Delhi District Court
Sh. Narender Singh vs . on 10 December, 2018
IN THE COURT OF Ms. T. PRIYADARSHINI, MM-01
(NEGOTIABLE INSTRUMENTS ACT) WEST DISTRICT,
TIS HAZARI COURTS, DELHI
Sh. Narender Singh
S/o Late Sh. Ajit Singh
R/o WZ-30, BE-129,
Hari Nagar,
New Delhi. ......Complainant
Vs.
Shri Thampi
S/o Late Shri P.N. Padmanaban
R/o D-2A/13-C
Janak Puri, New Delhi .......Accused
Complaint Case No. : 1287/2016
Date of institution : 21.03.2012
Offence alleged : Under Section 138 NI Act
Plea of the accused : Not pleaded guilty
Final order : Acquittal
Date of Decision : 10.12.2018
JUDGMENT
1. The instant complaint is in respect of an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter "the NI Act").
2. Brief facts alleged by the complainant is set out below:
CC No.1287/2016 page no.1/11a) The accused and the complainant had friendly relations and the accused approached the complainant for a friendly loan of Rs.
5,50,000 which was granted to him by the complainant at a simple rate of interest of 2% per month for a period of 16 months.
b) In discharge of his liability, accused issued post-dated cheque bearing number 307341 dated 13.02.2012 for an amount of Rs. 7,26,000 drawn on South Indian Bank, Rajouri Garden branch (hereinafter "the impugned cheque").
c) The complainant presented the impugned cheque and the said cheque was returned as unpaid / dishonored for the reason "FUNDS INSUFFICIENT" vide cheque return memo dated 17.02.2012.
d) Despite various reminders, the accused did not make the payment. On 25.02.2012, the complainant sent legal demand notice through his counsel and called upon the accused to make the payment of the amount of the cheque in question within 15 days of receipt of legal notice. The accused failed to make the payment amount involved despite service of notice and therefore, according to the complainant, the accused is liable for the offence under Section 138 of the NI Act. Hence, the present complaint is filed.
3. To prove his case, the complainant has examined himself as CW1 by way of affidavit Ex. CW1/A and has relied upon the following documents:
a) Impugned cheque Ex. CW1/1;
b) Return memo dated 17.02.2012 Ex. CW1/2;
c) Legal demand notice dated 25.02.2012 Ex. CW1/3; and
d) Speed post, UPC receipts and returned courier covers Ex.
CW1/4 to Ex. CW1/8.
CC No.1287/2016 page no.2/11
4. On finding a prima facie case against the accused, he was summoned vide order dated 07.04.2012. Consequent to the service of summons, the accused entered his appearance and was admitted to bail. On 18.11.2013, notice under Section 251 of the Code of Criminal Procedure 1973 (hereinafter "the Code") was framed against the accused to which he pleaded not guilty and claimed trial. The accused admitted his signatures on the cheque. He stated that the complainant is unknown to him and he has no relations with the complainant at any point in time. He also stated that he does not know how the impugned cheque came into the possession of the complainant and submitted that the present case is false and frivolous. In relation to the demand notice, he denied receipt, however admitted that the address mentioned in the notice is the correct address.
5. Subsequently, the accused was granted a right to cross-examine the complainant and therefore, the complainant was asked to lead evidence to prove his case. In his evidence, the complainant deposed as CW-1 and adopted the evidence led by him at the pre-summoning stage as his post-summoning evidence. In his affidavit he has fully corroborated the averments made by him in his complaint. The complainant was cross-examined by the Learned Counsel for accused. Complainant evidence was closed vide order dated 17.08.2016.
6. Statement of accused was recorded under Section 313 read with Section 281 of the Code on 22.09.2016 and all the incriminating circumstances were put to him to enable him to offer an explanation. The accused stated that his wife and brother of complainant, Sh. Harbans Singh, started a partnership business in August 2010 and a bank account in the name of the partnership M/s Parvati Impex was opened with Punjab National Bank, Nangal Raya and another bank with his wife as CC No.1287/2016 page no.3/11 proprietor was opened with South Indian Bank Limited, Rajouri Garden. He also stated that he was the authorised signatory of the bank account maintained with South Indian Bank. He further stated that all his documents such as cheque book, pass book and other important documents were lying in the premises of the business and the said Harbans Singh used to frequently visit the premises with his son. He averred that he has not taken any loan from the complainant and the cheques were kept in blank signed form in the premises of the business which have been misused by the complainant in connivance with Harbans Singh. On the basis of the above, he averred that he did not owe any liability to the complainant.
7. Then the matter was listed for defence evidence. Accused examined himself as DW-1 and was duly cross-examined by the Learned counsel for the complainant. Defence evidence was closed by the accused on 26.03.2018.
8. Final arguments have been heard on behalf of the both the parties. The matter was then reserved for judgment. The submissions made on behalf of both the parties and the judgments relied on by both the parties have been considered. The written arguments and the record of the case has been carefully perused.
9. In order to ascertain whether the accused has committed the offence under Section 138 of the NI Act, it is deemed fit to examine separately as to whether all the indispensable ingredients constituting the offence have been proved by the complainant. The offence under Section 138 of the NI Act has the following ingredients:-
CC No.1287/2016 page no.4/11a) The cheque has been drawn on an account maintained by a person in a bank for payment of a certain amount of money to another person from out of that account;
b) The cheque has been issued for the discharge, in whole or in part, of any legal and enforceable debt or other liability;
c) That 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;
d) That cheque has been 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;
e) The payee or the holder in due course of the cheque has made a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
f) 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.
10. Presentation of the impugned cheque for encashment and dishonour of the cheque for the reason "funds insufficient" is not disputed as it is a matter of record proved by the return memo dated 17.02.2012 which is Ex. CW1/2. Therefore, it is a matter of record and has been proved that the cheque was presented within its validity period and dishonoured by the banker of the accused. In relation to service of CC No.1287/2016 page no.5/11 demand demand notice dated 25.02.2012 which is Ex. CW1/3, the accused has admitted that the address mentioned in the demand notice is his correct address, however, he has denied receipt of the demand notice. As the address in the demand notice is admittedly the correct address of the accused, presumption of due service is drawn under Section 27 of General Clauses Act which provides that where notice is sent to the correct address, the same shall be presumed to have been duly served. In M/s Darbar Exports and others vs. Bank of India, [2003 (2) SCC (NI) 132 (Delhi)], the court held that a presumption of service of notice is to be drawn where the notice is sent through registered post as well as UPC on correct address. In light of the same, the legal notice is deemed to have been served upon the accused. As such, the legal notice stood served upon the accused but no payment was made despite the service. Finally, the complaint has been filed within limitation period. Therefore, essential ingredients mentioned from c) to f) in the above paragraph have been duly satisfied. The only issues remaining for determination is firstly, whether the impugned cheque has been drawn on a bank account maintained by the accused and secondly, whether a legally valid and enforceable debt existed qua the complainant and the cheque in question was issued in discharge of said liability / debt.
Whether the impugned cheque is drawn on an account maintained by the accused?
11. The accused has admitted that the impugned cheque bears his signature. The impugned cheque has been drawn on a bank account maintained by M/s Parvathy Impex. The accused while leading evidence has placed on record bank statement of the bank account on which the impugned cheque is drawn which is Ex. CW1/X2. He has also produced bank statement of the other bank account maintained by M/s Parvathy Impex with Punjab National Bank which is CW1/X3. In the bank statement Ex. CW1/X2 it is clearly mentioned that the bank account is in the name of CC No.1287/2016 page no.6/11 M/s Parvathy Impex which is a proprietorship firm with Ms. Chandrika as proprietor. It also mentions that the accused is the authorised signatory of the bank account. Therefore, from the evidence on record it is crystal clear that the accused is merely the mandate holder and said Chandrika, the proprietor, is the mandate giver. It is crucial to examine whether the mandate holder can be held liable under Section 138 of the NI Act?
12. It is relevant to note that in Bhupinder Singh Bhogal vs. G.E. Capital Transportation Financial Services Limited (2010 SCC OnLine Del 4423), the Hon'ble High Court of Delhi held that:
"A conjoint reading of Sections 7 and 138 of the Act clearly indicates that it is only the drawer of the cheque who can be held responsible for the offence under section 138 of the said Act. Exception to this rule is provided in Section 141 of the Act which makes the persons other than drawer vicariously liable for the offence under Section 138 of the Act, but only if the drawer is a company or firm or association of individual and in such an eventuality, all such persons, who at the time when offence was committed, were in charge or responsible for the conduct of the business of such company or firm or association of individuals, would be deemed to be guilty for the offence under Section
138."
13. Therefore, where a cheque has been drawn by a proprietorship firm, only the proprietor and no one else is culpable under Section 138 of the NI Act. As laid down in N. Vaidyanathan vs. Dodla Daily Limited [2000 All MR (Cri) Journal 9], it is a settled position that the proprietorship concern by itself is not a legal entity apart from its proprietor. In R. Ravi Chandran vs. C. Subramanian [(2006) 1 MLJ (Crl.) 68], the Hon'ble High Court of Madras has observed that the mandate holder is not CC No.1287/2016 page no.7/11 the drawer in the real sense, as it should be understood for the purpose of Section 138 of the NI Act. It has also been observed 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 the cheque as mandate holder and therefore, as such, he cannot be held responsible for the non-payment of the amount. The relevant observation is reproduced below:
"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 as mentioned in "cheque drawn by a person" or "on an account maintained by him".
14. In Santosh Kumar Rai v. Prafful Aggarwal (in Criminal Revision Number 42/2016, decided on 16.05.2016), the Learned Sessions Judge, Tis Hazari Courts, Delhi held that a mandate holder who has only signed the cheque as authorised signatory on behalf of the proprietor cannot be prima facie held liable and there are no grounds for proceeding against him. The Learned ASJ observed that "The bank account is being maintained by Sushil Agarwal, proprietor of M/s Kishan Enterprises. It is an admitted position that mandate holder Prafful Agarwal is not the account holder, though he is authorised signatory on behalf of proprietor and Sushil Aggarwal, proprietor is the mandate giver. Prafful Aggarwal, who only signed the cheque as an authorised signatory on behalf of proprietor M/s Kishan Enterprises cannot be held prima facie liable."
15. In Sanjay Banaik vs. State and another [2008 SCC OnLine Del 924], the Hon'ble High Court of Delhi held that it is incumbent on the complainant to CC No.1287/2016 page no.8/11 establish the identity of the accused and how he / she is connected with the offence. In the instant matter, the complainant has not been able to establish that the accused is connected with the dishonour of the impugned cheque in such a manner that he becomes liable under Section 138 of the NI Act.
16. Summarising the above, the following legal position is clear -
a) Under the NI Act, a proprietorship firm is not a separate legal entity distinct from its proprietor and therefore, a criminal complaint against the proprietorship firm cannot lie in its own name and has to necessarily be filed in the name of its proprietor. In the instant case, the firm, M/s Parvathy Impex, has not been impleaded as a party neither has the demand notice been sent to the firm and therefore, is liable to dismissed on this ground alone.
b) A person can be prosecuted for dishonor only where the cheque is drawn by him in a bank account maintained by him gets dishonored due to specific reasons. Where the person prosecuted against is not the drawer / signatory of the cheque and the cheque was not drawn on an account maintained by such person, he / she cannot be made liable.
c) The concept of vicarious liability for an offence under section 138 as is laid down in section 141 of the NI Act is applicable only in cases of companies, partnership firms and association of persons and not in the case of proprietorship firms. Therefore, a mandate holder i.e. authorised signatory of a bank account maintained by the proprietorship firm cannot be held liable under Section 138 of the NI Act.
CC No.1287/2016 page no.9/1117. The learned counsel for complainant during the cross-examination of the accused has suggested that the accused had opened a proprietorship firm by the name of M/s Parvathy Impex declaring himself as the proprietor. The accused has admitted that he has opened a bank account with Andhra Bank and has declared himself as proprietor of M/s Parvathy Impex. However, in the same breath, the accused clarified that the bank account was closed prior to the partnership between his wife and Harbans. Moreover, such suggestions are not relevant as an offence under Section 138 of the NI Act is a technical offence wherein it is essential to establish that the accused maintains the bank account. It has been established beyond any reasonable doubt that the impugned cheque has been drawn on a bank account maintained by the firm M/s Parvathy Impex and the accused is not the proprietor of the said firm. Though he has admitted that he is the authorised signatory, he cannot be held liable under Section 138 read with Section 141 of the NI Act as vicarious liability under Section 141 is not attracted in case of bank accounts maintained by proprietorship firms. He is merely a mandate holder and has no primary liability for the dishonour of the impugned cheque.
18. Therefore, the first and foremost essential that the cheque must have been drawn on a bank account maintained by the accused is not made out and therefore, complaint is not legally maintainable and is liable to be dismissed as the accused is merely a mandate holder. It is considered unnecessary and superfluous to examine whether there was a valid and enforceable debt / liability for which the impugned cheque was issued as all the ingredients have to be cumulatively satisfied for a case to be successfully made out against the accused. Therefore, I am not prodding into the question whether other ingredients of Section 138 of the NI have been satisfied.
CC No.1287/2016 page no.10/11
19. In view of the aforesaid, the accused deserves to be acquitted and therefore, accused is hereby acquitted for the offence under Section 138 N I Act. This court exonerates the accused for the offence u/s 138 NI Act. The accused is hereby acquitted. Bail bonds are cancelled and surety stands discharged. Endorsement, if any, stands cancelled.
A copy of the order be sent to District Courts website.
Digitally signed by PRIYADARSHINI PRIYADARSHINI THYAGARAJAN THYAGARAJAN Date: 2018.12.10 16:21:37 +0530 Announced in open court on T. PRIYADARSHINI 10.12.2018 MM-01(NI ACT)WEST/DELHI CC No.1287/2016 page no.11/11