Delhi District Court
Complainant vs M/S. Point Plastics on 24 May, 2014
IN THE COURT OF SH. APOORV SARVARIA, CIVIL JUDGEI, NEW
DELHI DISTRICT, NEW DELHI
C.C. No: 758/11
Unique Case ID No.
Polychem Ltd.
Tolstoy House,
15/7 Tolstoy Marg,
1, Tolstoy Lane, New Delhi.
Through: V K Grover
Regional Manager
.....Complainant
Versus
1. M/s. Point Plastics
A73, Main Vikas Marg,
Shakarpur, Laxmi Nagar,
New Delhi.
2. Nalini Mohela
Proprietor of M/s. Point Plastics
A73, Main Vikas Marg,
Shakarpur, Laxmi Nagar,
New Delhi.
3. Rakesh Mohela
Authorised Signatory
A73, Main Vikas Marg,
Shakarpur, Laxmi Nagar,
New Delhi.
.....Accused
COMPLAINT UNDER SECTION 138 OF THE
NEGOTIABLE INSTRUMENTS ACT, 1881
Date of Institution: 15.03.1996
Date of Reserving Judgment: 17.02.2014
Date of Judgment: 24.05.2014
CC No. 758/11
Polychem Ltd. v. M/s. Point Plastics Page 1 of 7
JUDGMENT
1. Short question to be decided is whether the authorised signatory of a proprietorship firm, who is not the proprietor himself is liable to be prosecuted under Section 138 of the NI Act.
Brief facts
2. The brief facts of the present complaint filed U/s. 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as "NI Act") are that the complainant Polychem Ltd. is a company incorporated under the Companies Act having its registered office at Mumbai and regional office at New Delhi. The complainant is stated to be carrying business of manufacturing and selling of polystern, styrene monomer, alcohal liquor, vinyalancetate monomer (ABS), etc.
3. The accused no.1 M/s. Point Plastic is a firm, accused no.2 is stated to be proprietor and accused no.3 is stated to be the authorised signatory of the firm and is stated to be responsible for conduct, affairs and business of accused no.1. It is stated that accused no.1 through accused no.2 and 3 placed the orders for supply of Acrylontrile Butadine Styrine (ABS) to the complainant and the complainant supplied and delivered materials to accused firm against the invoices raised and as per the statement of accounts as on 15.01.1996 a debit balance of Rs. 40,38,469/ was outstanding against the accused.
4. It is stated that in partial discharge of the aforesaid liability, accused gave cheque no. 833585 dated 26.01.1996 for Rs. 72,825/ and cheque no. 833597 dated 29.01.1996 for Rs. 99,600/ both drawn on Syndicate Bank, Nirman Vihar, Delhi. Thereafter, the complainant presented the aforesaid cheques in its bank but the same were returned unpaid with remarks "payment stopped by drawer". Thereafter, the complainant issued legal notice dated 06.02.1996 CC No. 758/11 Polychem Ltd. v. M/s. Point Plastics Page 2 of 7 through registered AD. It is stated that despite service of the legal notice accused did not make the payment of the cheque amount within the prescribed period. Therefore, it is stated that the accused are liable for the commission of the offence U/s. 138 of the NI Act.
Proceedings Before Court
5. The present complaint was received by way of assignment. Summons were issued against the accused persons. The accused entered appearance and took bail and notice of accusation was framed against the accused to which accused pleaded not guilty and claimed trial. On 21.08.2007, the accused no.2 Nalini Mohela was declared a proclaimed offender.
6. In support of his case, the complainant produced CW1 Sh. V K Grover who was examined and thereafter cross examined. The complainant also produced CW2 Sh K K Madan from Syndicate Bank who was examinedinchief and thereafter crossexamined after which the complainant closed its evidence.
7. During examination conducted U/s. 313 Cr.P.C, the accused Rakesh Mohela stated that he had business dealings with the complainant and the statement of accounts filed by the complainant is wrong. He also stated that cheque was issued as security and the material supplied by complainant was not up to the mark and that is why payment was stopped.
8. In support of his defence, the accused has produced DW1 Sh. Ved Prakash from the Syndicate Bank who was examined and discharged, DW Sh. Laxmi Narayan Udupa from the Syndicate Bank who was examined and discharged after which the defence evidence was closed.
9. This court has heard Sh. S C Chawla, Ld. Advocate for the complainant as well as Sh. Anoop Gupta, Ld. Advocate for the accused and perused the record.
CC No. 758/11 Polychem Ltd. v. M/s. Point Plastics Page 3 of 7Findings
10.The preliminary question to be dealt before proceeding on merits is whether the accused no.3 Rakesh Mohela who was the authorised signatory of M/s. Point Plastics, proprietorship firm of which accused no.2 Ms. Nalini Mohela was proprietor is liable for commission of offence U/s. 138 of the NI Act.
11. It is admitted by the complainant that M/s. Point Plastics is a proprietorship firm. It is well settled that the concept of vicarious liability U/s. 141 of NI Act is applicable in cases of a company as defined in that section and is not applicable to a proprietorship firm. In this context, it would be relevant to refer to a decision of Madras High Court in R. Ravi Chandran v. C. Subramanian alias C.S. Maniam, Mandate Holder of M/s. Southern Biologicals, (2006) 1 Mad LJ 68 in which the High Court of Madras has observed as under about the liability of an authorised signatory of a proprietorship firm:
"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 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 biologicals, CC No. 758/11 Polychem Ltd. v. M/s. Point Plastics Page 4 of 7 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 authorised signatory on behalf of the account holder........
12.The learned counsel for the appellant fairly brought to my notice a decision of this Court in G. Rukkumani v. K. Rajendran, 2001 Crl.L.J. 3120, wherein also it is held that the mandate giver cannot be let off on 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 CC No. 758/11 Polychem Ltd. v. M/s. Point Plastics Page 5 of 7 of the demand of the opposite party under the Negotiable Instruments Act, when the cheque was issued to discharge the partial liability", which principal 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."
12.In Dr. V. Bala Raju vs Pashak Feeds Pvt. Ltd. 2005 CriLJ 1129(AP), it was observedas under:
"5. Though the heading of Section 141 of the Act reads 'offences by companies', as per the explanation to that Section "Company"
means "any body corporate and includes a firm or other association of individuals; and "director" in relation to a firm, means a partner in the firm." Therefore, by virtue of the explanation, to Section 141 of the Act theory of vicarious liability is also extended to bodies corporate firms and associations of individuals only but not to sole proprietary concerns. Since Kousalya Enterprises, admittedly, is a proprietary concern, it cannot be said to be a Company, or a firm or a body corporate or an association of individuals, for to first respondent to invoke Section 141 of the Act to make the petitioner also liable on the ground that he is managing its affairs. It is well known that penal statute has to be strictly construed, and it is also well known while construing a Section no word can be added to or deleted from that Section. So by invoking Section 141 of the Act a person who is not either the drawer of the dishonoured cheque, or the proprietor but is in charge of the day to day affairs of a sole proprietary concern, cannot be made liable for an offence under Section 138 of the Act."
13.In Harinder Dhingra v. State 137 (2007) DLT 231 the Hon'ble High Court of Delhi has, in similar circumstances held that when the cheque in question is signed by the sole proprietorship concern and the accused is not the drawer of the cheque, as per the provisions of Section 138 of NI Act, the complaint against the accused, who was not the drawer of the said cheque could not have been filed. In that view of the matter, the Hon'ble High Court of Delhi had CC No. 758/11 Polychem Ltd. v. M/s. Point Plastics Page 6 of 7 quashed the summoning order against the accused who was not the drawer of the cheques in respect of which the complaint in that case was filed.
14. In Raghu Lakshminarayan v. Fine Tubes AIR 2007 SC 1634, the Supreme Court has observed that if the drawer of the cheque in question is not a company within the meaning of Section 141 of the NI Act, the question of an employee being proceeded against in terms of Section 141 of the NI Act would not arise.
15.In view of the aforesaid observations, the court finds that the accsued no.3 Sh.
Rakesh Mohela being the authorised signatory (mandate holder) and not the drawer of the cheques as the same were in the account of M/s. Point Plastics, proprietary concern of accused no.2 Ms. Nalini Mohela, the complaint against accused no.3 would not be maintainable. The offence, if any, can only be made out against accused no.2 who is the proprietor of M/s. Point Plastics. In view of the abovesaid observations, no offence is made out against accused no.3. The complaint is dismissed only qua accused no.3. There is no need to go into merits at this stage as the complaint is not maintainable against accused no.3.
16.Accused no.3 Sh. Rakesh Mohela is acquitted. Bail bonds stand cancelled.
Surety is discharged subject to compliance with Section 437A Cr.P.C.
Announced in the Open Court (Apoorv Sarvaria)
on 24th May, 2014 Civil JudgeI/MM, New Delhi District
New Delhi
CC No. 758/11
Polychem Ltd. v. M/s. Point Plastics Page 7 of 7