Delhi High Court
M/S. Arsh Electronics Pvt. Ltd. vs M/S. Telematica Star Ltd. & Anr. on 23 July, 2010
Author: A.K. Pathak
Bench: A.K. Pathak
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ Crl. L.P. Nos. 12-13/2009
% Decided on: 23rd July, 2010
M/s. Arsh Electronics Pvt. Ltd. ..... Petitioner
Through: Mr. R.S. Tomar, Adv.
Versus
M/s. Telematica Star Ltd. & Anr. ..... Respondents
Through: None
CORAM:
HON'BLE MR. JUSTICE A.K. PATHAK
1.Whether the Reporters of local papers
may be allowed to see the judgment? Not necessary
2.To be referred to Reporter or not? Not necessary
3.Whether the judgment should be reported
in the Digest? Yes
A.K. PATHAK, J. (ORAL)
1. Both the above petitions are being disposed of together as not only the facts involved therein are similar but the question of law which needs to be answered is also same.
2. Petitioner seeks leave to appeal against the judgments passed by the learned Metropolitan Magistrate, Patiala House Courts, New Delhi whereby complaints under Section 138 and 142 of the Negotiable Instruments Act, 1881 (for short hereinafter referred to as "said Act"), have been dismissed resulting in acquittal of the respondent (accused).
3. In the complaint involved in Crl. L.P. No. 13/2009, petitioner alleged that it had supplied certain electronic goods to respondent No. 1 M/s. Telematica Star Ltd. vide bill No. 056 dated 21st May, 2003 for Page 1 of 8 Crl. L.P. Nos. 12-13/2009 Rs.1,07,467.26. In order to clear its liability respondent No. 1 issued a cheque bearing No. 937273 dated 16th August, 2003 for Rs.1,07,467.26 drawn on ICICI Bank Ltd., Defence Colony, New Delhi favouring the petitioner. On presentation, said cheque was returned dishonored vide memo dated 18th August, 2003 on the ground "insufficient account balance". Petitioner informed this fact to the respondent when he was asked to present the cheque again. As advised, petitioner presented the cheque with its banker for encashment but the same was again returned dishonored on 6th September, 2003 on the ground "payment stopped by the drawer". Since the amount involved in the cheque remained unpaid by the respondent, within the statutory period, despite service of demand notice dated 10th September, 2003, complaint was filed.
4. In the second complaint involved in Crl. L.P. No. 12/2009 it was alleged that the respondent issued a cheque bearing No. 937275 dated 29th August, 2003 drawn on ICICI Bank, Defence Colony Branch for Rs. 96,560/- favouring petitioner to square up the liability of bill No. 295 dated 17th March, 2003 for Rs.96560/- regarding supply of electronic components to the respondent. On presentation, this cheque was returned unpaid vide bank's memo dated 31st July, 2003 for the reasons "Insufficient Account Balance". When this fact was brought to the notice of the respondent he advised the petitioner to present the cheque again but on second time also cheque was returned unpaid with the remarks "payment stopped by the drawer". Page 2 of 8 Crl. L.P. Nos. 12-13/2009 The amount was not paid within fifteen days of service of the notice of demand, hence, the complaint.
5. In both the complaints respondent No. 2 was arrayed in the cause title as an accused being Director (Marketing & Finance) of the respondent. However, no averment was made in the complaint that he was the person responsible for managing the day to day affairs of the company and was vicariously liable for the offence under Section 138 of the said Act committed by the respondent No. 1 company by taking aid of Section 141 of the Act.
6. Defence of the respondents before the trial court was that the cheques were not issued by respondent No. 1 company. In fact, cheques were issued by a partnership firm M/s. Telematica Star Systems of which respondent No. 2 was one of the partner. No legal notice was received either by M/s. Telematica Star Systems nor by respondent No. 2 in that regard. Respondent No. 1 was not the drawer of the cheques thus no offence can be said to have been committed by it on the cheques of a third party namely M/s. Telematica Star Systems having been dishonored. As no offence under Section 138 of the Act was committed by the respondent No. 1 therefore, Section 141 of the Act would not be attracted to hold respondent No. 2 vicariously liable for the offence under Section 138 of the Act.
7. On the basis of evidence adduced by the parties, learned trial court has concluded that the cheques were issued by M/s. Telematica Star Systems and not by the respondent No. 1, therefore, upon said cheques having been dishonored, respondent No. 1 cannot be said to Page 3 of 8 Crl. L.P. Nos. 12-13/2009 be guilty for having committed offence under Section 138 of the Act. Respondent No. 1 was not the "drawer" of the cheques. Mr. Vasim Faruqi, who was impleaded as Director of respondent No. 1 could not be held vicariously liable by taking aid of Section 141 of the Act as no offence was committed by respondent No. 1. The fact that Mr. Vasim Faruqi was common in both M/s. Telematica Star Ltd. and M/s. Telematica Star Systems being Director and partner respectively was not sufficient to maintain the complaint against the respondents. Complaint could have been maintained only against the "drawer" of the cheque i.e. M/s. Telemetica Star Systems and its partner as only "drawer" of the cheque was liable for the offence under Section 138 of the said Act. Since the cheque was issued by M/s. Telematica Star Systems, criminal liability could have been fastened upon the said firm alone. M/s. Telematica Star Ltd. and its Directors were not liable for the offence under Section 138 of the said Act when admittedly cheque was issued by M/s. Telematica Star Systems which was a different entity.
8. In the facts of this case and the law applicable thereto I do not find the view taken by the trial court to be perverse nor is there any manifest error therein. The conclusion drawn by the trial court is in consonance with the well settled legal position that it is the drawer of the cheque, who alone would be liable for the offence under Section 138 of the said Act upon a cheque issued towards discharge of any debt or liability, being returned unpaid on the ground of "insufficient funds" in the account of the drawer.
Page 4 of 8 Crl. L.P. Nos. 12-13/2009
9. At this stage, it would be relevant to refer to Section 138 of the said Act, which reads as under:-
"Dishonor of cheque for insufficiency, etc. of funds in the account-
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 provision of this Act, be punished with imprisonment for (a term which may be extended to two years) 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) XXXXXXXXXXXXXXXXX
(b) XXXXXXXXXXXXXXXXX
(c) XXXXXXXXXXXXXXXXX
(emphasis supplied)
10. Section 7 of the said Act envisages that the maker of a bill of exchange or cheque is called the "drawer"; the person thereby directed to pay is called the drawee.
11. A conjoint reading of Sections 7 and 138 of the said 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 liable for the offence under Section 138 of the said Act, but only if drawer is a company or firm or Page 5 of 8 Crl. L.P. Nos. 12-13/2009 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 of the said Act.
12. In M/s. Gujarat Oleo Chemical vs. State & Anr., reported in 2010 (1) JCC (NI) 84, it was held that it is only the signatory of the cheque i.e. drawer of the cheque, who had drawn the cheque in his individual capacity and from his individual account, would be liable for prosecution under Section 138 of the said Act not the company and its Director. Similarly, in Srikant Somani & Ors. vs. Sharad Gupta & Anr., reported in 2005 (2) JCC (NI) 138, it was held that only drawer of the cheque was liable for the offence under Section 138 of the said Act. In Pratap Singh Yadav and Anr. vs. Atal Behari Pandey, reported in 2003(1) RCR (Criminal) 697, son had issued a cheque to discharge debt of his father. Upon cheque being returned dishonored, complaint under Section 138 of the Act was filed against the father as well as his son. It was held that only son was liable and not the father. In Smt. Kamana Gupta vs. N.C.T. of Delhi & Anr., reported in 2001(2) JCC (Delhi) 61, cheque was not issued by the company but was issued by one Ashok Gupta in his individual capacity. In these circumstances, it was held that drawer of the cheque alone and no other person was liable to be presecuted under Section 138 of the Act. In Manish Kant Aggarwal vs. M/s. National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) & Anr., reported in 2009(1) C.C. Page 6 of 8 Crl. L.P. Nos. 12-13/2009 Cases (HC) 155, it was held that Section 138 of the Act makes it manifestly clear that if a cheque is drawn by a person on an account maintained by him and issued for discharge of an existing debt and the cheque bounces, either on account of insufficiency of the funds or on account of the fact that it exceeded the amount arranged to be paid from that account, that person was deemed to had committed the offence. Well-settled legal position as emerges from the aforementioned judgments is that only the drawer would be solely liable for prosecution under Section 138 of the Act in case of dishonorment of the cheque either on the ground of insufficiency of funds or that it exceeded the amount available in the account. In case the drawer happens to be a company, firm or association of individuals, then all such persons as detailed in Section 141 of the Act would be liable for prosecution.
13. In the case at hand, admittedly cheques were issued by M/s. Telematica Star Systems and not by respondent No. 1. However, complaints were not filed against M/s. Telematica Star Systems nor respondent No. 2 was impleaded as its partner. Respondent No. 2 was not impleaded as partner of the firm but had been impleaded as Director of M/s. Telematica Star Ltd which was not the drawer of the cheques. Without launching the prosecution against M/s. Telematica Star Systems being the main offender, the question of respondent No. 2 being vicariously liable by taking aid of Section 141 of the said Act would also not arise in this case.
Page 7 of 8 Crl. L.P. Nos. 12-13/2009
14. Respondent No. 1 company is not the drawer of the dishonored cheques, therefore, was not required to respond to the legal notice by making payment. Respondent No. 1 not being drawer of the cheques can be said to have committed no offence under Section 138 of the said Act. As respondent No. 1 is not guilty of committing offence under Section 138 of the Act, respondent No. 2 being its Director cannot be fastened with vicarious liability of having committed offence by taking aid of Section 141 of the said Act.
15. In view of above discussions, I do not find the view taken by the learned trial court to be perverse or contrary to the evidence adduced before it. I do not find any justification to grant leave to appeal to the petitioner. Petitions are dismissed.
A.K. PATHAK, J.
July 23, 2010 rb Page 8 of 8 Crl. L.P. Nos. 12-13/2009