Allahabad High Court
Jai Prakash Lohia vs State Of U.P.And Another on 2 November, 2022
Author: Saurabh Shyam Shamshery
Bench: Saurabh Shyam Shamshery
HIGH COURT OF JUDICATURE AT ALLAHABAD Court No. - 84 Case:-APPLICATION U/S 482 No.- 11694 of 2022 Applicant:-Jai Prakash Lohia Opposite Party :- State Of U.P.And Another Counsel for Applicant :- Namit Srivastava Counsel for Opposite Party :- G.A.,Amrita Singh Hon'ble Saurabh Shyam Shamshery,J.
1. Heard Namit Srivastava, learned counsel for the applicant and Amrita Singh, learned counsel for the O.P. No.2.
2. By means of this application, applicant has prayed for quashing the entire proceedings of Criminal Case No.162 of 2021 under Section 138 of Negotiable Instruments Act, 1981, Shanti Devi vs. Jai Prakash Lohia, Police Station-Kotwali Sadar, district-Ballia. The applicant has not challenged the order dated 24.2.2021.
3. Learned counsel for applicant submits that the summoning order issued under Section 138 of N.I. Act was erroneous that entire allegations made in complaint are against the company namely C.G.R. Associates and Real Estate, however, the company has not been made a party therein and the applicant was made an accused in individual capacity, therefore, summoning order is bad in law and criminal proceedings are liable to be quashed.
4. Learned counsel for the applicant has placed reliance upon a judgment of Supreme Court in Alka Khandu Avhad vs. Amar Syamprasad Mishra and Anr, (2021) 4 SCC 675 and placed reliance on paragraphs 9 and 10 for consideration, which are mentioned hereinafter:
"9. On a fair reading of Section 138 of the NI Act, before a person can be prosecuted, the following conditions are required to be satisfied:
9.1) that the cheque is drawn by a person and on an account maintained by him with a banker;
9.2) for the 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; and 9.3) the said cheque 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.
10. Therefore, a person who is the signatory to the cheque and the cheque is drawn by that person on an account maintained by him and the cheque has been issued for the discharge, in whole or in part, of any debt or other liability and the said cheque has been returned by the bank unpaid, such person can be said to have committed an offence. Section 138 of the NI Act does not speak about the joint liability. Even in case of a joint liability, in case of individual persons, a person other than a person who has drawn the cheque on an account maintained by him, cannot be prosecuted for the offence under Section 138 of the NI Act. A person might have been jointly liable to pay the debt, but if such a person who might have been liable to pay the debt jointly, cannot be prosecuted unless the bank account is jointly maintained and that he was a signatory to the cheque."
5. He has further placed reliance upon a judgment of Supreme Court in Aneeta Hada Vs. M/s Godfather Travels & Tours Pvt. Ltd. (2008) 13 SCC 703 and placed reliance on paragraph 40 that:
"The clear findings contained in a binding precedent were, however, sought to be explained by a two Judge Bench of this Court in Sehoratan Agarwal and another v. State of Madhya Pradesh, [ (1984) 4 SCC 352 ] stating :(SCC pp.354-55, para 5) "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 alongside the Company itself. Section 10 indicates the persons who may be prosecuted where the contravention is made by the Company. It does 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 alongwith 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 Madias v. C.V. Parekh (supra) 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 p.493, para 3) "3...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 convention of Clause 5 of the Iron & 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 & Steel (Control), Order the two respondents could not be held responsible. The actual contravention was by Kamdar and Villabhadas Thacker and any contravention by them would not fasten responsibility on the respondents."
6. Copy of above referred judgment was supplied by counsel for applicant running only into 1-18 pages downloaded from indiankanoon.org which was an incomplete document. Judgment given by J.V.S. Sirpurkar (disagreeing) was not placed as finally matter was referred to larger bench due to conflict of opinion and a bench of 3 Judges dealt the same in Aneeta Hada Vs. Godfather Travels & Tours Private Limited (2012) 5 SCC 661. The operative part of judgment is mentioned hereinafter:
"59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh (supra) which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal (supra) does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada (supra) is overruled with the qualifier as stated in paragraph 51. The decision in Modi Distilleries (supra) has to be treated to be restricted to its own facts as has been explained by us hereinabove."
7. Learned counsel for O.P. No.2 has supported the summoning order and submits that since summoning order is not under challenge, therefore, present application is not maintainable.
8. The objection is worth consideration that applicant has not challenged the summoning order passed by learned Trial Court passed under section 204 Cr.P.C. with prima-facie opinion that there are sufficient grounds to proceed against the applicant, therefore, this application can be dismissed on this ground, however since arguments are raised on merit and which are on legal issues, therefore, court proceeds to deal with rival submissions on merit.
9. It is not in dispute that cheque was signed by the applicant in personal capacity. There are averments of applicant that unfilled cheques were stolen by complainant, however, he has not denied that he has put his signature on the cheque as well as that cheque was dishonoured due to ''insufficient funds'. Even the allegations made in the complaint are that the complainant has paid the amount in favour of the company towards plot, but the same was allotted but no such land was found on spot.
10. Learned counsel for the applicant has placed reliance upon a document which is not before the court concerned that the company is a proprietorship company, that he has no concern with the company of his real brother. There is no document on record in regard to proprietorship firm except details of a bank account.
11. According to complainant dispute was with the Company and that plot allotted was not found on actual place, therefore, money was demanded to be returned back and according to the complainant, money was returned back by way of cheque issued by the drawer namely the applicant herein towards debt.
12. The Supreme Court in Alka Khandu Avhad (supra) has also mentioned that a person who is the signatory to a cheque and the cheque is drawn by that person on an account maintained by him and that cheque has been issued for the discharge, in whole or in part, of any debt or other liability and said cheque has been returned by the bank unpaid, such person can be said to have committed an offence.
13. Further in Aneeta Hada (supra) case was proceeded on the basis that the petitioner therein was neither drawer of the cheque nor he was a partner when the cheque got dishonoured.
14. In the present case, cheque was drawn in personal capacity which was not denied and as mentioned in the complaint that it was towards the liability incurred by the company, therefore, applicant cannot escape from his liability as the cheque was drawn by him which got dishonoured. It was specific allegation of the complainant that applicant was actively involved in inducing the complainant to purchase a plot and he was a part of negotiation of plot as well as return of money and that despite notice was issued he has not replied to it, therefore, a presumption can be drawn that applicant has committed an offence under Section 138 Negotiable Instruments Act. It is also not the case of applicant that cheque was issued towards security.
15. Facts of present case are squarely covered against the applicant by a judgment passed by Supreme Court in Mainuddin Abdul Sattar Shaikh Vs. Vijay D. Salvi, (2015) 9 SCC 622. Relevant paragraphs 11, 12 and 13 thereof are mentioned hereinafter:
"11. About the liability under Section 138 of the NI Act, where the cheque drawn by the employee of the appellant company on his personal account, even if it be for discharging dues of the appellant-company and its Directors, the appellant-company and its Directors cannot be made liable under Section 138. Thus, we observe that in the abovementioned case, the personal liability was upheld and the Company and its Directors were absolved of the liability. The logic applied was that the Section itself makes the drawer liable and no other person. This Court in P.J. Agro Tech Limited (supra) noted as under: (SCC p.150, para 14) "14. ...An action in respect of a criminal or a quasi-criminal provision has to be strictly construed in keeping with the provisions alleged to have been violated. The proceedings in such matters are in personam and cannot be used to foist an offence on some other person, who under the statute was not liable for the commission of such offence."
(Emphasis Supplied) Going by the strict interpretation of the provision the drawer which in the present case is the respondent is liable under Section 138 of the N.I. Act.
12. The Respondent has adduced the argument that in the complaint the appellant has not taken the averment that the accused was the person incharge of and responsible for the affairs of the Company. However, as the respondent was the Managing Director of M/s. Salvi Infrastructure Pvt. Ltd. and sole proprietor of M/s. Salvi Builders and Developers, there is no need of specific averment on the point. This Court has held in National Small Industries Corporation Ltd. Vs. Harmeet Singh Paintal and Anr.,[2] as follows: (SCC p.346, para 39) "39 (v) "If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with."
13. Thus, in the light of the position which the respondent in the present case held, we are of the view that the respondent be made liable under Section 138 of the NI Act, even though the Company had not been named in the notice or the complaint. There was no necessity for the appellant to prove that the said respondent was incharge of the affairs of the company, by virtue of the position he held. Thus, we hold that the respondent Vijay D Salvi is liable for the offence under Section 138 of the NI Act."
16. It would be relevant to mention paragraphs 16 to 19 from Rathish Babu Unnikrishnan Vs. State (Govt. of NCT of Delhi) and Another, 2022 SCC OnLine SC 513:
"16. The proposition of law as set out above makes it abundantly clear that the Court should be slow to grant the relief of quashing a complaint at a pre-trial stage, when the factual controversy is in the realm of possibility particularly because of the legal presumption, as in this matter. What is also of note is that the factual defence without having to adduce any evidence need to be of an unimpeachable quality, so as to altogether disprove the allegations made in the complaint.
17. The consequences of scuttling the criminal process at a pre-trial stage can be grave and irreparable. Quashing proceedings at preliminary stages will result in finality without the parties having had an opportunity to adduce evidence and the consequence then is that the proper forum i.e., the trial Court is ousted from weighing the material evidence. If this is allowed, the accused may be given an un-merited advantage in the criminal process. Also because of the legal presumption, when the cheque and the signature are not disputed by the appellant, the balance of convenience at this stage is in favour of the complainant/prosecution, as the accused will have due opportunity to adduce defence evidence during the trial, to rebut the presumption.
18. Situated thus, to non-suit the complainant, at the stage of the summoning order, when the factual controversy is yet to be canvassed and considered by the trial court will not in our opinion be judicious. Based upon a prima facie impression, an element of criminality cannot entirely be ruled out here subject to the determination by the trial Court. Therefore, when the proceedings are at a nascent stage, scuttling of the criminal process is not merited.
19. In our assessment, the impugned judgment is rendered by applying the correct legal principles and the High Court rightly declined relief to the accused, in the quashing proceeding. Having said this, to rebut the legal presumption against him, the appellant must also get a fair opportunity to adduce his evidence in an open trial by an impartial judge who can dispassionately weigh the material to reach the truth of the matter. At this point, one might benefit by recalling the words of Harry Brown, the American author and investment advisor who so aptly said - "A fair trial is one in which the rules of evidence are honored, the accused has competent counsel, and the judge enforce the proper court room procedure - a trial in which every assumption can be challenged." We expect no less and no more for the appellant."
(Emphasis added)
17. The outcome of above discussion is that applicant who has issued cheque in individual capacity in discharge liability of a company has been rightly made an accused in his individual capacity, therefore, as held in Rathish Babu Unnikrishnan (supra) in absence of company as an accused, proceedings may go on against the applicant as well as other ingredients of Section 138 N.I.Act are prima facie made out.
18. Accordingly, application is rejected. The trial shall proceed and be concluded keeping in view the direction passed by Supreme Court in Re-:Expeditious trial of cases under Section 138 N.I. Act, 1881, reported in 2021 SCC Online SC 325.
19. Shri. Namit Srivastava, learned counsel for the applicant shall remain more cautious while placing reliance on a judgment and that to provide a complete copy of a judgment to court only from a approved journal and not from a unapproved legal portal.
Order Date :- 2.11.2022 SB (Serial No.5 out of 316 fresh cases)