Delhi District Court
M/S Yes Bank vs . A. R. Industries Pvt. Ltd. on 1 November, 2011
1
CC No. 228/09
IN THE COURT OF MS. GURMOHINA KAUR :
METROPOLITAN MAGISTRATE:SPECIAL COURT13,
DWARKA COURTS : NEW DELHI.
C.C NO.228/09
M/s Yes Bank Vs. A. R. Industries Pvt. Ltd.
1. Complaint Case No. : 228/09
2. Name of the complainant : M/s Yes Bank, A42,
Vishal Enclave, Opposite
TDI Mall, New
Delhi110027
Also at : 48, Nyaya Marg,
Chanakya Puri, New
Delhi110021
3. Name of the accused and his : 1. A.R. Industries Pvt.
parentage and residence Ltd., 14/5, Mathura Road,
Faridabad, Haryana121003
2. Sh. Subhash Aggarwal,
Director, M/s A.R. Industries
Pvt. Ltd., C1/66,
Safdarjung Development
Area, New Delhi110016
3. Sh. Devender Kumar
Aggarwal, Director, M/s
A.R. Industries Pvt. Ltd.
14/5, Mathura Road,
Faridabad121003
2
CC No. 228/09
4. Offence complained of or proved: U/s 138 of the
Negotiable Instrument Act,
1881
5. Plea of the accused : Pleaded not guilty
6. Final Order : All the Accused are
Convicted
7. Date of Order : 01.11.2011
BRIEF FACTS OF THE CASE
1. The brief facts of the case are that the Complainant is a bank, incorporated as a company under the Companies Act, 1956, registered under the Banking Regulation Act, 1949 and having its registered office at Delhi. Mr. Pushpinder Singh is the Authorized Representative of the Complainant company who was substituted in the present complaint vide order dated 25.03.2011 and he has been authorized to represent the complainant company in terms of Power of Attorney executed on 28.10.2010.
2. It is stated in the complaint that a loan facility was granted by the complainant bank Vide Loan Account No. BLN000300000325 to the accused company and in consideration to absolve the liability arising out of the said loan, the accused company issued two cheques bearing no. 595318 dated 15.11.2008 & 595319 dated 15.12.2008 for an amount of Rs.1,08,457/ each and both drawn on State Bank of India, SBI, Faridabad121001 i.e. Ex.CW1/B & Ex.CW1/B1 and when the 3 CC No. 228/09 said cheque were presented for encashment were returned back with remark 'insufficient funds' vide cheque return memos dated 19.01.2009 i.e. Ex. CW1/C & Ex.CW1/C1. A legal demand notice which is Ex. CW1/D dated 09.02.2009 was sent by the complainant bank through its lawyer which was duly served on the accused vide registered AD postal receipts dated 11.02.2009 which are Ex.CW1/D1 & Ex.CW1/D4 and duly signed Registered AD Cards which are Ex.CW1/E to Ex.CW1/E4 and that the accused failed to make the payment within the statutory period of 15 days and hence this criminal complaint was filed by the complainant.
3. Upon service of summons, the accused no. 3 put his appearance through counsel on 12.11.2010. Upon service of summon, the accused no. 2 put his appearance on 07.02.2011. Notice were framed against the accused nos. 3 on 30.11.2010 and against the accused no. 2 on 07.02.2011 to which they pleaded not guilty and claimed trial. EVIDENCE
4. To support its case, the complainant company examined CW1 Mr. Pushpinder Singh, AR of the Complainant company on 25.03.2011 and thereafter on 01.06.2011.
5. CW1 tendered his evidence by way of affidavit and reiterated the contents of the complaint and relied upon the documents filed at the stage of presummoning evidence. During the crossexamination of CW1 by the Ld. Counsels for the accused no. 2, CW1 stated that the accused no. 1 M/s A.R. Industries Pvt. Ltd. took a loan from the complainant bank and that the accused no. 2 who was the Director of M/s A.R. Industries Pvt. Ltd. had issued the cheques in question as 4 CC No. 228/09 monthly installments of the loan. It was further stated that the cheques in question were not handed over on the dates mentioned on the cheques in question. It was further stated that accused no. 2 was in full control of the cheques in question even after the same were handed over to the complainant bank. CW1 also stated that the cheques in question were firstly presented on different dates and when they got dishonoured, they were again presented for the second time together and the return memos with respect to second presentation of the cheques in question have been placed on record. It was also stated that with respect to the legal demand notice no postal seal or stamp is present and the card placed on record do not contain the signatures of the accused no. 2 - Subhash Aggarwal. It was further added that the accused no. 2 was the signatory of the loan agreements and that the cheques in question were issued by him in his capacity as Director of the Accused no. 1 M/s A.R. Industries Pvt. Ltd. and not in his personal capacity. CW1 also stated that the accused no. 2 was not informed before the presentation of the cheques in question since the cheques were issued by him and he was well aware that the same could be presented for encashment.
6. CW1 in his crossexamination dated 01.06.2011 conducted by the Ld. Counsel for the accused no. 3 stated that the cheques in question did not bear the signatures of the accused no. 3 and that as per the bank record at the time of disbursal of the loan amount, accused no. 3 was its serving Director of M/s A.R. Industries Pvt. Ltd. In his cross examination on 22.07.2011, CW1 stated that the loan agreement did not bear the signatures of the accused no. 3. He, however, had added that the complainant company had valid proof that the accused no. 3 5 CC No. 228/09 was the Director at the time of disbursal of the loan. CW1 also added that even at the time of commission of the offecne, the accused no. 3 was the Director of M/s A.R. Industries Pvt. Ltd. CW1 stated that the reply Ex.CW1/D3X sent by the accused no. 3 to the complainant with respect to the legal demand notice has not been placed on record. CW1 also stated that para 9 of the complaint clearly shows that the accused no. 3 was the Director of M/s A.R. Industries Pvt. Ltd. at the time of issuance of cheques in question. CW1 also stated in his cross examination on 13.09.2011 that no documents bearing the signatures of the accused no. 3 with respect to this loan transaction could be traced out. It was also stated on this date that the complainant did not receive any reply of the legal demand notice sent by accused no. 3.
7. Complainant Evidence was thereafter closed on 13.09.2011.
8. The statement of the accused no. 2 under Section 313 of Cr.P.C. was thereafter recorded on 13.09.2011 wherein he stated that the loan was taken by the accused company M/s A.R. Industries Pvt. Ltd. and that the cheques in question were issued as post dated EMI cheques on behalf of the accused company. He further stated that he did not receive any legal notice and that he has no personal liability in the present complaint.
9. The statement of the accused no. 3 under Section 313 of Cr.P.C. was thereafter recorded on 21.09.2011 wherein he stated that he did not take any loan facility from the complainant bank personally and that the cheques in question were not signed by him. It was also stated that he has received the legal demand notice and had duly replied the same. He also added that he had no information with respect to dishonour of the cheques in question.
6CC No. 228/09
10. Thereafter, the matter was fixed for D.E. on 21.09.2011. Both the accused persons submitted that they do not wish to lead D.E. and thereafter, both the parties lead their final arguments on the same day. ARGUMENTS
11. During final arguments, Ld. Counsel for Complainant company submitted that all the necessary ingredients of Section 138 of the Negotiable Instruments Act had been fulfilled. Ld. Counsel further argued that the cheques in question were issued by the accused no. 2 as monthly installments towards the loan availed by the accused no. 1 M/s A.R. Industries Pvt. Ltd. and also that accused no. 3 was a serving director at the date of issuance of cheques and was therefore liable in view of the provisions of Section 141 of N.I. Act. Ld. Counsel for the complainant further argued that the accused company had only two directors namely accused nos. 2 & 3. It was further argued that the ground taken by the accused no. 3 that he had resigned as a director from the accused company was not tenable as the resignation was not accepted and form 32 submitted on behalf of the accused company at the Registrar of Company still mentioned that the accused no. 3 to be a Managing Director. With respect to the accused no. 2, Ld. Counsel for the complainant argued that the accused no. 2 was the signatory of the cheuqes in question and was therefore, liable.
12. On the other hand Ld. Counsel for the accused no. 2 argued that the accused no. 2 had signed the cheques in question as the Director of the accused company and that the cheques in question were handed over to the complainant bank at the time when the accused company availed the loan from the complainant bank as monthly installments and that after the handing over the aforesaid cheques the accused no. 7 CC No. 228/09 2 was not in control over the aforesaid cheques question and that they were presented without any knowledge or intimation from the complainant bank. It was further argued that the loan agreement has not been placed on record nor has the loan account number been mentioned. It was further argued that the loan was taken by the accused no.1 and not by the accused no. 2 personally. It was also argued that the accused no. 2 did not receive any legal demand notice as the Cards placed on record Ex.CW1/E and Ex.CW1/E1 are forged and fabricated as they do not bear the stamp or seal of the concerned post office and further that they do not bear the signatures of the accused no. 2.
13. Ld. Counsel for the accused no. 3, on the other hand argued that the loan agreement/any document with respect to the loan transaction was not signed by the accused no. 3. It was also argued that it was an admitted fact that the accused no. 3 had not signed the cheques in question. It was further argued that no Board Resolution has been placed on record by the complainant bank to show that the term of the loan was extended. It was further argued that no document has been placed on record to prove that the accused no. 3 was serving as a director of the accused company at the time of issuance of the cheques in question. Ld. Counsel for the accused no. 3 also argued that the accused no. 3 had resigned from the Board of Directors of the accused no. 1 on 22.07.2007 and the same was accepted by the accused no. 2 on 02.01.2008. It was also argued that a reply to the legal notice was sent by the accused no. 3 wherein he had stated the aforesaid facts. Ld. Counsel for the accused no. 3 also placed on record the Judgments on which he relied upon to substantiate his 8 CC No. 228/09 arguments.
SECTION 138 NEGOTIABLE INSTRUMENTS ACT
14. This court has heard the arguments on both the sides and have carefully gone through the record. On the basis of the facts and arguments placed before the court, Three main issues are to be decided as hereunder: i. Whether the accused no. 3 was incharge responsible of accused no. 1 at the time of commission of offence U/s 138 N.I. Act?
ii. Whether the legal demand notice was served to the accused persons?
iii. Whether there was legally enforceable liability outstanding against the accused persons as on the date of presentation of the cheques in question?
15. It is now pertinent to go through Section 138 of Negotiable Instruments Act.
138. Dishonour of cheque for insufficiency, etc., of funds in the accounts 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, 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 agreement 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 year", 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 induce course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by 9 CC No. 228/09 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 cheques 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 purpose of this section, "debt or other liability" means a legally enforceable debt or other liability.
16. It is pertinent to mention section 139 and Section 118 of the Negotiable Instruments Act which are as follows:
"Section 139. Presumption in favour of holder It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability."
"Section 118. Presumption of Negotiable Instruments of consideration Unless the contrary is proved, the following presumptions shall be made
(a) of considerationthat every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration;
(b) as to date that every negotiable instrument bearing a date was made or drawn on such date;
(c) as to time of acceptance that every accepted bill of exchange was accepted within a reasonable time after its date its date and before its maturity;
(d) as to time of transfer. that every transfer of a negotiable instrument was made before its maturity;
(e) as to order of endorsements that the endorsements appearing upon a negotiable instrument were made in the order in which they appear thereon;10 CC No. 228/09
(f) as to stampsthat a lost promissory note, bill of exchange or cheque was duly stamped;
(g) that holder is a holder in due course that the holder of a negotiable instrument is a holder in due course; provided that, where the instrument has been contained from its lawful owner, or form any person in lawful custody thereof, by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him."
17. Section 139 of the Negotiable Instruments Act lays down that it shall be presumed, unless contrary is proved that the holder of the cheque received the cheque of the nature stated in section 138 for the discharge of a debt or liability.
ISSUE NO. 1 : Whether the accused no. 3 was incharge responsible of accused no. 1 at the time of commission of offence U/s 138 N.I. Act?
18. As per complaint, the accused nos. 2 & 3 were incharge of the day to day affairs of the accused company had jointly and severely issued the cheques in question in lieu of monthly installments against the loan granted to accused no. 1 by the complainant company.
19. It is well settled that as per Section 141 of N.I. Act , the signatory of the alleged cheque and the Managing Director of the company are deemed liable and there is no requirement of specific averments in the complaint in this regard. In the present complaint accused no. 2 - Mr. Subhash Aggarwal is the signatory of the cheques in question and therefore, his liability U/s 141 of N.I. Act is not a question of dispute.
20. With respect to the accused no. 3, the main contention was that he had resigned from the accused company 22.10.2007 and the cheques in question are of November & December 2008 and 11 CC No. 228/09 therefore, he is not liable for the same. The copy of resignation letter dated 22.10.2007 which is Mark CW1/D has been placed on court record by the accused no. 3 to prove the same. The reply to the same by the accused no. 2 Sh. Subhash Aggarwal dated 04.01.2008 has also been filed on record wherein it is stated that the same would be put up before the Board Meeting to be held in January 2008. However, no documents has been placed on record to show that any Board meeting was held in the month of January 2008 or that the alleged resignation letter was ever accepted by the Board of Directors or by the Registrar of Companies. The accused no. 3 has not lead defence evidence to prove the aforesaid facts nor has any document been placed on record except a reply to the legal demand notice sent by the accused no. 3 to the complainant bank wherein he reiterated the aforesaid facts. The judgment of Manish Kant Aggarwal Vs. NAFED & Anrs 156 (2009) DLT 415 relied upon by the accused no. 3 is not applicable in the present complaint as in the aforesaid case the resignation of the Director was accepted by the Board of Directors of the company and a form 32 had been submitted to the Registrar of Companies in this regard. With respect to the 2nd judgment of National Small Scale Industries Corporation Vs. Harmeet Singh MANU/SC/0112/2010, the Hon'ble Supreme Court has held: "Therefore, this Court has distinguished the case of persons who are incharge of and responsible for the conduct of the business of the company at the time of the offence and the persons who are merely holding the post in a company and are not incharge of and responsible for the conduct of the business of the company. Further, in order to fasten the vicarious liability 12 CC No. 228/09 in accordance with Section 141, the averment as to the role of the concerned Directors should be specific. The description should be clear and there should be some unambiguous allegations as to how the concerned Directors were alleged to be incharge of and was responsible for the conduct and affairs of the company."
Ld. Counsel for the accused no. 3 has also relied upon the judgment of Hon'ble Supreme court in S.M.S. Pharmaceuticals Ltd. V. Neeta Bhalla & Anr. 146(2008)DLT239 (SC) wherein it is held:
"19. In view of the above discussion, our answers to the questions posed in the reference are as under:
(a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was incharge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint.
Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.
(b) The answer to the question posed in subpara (b) has to be in the negative. Merely being a Director of a company is not sufficient to make the person liable under Section 141 of the Act. A Director in a company cannot be deemed to be incharge of and responsible to the company for the conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be incharge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases.
(c) The answer to Question (c) has to be in the affirmative. The question notes that the Managing Director or Joint Managing Director would be admittedly incharge of the company and responsible to the company for the conduct of its business. When 13 CC No. 228/09 that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as Managing Director or Joint Managing Director, these persons are incharge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under Subsection (2) of Section 141."
21. On a careful analysis of Section 141 of the N.I. Act, it is clear that persons incharge of and responsible for the conduct and day to day affairs of the business of the company at the time of commission of offence are vicariously liable for the office U/s 138 N.I. Act along with the company. In the present complaint the complainant has stated that the accused no. 1 availed a loan facility from the complainant bank and the cheques were issued towards payment of the same by the accused company and that at the time of issuance of cheques in question, both the Directors were liable for managing the day to day affairs of the accused company. Hence, the essential ingredients in order to attract the provisions of Section 141 N.I. Act are hereby fulfilled in the present complaint.
22. It is also important to mention that the accused no.3 has filed on record the copy of resignation letter tendered by him and the response of accused no. 2 with respect to the same along with reply to the legal demand notice. However, the accused no. 3 has not placed on record any document wherein his alleged resignation was accepted by the accused company or by the Registrar of Companies. 14 CC No. 228/09 It is also pertinent to note that the accused no. 3 has not examined himself as a witness nor any document has been placed on record to show that the accused no. 3 had no concern or relation with the day to day affairs of the accused company after his alleged resignation on 22.10.2007.
23. In view of the aforesaid facts, the accused no. 3 has failed to show that he ceased to be responsible for the day to day affairs of the accused company - M/s A.R. Industries Pvt. Ltd. on the date of commission of the offence and continue to be a Director of the accused company. Thus, by virtue of the aforesaid facts, he would come under the provisions of Section 141 N.I. Act. ISSUE NO. 2 : Whether the legal demand notice was served to the accused persons?
24. It is pertinent to mention Section 27 of the General Clauses Act wherein a presumption of service is drawn in if a notice is sent at the correct address of the accused. Section 27 of the General Clauses Act, 1897 deals with the presumption of deemed service. The Section Reads as under: "Where any (Central Act) or Regulation made after the commencement of this Act authorizes of requires any document to be served by post, where the expression "serve" or either of the expressions "give" or "send" or any other expression is used, then, unless a different intention appears, the service 15 CC No. 228/09 shall be deemed to be effected by properly addressing prepaying and posting by registered post, a letter containing the document, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post".
25. The legal demand notice was sent by the complainant bank through postal department vide postal receipts dated 11.02.2009 to all the accused. The accused no. 3 has in his statement recorded U/s 313 Cr. P. C. admitted that he received the legal demand notice and had filed reply with respect to the same. The copy of the reply is also placed on record. Therefore, receipt of legal demand notice by accused no. 3 is proved beyond doubts.
26. With respect to the accused no. 2, the main contention is that the alleged AD Card i.e. on record do not bear the stamp and seal of the of the postal department nor contain the signatures of the accused no.2 himself and hence, presumption of service can not be raised. It is argued by the Ld. Counsel for accused no. 2 that CW1 has admitted in his crossexamination that he did not personally sent the legal demand notice. The word acknowledgment has not been mentioned on the Card nor it bears the signatures of the accused no.
2.
27. On a careful analysis of the judicial record, it is seen that legal demand notice were sent at the correct addresses of the accused persons within a stipulated time period.
16CC No. 228/09
28. With respect to the accused no. 1, being the accused company, legal demand notice was also deemed served by virtue of the postal receipt placed on court record.
29. With respect to accused no. 2, it is seen that in view of provisions 138 N.I. Act and Section 27 General Clauses Act, prima facie, presumption of service is raised in favour of accused no. 2 and that it is the duty of the accused no. 2 to examine any postal witness or any other person in order to rebut the aforesaid presumption. However, no evidence was lead on behalf of the accused no. 2 in this respect and only some questions were put during the crossexamination of AR. It is seen that the legal demand notice was never sent by the AR personally but was sent through the counsel or attorney of the complainant. In this case also the legal demand notice was sent through attorney of the complainant by way of registered AD and postal receipt of the same are placed on record. Also, the address mentioned of all the accused are correct and nothing has come on record to show that any of the accused persons do not reside at the address stated in the legal demand notice as well as the complaint. It is also seen that the bail bonds filled in by both the accused no. 1 and 2 bears the same address as that mentioned in the legal demand notice as well as complaint. The accused no. 2 has not examined any part or no document has been placed on record to show that the address mentioned in the complaint is wrong. Further, nothing has been placed on record by the accused no. 2 to rebut the presumption raised by virtue of Section 27 General Clauses Act. The statement made by CW1 in his crossexamination with respect to the legal 17 CC No. 228/09 demand notice that he had not personally sent the same but he has reiterated that legal demand notices were duly sent to all the accused persons. CW1 has also denied the fact that the AD Cards placed on record are false and fabricated. In order to rebut the aforesaid statement, no witness or document produced before the court by the accused no. 2. In view of the aforesaid facts, the issue is decided in favour of the complainant and presumption of valid service is made out against all the accused persons.
ISSUE NO. 3 : Whether there was legally enforceable liability outstanding against the accused persons as on the date of presentation of the cheques in question?
30. It is the case of the complainant that the accused company had taken a loan from the complainant bank and had issued the cheques in question towards the monthly installments of the same. Accused no. 2 is the signatory of the cheques in question being the Director of the accused company and the accused no. 3 being the Managing Director of the accused company at the time issuance of cheques in question. It is an admitted fact that the accused company availed the loan facility from the complainant bank.
31. On the perusal of the file it is seen that the cheques in question are with respect to the monthly installments and not for the payment of any total outstanding amount. It is also important to mention here that the amount mentioned in the cheques in question is the monthly installments due and payable by the accused company towards the complainant bank. It is seen that neither the accused no. 2 nor the 18 CC No. 228/09 accused no. 3 have put any question/suggestions with respect to the outstanding liability of the accused company as on the date of issuance of cheques in question during the crossexamination of the complainant. It is also to be seen that no document or statement of account has been placed on record to show that the cheques in question were not issued against any legal liability by the accused persons to the complainant bank.
32. Hence, in view of the aforesaid facts placed on record, the issue no. 3 is decided in favour of the complainant and against the accused persons.
FINAL ORDER
33. In view of the aforesaid facts and discussions, this court is of the opinion that the complainant has been able to prove its case and the accused persons have failed to rebut the presumption raised by virtue of Section 139/141 N.I. Act. Hence, the accused no. 1(Accused company), - M/s A.R. Industries Pvt. Ltd., Accused No. 2 - Mr. Subhash Aggarwal & Accused No. 3 - Sh. Devender Kumar Aggarwal are hereby convicted for an offence U/s 138 N.I. Act.
34. Copy of the judgment be provided to all the accused free of cost.
35. Now to come up for orders on quantum of sentence.
Announced in the Open Court
on 1st November 2011 (GURMOHINA KAUR)
METROPOLITAN MAGISTRATE
DWARKA COURT:NEW DELHI