N. Shroff was opened and who is authorised person to operate that bank account. There is no dispute with regard to bank account which has been opened by "M. N. Shroff" with the Pragali Cooperative Bank Ltd. It is quite possible that both the accused might have opened an account in the name of "M. N. Shroff with the said bank and both would have given their specific (sic. specimen) signatures for operating that account. In spite of sufficient time was given to Shri Amin, that type of documents are not produced by Shri Amin to satisfy the query made to him by this Court. It is also interesting to note that Shri Amin has produced original Power of Attorney executed by accused No. 1 in favour of accused No. 2 on 30th October, 1991. As per that deed of Power of Attorney, accused No. 1 Manjulaben Navinchandra Doshi, is Proprietor of M/s. M. N. Shroff and she authorised accused No. 2 in her own name and on her own behalf to do and execute all the acts and things as narrated in the deed of Power of Attorney. One of that three acts is to open and operate any kind of bank account on behalf of her and on behalf of any of her proconcerns and on behalf of the proprietorship firm wherein she is an owner. The second act is to do all such things in respect of her bank accounts in effect as she agreed to ratify and confirm whatever accused No. 2 shall do. Thus, from this Power of Attorney it appears that accused No. 2 who is a husband of accused No. 1 has been fully empowered by accused No. 1 to transact all types of businesses relating to her bank account. If we peruse a cheque in question, we find that accused No. 2 signed the cheque as follows :
"FOR M. N. SHROFF Sd/ illegible Authority"
11. Thus, on perusal of cheque by conjoint reading of Power of Attorney, it is crystal clear that accused No. 2 was empowered to sign the cheque by Page 32 of 35 HC-NIC Page 32 of 35 Created On Sat Aug 12 09:02:57 IST 2017 R/CR.MA/12365/2015 JUDGMENT accused No. 1, and therefore, when he was empowered to sign the cheque, it can be said that accused No. 2 made a cheque for and on behalf of accused No. 1. Now, he cannot escape from his liability by saying that he signed the cheque only under authority and not in his individual capacity, Shri Amin has also placed reliance on Section 26 of the Act. Section 26 of the Act reads as follows :
"Capacity to make, etc., promissory notes etc : Every person capable of contracting, according to the law to which he is subject, may bind himself and be bound by the making, drawing, acceptance, endorsement, delivery and negotiation of a promissory note, bill of exchange or cheque."
11.1 In view of Section 26 every person capable of contracting according to law, may bind himself, and therefore, when accused No. 2 has made/drawn a cheque he is responsible for bouncing of that cheque. Shri Amin has also placed reliance on Section 29 of the Act. Section 29 of the Act reads as follows :
"Section 29. Liability of legal representative signing : A legal representative of a deceased person who signs his name to a promissory note, bill of exchange or cheque is liable personally thereon unless he expressly limits his liability to the extent of the assets received by him as such."
11.2 This Section 29 will not be applicable to this case as it pertains to legal representatives of deceased persons. Here, in this case, accused No. 2 signed that authority given by accused No. 1. As per Section 30 of the Act, the drawer of a bill of exchange or cheque is bound, in case of dishonour by the drawee or acceptor thereof, to compensate the holder, provided due notice of dishonour has been given to or received by the drawer as hereinafter provided."
11.3 In view of above legal position, prima facie it appears that accused No. 2 signed to make a cheque in question, and therefore, he is a drawer of the cheque, and therefore, contention of Shri Amin cannot be sustained. Hence, it is rejected.
The learned Single Judge of this Court, however, had no occasion to consider the liability of the principal.
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R/CR.MA/12365/2015 JUDGMENT
50 In view of the aforesaid discussion, I hold that the applicants
cannot be prosecuted for the offence punishable under Section 138 of the N.I. Act. The view taken by the Kerala High Court in the case of Jayaprabha (supra) is supported by a decision of the Madras High Court in the case of Sudesh Kumar Sharma vs. K.S. Selvamani reported in 1995 (1) Civil Court Cases 118 : 1995(1) Current Civil Cases 118. I may quote the relevant observations as under:
"I have carefully considered the submissions made by learned counsel on both the sides. I shall first consider the question as to whether the first accused can be proceeded against for the offence alleged. To consider this point, the relevant allegations in the complaint need be stated. In the first paragraph of the complaint, it is stated that the second accused, son of the accused, and the first accused are running the business, that the first accused is the proprietor and the second accused is the authorised signatory of Pushpanchali. In paragraph 2 of the complaint, it is stated, under particulars of the cheques, that cheques were drawn by the second accused. I shall immediately refer to Section 138 of the Act which stated that 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, was dishonoured for insufficient funds or for exceeding the arrangement, the said person shall deemed to have committed an offence. In this case, the drawer of the cheque is the second accused. The first accused was the proprietor of the concern for whose liability his son, the second accused had issued the cheque and so criminal liability cannot be fastened on the first accused. So, I am clear that the first accused cannot be made liable for an offence under Section 138 of the Act in any one of these complaints..."
51 In the result, both the applications succeed and are hereby allowed. The further proceedings of the two Criminal Cases Nos.313 of 2015 and 314 of 2015 respectively pending in the Court of the learned Additional Chief Metropolitan Magistrate, Negotiable Instruments Act, Court No.30, Ahmedabad are hereby quashed so far as the applicants are concerned. Rule is made absolute. Direct service is permitted.
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