Himachal Pradesh High Court
B.N. Mehta vs Kapoor Agencies And Anr. on 10 December, 2002
Equivalent citations: I(2004)BC99, 2003CRILJ2611
Author: Kuldip Chand Sood
Bench: Kuldip Chand Sood
JUDGMENT Kuldip Chand Sood, J.
1. By this judgment, I propose to dispose of these two petitions B.N. Mehta v. Kapoor Agencies and Anr. (Criminal Revision No. 102 of 2000) and B.N. Mehta v. Kapoor Sons and Ors. (Criminal Revision No. 103 of 2000) as both these petitions raise common questions of law based on similar facts.
2. These two petitions are directed against the order of learned Sessions Judge, Shimla dated November 1, 1999 In Criminal Revision No. 25-S-10 of 1998 impugned in Criminal Revision No. 102 of 2002 and in Criminal Revision No. 26-S-10 of 1998 impugned in Criminal Revision No. 103 of 2002.
3. Facts in brief:
B.N. Mehta, petitioner herein (referred to accused hereinafter) was General Manager of the Shimla Central Co-operative Consumers Store Ltd. (Super Bazar), Shimla hereinafter referred to as "Super Bazar" at the relevant time. He issued certain cheques to the respondents, hereinafter referred to as complainant(s) in his capacity as General Manager of the Super Bazar. These cheques were dishonoured for want of sufficient funds in the account. The complainant issued notice to the accused within fifteen days of the dishonour of the said cheques but without any response. In the circumstances, the complainant(s) filed complaint(s) before the learned Judicial Magistrate 1st Class (Court No. 1), Shimla.
4. Learned Magistrate after recording the preliminary evidence, summoned the accused to answer the charges under Section 138 of the Negotiable Instruments Act (Act for short). The accused after appearing before the learned Magistrate, filed an application stating that he was the General Manager of the Super Bazar, a Co-operative Society, which stands liquidated and an Official Liquidator has been appointed. He further submitted that he no longer was the General Manager of the Society and, therefore, cannot be proceeded against. The learned Judicial Magistrate by his orders dated June 10, 1998 accepted the plea of the accused and discharged him. Learned Magistrate relying upon a judgment of the Madras High Court in K. Krishana Bai v. Arti Press, Sibakasi, I (1992) Banking Cases 361 (Madras), took a view that as the Society was not impleaded as co-accused, therefore, complaint against the accused alone was not maintainable. Dissatisfied, the complainant filed a revision petition before the learned Sessions Judge, Shimla. Learned Sessions Judge relying upon Manimekalai v. Chapaldas Kalyanji Sanghvi, 1995 Cri.LJ 1102 (Madras) and R. Ramchandran v. Yerram Sesha Reddy, II (1997) EC 253=1997 Cri.LJ 1595 (A.P.), held that a person in charge of the affairs of a company could be prosecuted for an offence under Section 138 of the Act without impleading the company as co-accused and, accordingly, set aside the orders of trial Magistrate. Learned trial Magistrate was directed to try the case and decide it in accordance with law.
5. Aggrieved, the accused is in revision petition.
6. These petitions were adjourned at the instance of the learned Counsel for the complainant on several occasions. Ultimately on August 22, 2002, the petitions were heard in the absence of the Counsel for the complainant who did not appear in spite of several adjournments.
7. Mr. S.R. Chauhan, learned Counsel for the petitioner strenuously urged that the view taken by the learned Magistrate is correct view and in the absence of the Co-operative Society being a co-accused, the complaint against the petitioner/accused who was the General Manager of the Super Bazar was not maintainable.
8. In order to appreciate the controversy the relevant provision of the Act may be noticed. Chapter XVII of the Act provides for penalties in case of dishonour of certain cheques for insufficiency of funds in the accounts. Section 138 contemplates that where a cheque drawn by a person on an account maintained by him with a Banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability is returned by the Bank unpaid, either for want of sufficient funds in the account or the amount involved in the cheques exceeds the amount arranged to be paid from that account by an agreement made with the Bank, then such person is deemed to have committed an offence and is liable to be punished with imprisonment for a term which may extend to one year or with fine which may extend to twice the amount of the cheque or with both.
9. I need not notice the proviso, which is not relevant for the purpose of decision of this case. Section 141 provides for the offences, which are committed by the Companies. Section 141 may be reproduced for convenience:
"141. Offences by companies--(1) If the person committing an offence under Section138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge; or that he had exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in Sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly".
10. It is to be noticed that if the offence under Section 138 is committed by a company, then every person who was in charge of and was responsible to the company for the conduct of the business of the company at the time of the commission of the offence, as well as the company shall be deemed to be guilty of the offence and liable to be proceeded against and punished under Section 138 of the Act. The proviso to Section 141(1) stipulates that if such person liable to punishment under Section 141(1) of the Act proves that offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence, then provision of Sub-section (1) of Section 141 would not be applicable to such person. However, Sub-section (2) contemplates that if an offence is committed by a company and it is proved that offence was committed with the consent or connivance of or is attributable to any neglect on the part of any Director, Manager, Secretary or other officer of the company, then such Director, Manager, Secretary or other Officer shall also be guilty of that offence and liable to be proceeded against and punished accordingly.
11. There is no dispute that Super Bazar, a Co-operative Society will be a company for the purpose of Chapter XVII of the Act under Explanation (a) to Section 141 of the Act.
12. It is the admitted position that accused was the General Manager of the Company. It is not in dispute that the accused was in charge/officer of the Super Bazar and responsible for the conduct of its business. It is also admitted that cheque was drawn by the accused in his capacity as the General Manager of Super Bazar, which was dishonoured for want of sufficient funds in the account of Super Bazar. Accused himself admitted in his application before the Trial Court that he was served and was appearing before the Court in his capacity as the General Manager of the Super Bazar. However, his grievance is that the Super Bazar, a Co-operative Society, stood liquidated by the State Government and an Official Liquidator Mr. R.R. Musafir has been appointed as Liquidator. It is the further contention that he is no longer the General Manager of the Society and has nothing to do with the Shimla Central Co-operative Consumers Stores Ltd., and, therefore, proceedings against him deserve to be dropped.
13. Mr. Chauhan relying upon S. Viswanathan v. United Phosphorous Ltd., 1999(97) Company Cases 922, contended that the complaint against the accused was not maintainable in the absence of Consumers Store being accused. It is true that a Single Judge of Madras High Court in S. Viswanathan constructing (construing?) the provisions of Section 141 of the Act held that expression "as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against" makes it clear that the company shall also, be prosecuted along with others who were in charge of the company which in other words would mean that if the company has not been impleaded as an accused in the proceedings under Section 138 of the Act, then proceedings against in charge or the person responsible to the company will not be maintainable.
14. It is true in the present case the complaint was filed by the complainant alleging that the accused was the General Manager of the Super Bazar at the relevant time and had also drawn the cheques towards the discharge of the liability of the complainant(s) which were dishonoured. The contention is that failure to implead the Super Bazar was fatal and, therefore, the proceedings against the accused were liable to be quashed.
15. Learned Counsel also placed reliance on K.P.G. Nair v. Jindal Menthol India Ltd., I (2001) BC 243 (SC)=VII (2000) SLT 189=IV (2000) CCR 100 (SC)=2001 Bank Journal 483. In that case, the Apex Court concluded that perusal of Section 141 makes it clear that where a Company committed an offence under Section 138 of the Act, then not only the Company but also every person who at the time the offence was committed was in charge and was responsible to the Company for the conduct of the business of the company is to be deemed to be guilty of the offence and is liable to be proceeded against and punished accordingly. In other words, ruled the Apex Court, that a person other than the Company can be proceeded against under Section 138 of the Act only if that person was in charge and was responsible to the Company for the conduct of the business and, therefore, the complaint should be clear and fulfil the requirement of the ingredients of the said person for being proceeded against for an offence which is alleged against such person. The ratio of this case is of no assistance to the petitioner.
16. With respect, I am not persuaded to concur with the views of the Madras High Court that in the absence of the Company being a co-accused proceedings under Section 138 of the Act, cannot be maintained against the person who is responsible for the affairs of the company. In Sheoratan Aggarwal v. State of Madhya Pradesh, (1984) 4 SCC 352, Section 10 of the Essential Commodities Act, which is in pari materia to Section 141 of the Act was considered by the Apex Court. Their Lordships held that it was not necessary that person in charge or an officer of the company should be simultaneously prosecuted along with the company. It was further held that each or any of them may be separately prosecuted or along with the company. The only condition is that there should be a finding that contravention was by the company. Section 10 of the Essential Commodities Act may be reproduced (at page 1825 of AIR):
"10. Offences by companies : (1) If the person contravening an order made under Section 3 is a company, every person who, at the time the contravention 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 contravention and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.
(2) Notwithstanding anything contained in Sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against, and punished accordingly......."
17. It may be noticed that the provisions of Sections 10(1) and (2) of the Act are in pari materia. Language used is the same. The proviso is same. The meaning of the Company is same.
18. Their Lordships interpreting the provisions of Section 10 of the Essential Commodities Act, observed :
"The section appears to our mind to be plain enough. If the contravention of the order made under Section 3 is by a company, the persons who may be held guilty and punished are : (1) the company itself, (2) every person who, at the time the contravention was committed, was in charge of and was responsible to the company for the conduct of the business of the Company whom for short we shall describe as the person in charge of the company, and (3) any director, manager, secretary or other officer of the company with whose consent or connivance or because of neglect attributable to whom the offence has been committed; whom for short we shall describe as an officer of the company. Any one or more or all of them may be prosecuted and punished. The company alone may be prosecuted. The person in charge only may be prosecuted. The conniving officer may individually be prosecuted. One, some or all may be prosecuted. There is no statutory compulsion that the person in charge or an officer of the company may not be prosecuted unless he be ranged along side the company itself. Section 10 indicates the persons who may be prosecuted where the company makes the contravention. It docs not lay down any condition that the person in charge or an officer of the company may not be separately prosecuted if the company itself is not prosecuted. Each or any of them may be separately prosecuted or along with the company. Section 10 lists the person who may be held guilty and punished when it is a company that contravenes an order made under Section 3 of the Essential Commodities Act. Naturally, before the person in charge or an officer of the company is held guilty in that capacity it must be established that there has been a contravention of the order by the company. That should be axiomatic and that is all that the Court laid down in state of Madras v. C. V. Parekh, 1971 Cri.LJ 418, as a careful reading of that case will show and not that the person in charge or an officer of the company must be arraigned simultaneously along with the company if he is to be found guilty and punished. The following observations made by the Court clearly bring out the view of the Court (SCC para 3, p. 493):
"It was urged that the two respondents were in charge of and were responsible to, the company for the conduct of the business of the company and, consequently, they must be held responsible for the sale and for thus contravening the provisions of Clause (5) of the Iron and Steel Control Order. This argument cannot be accepted, because it ignores the first condition for the applicability of Section 10 to the effect that the person contravening the order must be a company itself. In the present case, there is no finding either by the Magistrate or by the High Court that the sale in contravention of Clause (5) of the Iron and Steel Control Order was made by the company. In fact, the company was not charged with the offence at all. The liability of the persons in charge of the company only arises when the contravention is by the company itself Since, in this case, there is no evidence and no finding that the company contravened Clause (5) of the Iron and Steel Control Order, the two respondents could not be held responsible. The actual contravention was by Kamdar and Vallabhadas Thacker and any contravention by them would not take responsibility on the respondents.
The sentence underscored by us clearly show that what was sought to be emphasized was that there should be a finding that the contravention was by the company before the accused could be convicted and not that the company itself should have been prosecuted along with the accused. We are, therefore, clearly of the view that the prosecutions are maintainable and that there is nothing in Section 10 of the Essential Commodities Act which bars such prosecutions".
19. In my view there is nothing in the language of Section 141 of the Act which suggests that a person in charge of and responsible to the Company for the conduct of the business of the Company, at the time when offence was committed under Section 138 of the Act, cannot be prosecuted without company being co-accused. The only condition for the prosecution of such person is that there should be an averment in the complaint that contravention of Section 138 was made by the company before such a person could be proceeded against.
20. In Anil Hada v. Indian Acrylic Ltd., X (1999) SLT 1=IV (1999) CCR 285 (SC)= (2000) 1 SCC 1, question raised was whether Directors of a Company can be prosecuted for the offence under Section 138 of the Act in the absence of the company. In that case M/s. Rama Fibres a Public Limited Company of which the appellant was one of the Directors issued certain cheques to complainant company. The complainant company filed complaints against the accused company and eleven other persons who were Directors of the accused company. The allegations in the complaint were that cheques were issued on behalf of the accused company for the debts due to the complainant and the drawee Bank dishonoured such cheques on the ground of insufficiency of funds in the account. The Magistrate took cognizance of the offence of each of the complaint and issued process against the accused. An objection, as in the present case, was raised by the accused company on the premise that winding-up proceedings have been ordered by the Court on the accused Company and, therefore, the prosecution proceedings could not be continued against the company. The Magistrate accepted the plea and directed the complaints to remain in suspense unless leave is obtained from the Court concerned. However, in respect of the two of the complaints, the Magistrate dropped the proceedings on the same premise.
21. Construing the provisions of Sections 138 and 141 of the Act, learned Judges observed that normally human beings who are natural persons can commit an offence. However, there are certain offences which could be attributed to juristic persons also and if drawer of the cheques happens to be juristic person, like a body corporate then such juristic person can be prosecuted for the offence under Section 138 of the Act in view of the proviso to Section 141 of the Act. Their Lordships proceeded to observe that the effect of Section 141 was that when company is the drawer of the cheque, such company is the principal offender under Section 138 of the Act and the remaining persons are made offenders by virtue of the legal fiction created by the Legislature in accordance with the provisions of that Section. Therefore, if the actual offence is committed by a company, then alone the other categories including person in charge of and responsible to the company for the conduct of the business of the company also became liable for the offence. In para 13 of the judgment, Their Lordships observed :
"13. If the offence was committed by a company it can be punished only if the company is prosecuted. But instead of prosecuting the company if a payee opts to prosecute only the persons falling within the second or third category the payee can succeed in the case only if he succeeds in showing that the offence was actually committed by the company. In such a prosecution the accused can show that the company has not committed the offence, though such company is not made an accused and hence the prosecuted accused is not liable to be punished. The provisions do not contain a condition that prosecution of the company is sine qua non for prosecution of other persons who fall within the second arid the third categories mentioned above. No doubt a finding that the company committed the offence is sine qua non for convicting those other persons. But if a company is not prosecuted due to any legal snag or otherwise, the other prosecuted person cannot on that score alone escape from the penal liability created through the legal fiction envisaged in Section 141 of the Act".
22. The Supreme Court thus has rested the controversy holding that if company is not prosecuted for any reason, the other persons can be prosecuted and cannot escape from the penal liability created through the legal fiction under Section 141 of the Act. The law laid down was reiterated by the Supreme Court in R. Rajgopal v. S.S. Venkat, AIR 2001 SC 2432. In that case, the High Court questioned the complaint filed by the complainant only on the ground that the firm on whose behalf cheque was issued was not made an accused in the complaint and only accused who happened to he the partner of the firm was alone made accused. The Apex Court referring to Anil Hada observed that the view of the High Court was not sustainable.
23. The view of the learned trial Magistrate that accused General Manager of the Super Bazar could not be proceeded against in the absence of Super Bazar being co-accused is not sustainable in law. The order of discharge had rightly been set aside by the learned Sessions Judge.
24. No other point was urged.
25. In result petitions fail and are dismissed. The accused-petitioner shall appear before the learned trial Magistrate on January 7, 2003. The records of the Courts below shall be remitted back immediately.