Punjab-Haryana High Court
T.P. Singh Kalra vs Star Wire India Ltd. on 28 January, 1998
Equivalent citations: 1998(2)ALD(CRI)760, [1998]93COMPCAS186(P&H)
Author: M.L. Singhal
Bench: M.L. Singhal
JUDGMENT M.L. Singhal, J.
1. By means of this judgment Crl. Misc. No. 14294-M, 14292-M and 14289-M, all of 1996, shall be disposed of as in these criminal miscellaneous petitions, the same question of law and fact is involved.
2. The facts have been taken out from Crl. Misc. No. 14294-M of 1996.
3. Through Crl. Misc. No. 14294-M of 1996, filed by T. P. Singh Kalra, director, Orion Auto and Steel Pvt. Ltd., G-3, Gandhi Nagar, Lashkar, Gwalior, he has prayed for the quashing of the complaint, annexure P-2, and the order, annexure P-1, passed by the Magistrate declining to discharge him in the complaint, annexure P-2. He has prayed for the quashing of every other proceeding taken in the complaint, annexure P-2.
4. Now, the facts in brief as set out by Star Wire India Limited, 21/4, Mathura Road, Ballabgarh, through its general manager, Shri V. K. Bountra - complainant in the complaint, annexure P-2, filed under section 138 of the Negotiable Instruments Act, 1881, as duly amended by Act No. 66 of 1988 (hereinafter to be referred to as "the Act").
5. The complainant-company is a public limited company incorporated under the Companies Act, 1956. Shri. V. K. Bountra is its general manager and is one of the principal officers of the company entitled to institute the complaint on behalf of the company. He has been authorised to file this complaint on behalf of the complainant-company by a resolution dated August 18, 1989, passed by the board of directors of the complainant-company. The company is engaged in the business of manufacturing of iron and steel products. As per the verbal order of the accused, the company supplied to the accused various quantities of bars. The accused took delivery of the goods sent by the company. The company supplied goods, vide bills Nos. 33 and 34, dated April 22, 1989, and April 24, 1989, for a sum of Rs. 1,12,212.54 and Rs. 1,06,923.16, respectively. In lieu of the receipt of the said bills by the accused and the bills raised by the company, the accused issued to the company cheque No. 013343, dated June 14, 1989, for a sum of Rs. 2,19,135.70 drawn on Central Bank of India, Banmore (M.P.), in the name and in favour of the complainant-company. The complainant-company deposited the said cheque with their banker, namely, Bank of Maharashtra, Neelam-Bata Road, Faridabad. The said cheque was sent to the banker of the accused for realisation of the amount. The cheque was returned by the banker of the accused with the remarks "exceeds arrangements" meaning thereby there were insufficient funds to the credit of the accused to meet the said cheque. Bank of Maharashtra, Faridabad, i.e., the banker of the company informed the company about the dishonour of the said cheque by the Central Bank of India, Banmore (M.P.). The said cheque was signed by T. P. Singh Kalra - accused as director of the accused company. Shri Harbhajan Singh Kalra - accused is the other director of the company. The directors of the accused-company have been sued as according to the relevant provisions of the Act in the event of commission of an offence by a company, every person who at the time the offence was committed was in charge of and was responsible to the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. As the said cheque had been returned by the banker of the accused unpaid on the ground that the amount standing to the credit of the account of the accused was insufficient to honour the cheque or exceeded the amount ordered to be paid from the account of the accused, the accused committed an offence punishable under section 138 of the Act. Notice dated August 9, 1989, was sent by the complainant-company to the accused as required under section 138(b) of the Act, but the accused failed to make payment of the said cheque within the stipulated period.
6. After recording preliminary evidence led by the complainant, Shri R. K. Sharma, Judicial Magistrate, First Class, Faridabad, vide order dated March 15, 1990, found sufficient grounds to proceed against the accused for an offence punishable under section 138 of the Act. Vide order dated June 10, 1992, a learned single judge of this court quashed proceedings against Harbhajan Singh Kalra - accused-director of the accused-company.
7. An application dated June 2, 1995, was moved by T. P. Singh Kalra, the petitioner herein, before the Magistrate for his discharge in the complaint saying that no notice had been served upon him as required under section 138 of the Act, and notice served upon the company, Orion Auto and Steel Industries was no substitute for notice required to have been served upon him. Service of notice is a condition precedent for the institution of the complaint. In the complaint, no date is mentioned as to when the cheque was dishonoured. The notice addressed to Orion Auto and Steel Industries was received on August 14, 1989. The complaint was filed on August 29, 1989 and was thus premature. The cheque was allegedly given by T. P. Singh Kalra as director of the company. The company was not impleaded. Impleadment of the company was a must. Further, there was no mention in the complaint that he was in charge of and responsible to the company for the conduct of the business of the company. The allegations made in the complaint at best constitute a civil liability as there was a contract between the complainant-company and Orion Auto and Steel Industries for the supply of goods and the payment of price of goods. The complainant-company had already filed a civil suit against T. P. Singh Kalra for the recovery of the amount of the cheque. The Judicial Magistrate First Class, Faridabad, declined to accept the prayer of T. P. Singh Kalra and discharge him in the complaint, annexure P-2.
8. In support of his prayer for the quashing of the complaint, annexure P-2, and the order, annexure P-1, declining to quash the complaint and discharge him, T. P. Singh Kalra has averred that against the order of summoning, Shri Harbhajan Singh Kalra, the other accused, filed a petition before the High Court by way of Crl. Misc. No. 3073-M of 1990 and, vide order dated September 6, 1991, the learned single judge of this court quashed the complaint as well as the order of summoning qua the other accused named Harbhajan Singh Kalra. While quashing the complaint and the order of summoning qua Harbhajan Singh Kalra, the learned single judge of this court felt impressed by this fact that notice had been served upon the company without naming the persons who were liable for issuing cheques. Through the application moved before the Magistrate, T. P. Singh Kalra, claimed parity with Harbhajan Singh Kalra qua whom the complaint and the order of summoning was quashed, the Magistrate refused to quash the complaint qua T. P. Singh Kalra arbitrarily although his case was squarely covered by the judgment of this court passed by the learned single judge in Crl. Misc. No. 3708-M/90. The learned single judge of this court clearly held that notice issued to the company was no notice in the eye of law as contemplated in the Act. This was a finding given by the High Court in the case of the co-accused. The Magistrate was not within his powers to give any finding which was at variance with the finding of this court. No notice was issued to the petitioner under section 138 of the Act which is a prerequisite for the filing of the complaint under section 138 of the Act. The complainant-company issued notice only in the name of another private limited company, Orion Auto and Steel Pvt. Ltd., but the said company was not arrayed or made party in the complaint. That notice which was issued in the name of the company did not specify as to which of the directors or which of the officials responsible for the affairs or business of the company had issued the cheques thereby incurring liability under the Act. It had to be specifically stated in the complaint as to who were the persons who were in charge of the affairs of the company and who were responsible for issuing cheques, etc. The two companies had mutual business dealings long back. Since long, they have stopped having mutual business dealings. Further, the complaint was filed before the expiry of the statutory period of 15 days' notice and, therefore, deserved dismissal on this short ground. Shri V. K. Bountra, General Manager (Finance), is neither the, payee nor the holder in due course of the cheque. According to section 141 of the Act, no court shall take cognizance of an offence punishable under section 138 of the Act except upon a complaint in writing made by the payee or, as the case may be, the holder in due course of the cheque. Further, the complaint was liable to be quashed when on the face of it, it was clear that no conviction would be possible. The complaint was filed in the year 1989. Seven years have elapsed. This inordinate delay has worked hardship to the petitioner.
9. It has been submitted by learned counsel for the petitioner that in the complaint, annexure P-2, there is no mention that the accused was in charge of and was responsible for the conduct of the business of the company to the company. In the absence of this allegation in the complaint, no complaint is competent against the directors of the company alone. In the complaint, should have been arrayed the company and the directors. In support of this submission, he drew my attention to Amrit Rani v. Surinder Kumar Sachdeva [1992] 2 RCR 16, where a learned single judge of this court held that if in the complaint there is no allegation that the petitioner was in charge of the business of the company and responsible to it for the conduct of its business, no criminal offence would be made out against the petitioner.
10. Suffice it to say that in Amrit Rani v. Surinder Kumar Sachdeva [1992] 2 RCR 16, the facts were different. There, accused No. 1, Ambay Enterprises, which consisted of Ashok Kumar, accused No. 2, and Smt. Amrit Rani, accused No. 3, as partners, purchased from the complainant firm goods worth Rs. 3,28,401.83. When a demand was raised by the complainant, the accused issued cheque dated December 20, 1990, for Rs. 2 lakhs drawn on Punjab and Sind Bank, Kukarmajra. On Presentation, this cheque was dishonoured for want of funds. The cheque had been issued by the accused with dishonest intention knowing fully well that there was no arrangement for that amount. On receipt of intimation from the bank, notice was issued by the complainant firm to the respondent-petitioner but the amount in question had not been paid. It was found that the cheque had been issued by Ashok Kumar alone. Amrit Rani did not sign the cheque. Nor had there been an allegation in the complaint that she was in charge of the business of the firm and was responsible to the firm for the conduct of its business. According to section 141 of the Act, if the person committing the offence under section 138 is a company then every person who at the time of commission of the offence was in charge of, or responsible to, the company for the conduct of its business becomes liable for that act along with the company itself. The complaint was quashed qua Amrit Rani as there was no allegation that she was in charge of the business of the company or that she was responsible for the conduct of the business of the firm. The cheque had also not been issued by her. In this case, the cheque was issued by T. P. Singh Kalra and was signed by him.
11. He drew my attention to the provisions of section 141 of the Act. Section 141 reads as follows :
"141. Offences by companies. - If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly."
12. He drew my attention to Sushil Singla v. Haripal Singh [1994] 1 RCR 621, where it was held that where the cheque was issued by the managing director of a private limited company and the cheque was dishonoured by the bank for want of sufficient funds, the complaint was instituted under section 138 against the managing director and the other directors of the company and no averments that the said directors were in charge of the business of the company and were responsible to the company for the conduct of its business, the complaint qua those directors could not proceed and was quashed. In Sushil Singla v. Haripal Singh [1994] 1 RCR 621, the facts were that Haripal Singh filed a complaint in respect of a cheque dated March 8, 1992, drawn on State Bank of Bikaner and Jaipur for Rs. 1,25,000 issued by Qimat Lal Garg, managing director of M.M. Leasing Limited. It was averred that the petitioners, Sushil Singla and Madhu Rani Garg, were simply directors of the company and were neither in charge of nor responsible for the affairs of the company. The cheque was issued by Qimat Lal Garg for and on behalf of the company who was in charge of and responsible to the company for the conduct of the business of the company. The petitioners, Sushil Singla and Madhu Rani Garg, were impleaded as accused although no offence was disclosed against them on a bare reading of the complaint. The complaint was quashed qua Sushil Singla and Madhu Rani Garg as there was no allegation in the complaint against them that when the offence was committed by the company, they were in charge of and were responsible to the company for the conduct of its business. Allegations in the complaint had been made against the company and its managing director, Qimat Lal Garg, and the cheque had also been issued by the managing director of the company. In Sushil Singla v. Haripal Singh [1994] 1 RCR 621, no question of law was involved whether the complaint should proceed independently against the directors of the company without the impleadment of the company. In my opinion, the complaint could proceed against the directors of the company independently without the company being impleaded as is suggested by the use of the words "as well as the company" in section 141 of the Act reproduced above. In my opinion, the present petitioner, T. P. Singh Kalra, cannot take shelter that since the company, Orion Auto and Steel Pvt. Ltd., has not been impleaded, he too could not be impleaded. In the complaint, annexure P-1, it has been clearly mentioned that the cheques were issued by T. P. Singh Kalra in lieu of the supplies made by the company to the accused. T. P. Singh Kalra had issued the cheques being director of the company which was dishonoured is the allegation made by the complainant-company in its complaint. Learned counsel for the respondent submitted that in para. 2 of the complaint, it had been clearly mentioned that the cheque was signed by the accused being the director of the company and in case of commission of offence by company, every person who at the time the offence was committed, was in charge of and was responsible to the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and there was no need to implead the company. He drew sustenance for this submission from the case V. N. Samant v. K. G. N. Traders [1995] 1 BC 346; [1998] 91 Comp Cas 612 by the Karnataka High Court.
13. Learned counsel for the petitioner drew my attention to Sharda Agarwal (Smt.) v. Addl. Chief Metropolitan Magistrate-II, Kanpur [1992] 3 RCR 499; [1993] 78 Comp Cas 123 (All), in support of the submission that where a cheque was issued by the managing director of a private limited company and the same was dishonoured, no complaint could be competent against the directors of the company without stating that they were in charge of and responsible to the company for the conduct of the business of the company at the time when the offence was committed. It would bear repetition that in the complaint, there is averment that as per verbal order of the accused, the complainant supplied to the accused various quantities of bars. Delivery of the said goods was duly taken by the accused and the complainant-company raised its bills in lieu of the above supplies. In lieu of the receipt of the said bills by the accused and the bills raised by the complainant-company, the accused issued to the complainant-company the cheques. The cheque was signed by T. P. Singh Kalra, accused No. 1 as a director of the accused company. Even otherwise, it will be a matter of evidence as to which of the accused was/were in charge of the business of the company and were responsible to the company for the conduct of the business of the company. Proof of this fact is not dependent upon the adducing of oral evidence alone. It will be dependent upon the adducing of documentary evidence also. Assuming that an allegation to this effect is missing in the complaint and the complaint is defective on this account, then the same can well be supplied at the trial by adducing evidence. It is also a civil case where evidence can be led only on the pleadings and no evidence can be led which is beyond the pleadings. As to whether notice issued to the accused was in conformity with the provisions of the Act is again a matter of evidence. It is also a matter of evidence whether the notice was issued to the company alone and no notice was issued to the directors thereof. It is also a matter of evidence whether a notice issued to the company could be taken to be a notice to the directors of the company as the company is not an abstract being. The company is only a legal entity. It is the directors composing a company to whom the issuance of notice would matter.
14. For the reasons given above, these criminal miscellaneous petitions fail and are dismissed. Nothing said above is meant to be an expression of opinion so far as the merits of the case are concerned. The merits of the case shall be gone into by the Magistrate after trial.