Andhra HC (Pre-Telangana)
Mohd. Isaq Gulsani vs J. Rajamouli And Another on 17 November, 2000
Equivalent citations: 2001(2)ALD728, 2001(1)ALD(CRI)8, 2001(1)ALT(CRI)80, 2001CRILJ522
ORDER
1. The petitioner seeks to quash the proceedings initialed against him in CC No.251 of 1999 on the file of the Judicial Magistrate of First Class, Luxettipet.
2. The petitioner is the accused in the said criminal case filed against him by the first respondent herein. The complaint was filed under Section 138 of the Negotiable Instruments Act (for brevity 'the Act') on the premise that the petitioner approached the complainant and borrowed an amount of Rs.13,000/- from his house at Itikyal village as 'hand loan' promising to repay the same as and when demanded; and that despite several demands, he did not repay the same; and that on 10-3-1999 the petitioner issued a cheque bearing No.731725 for the said amount and when the cheque was presented through the Banker of the complainant, it was dishonoured; and, therefore, he committed the offence under Section 138 of the Act.
3. Pursuant to the summons issued by the Court, after taking cognizance of the case in CC No.251 of 1999, the petitioner appeared before that Court and later he filed the present petition seeking to quash the proceedings on the premise that the cheque was issued by the person in the capacity of a President of A.P. Habitat Society, Hyderabad, and neither the Society nor the President in that capacity representing the Society has been impleaded as an accused and inasmuch as the petitioner has been impleaded in his individual capacity, the complaint is not sustainable is liable to be quashed.
4. The learned Counsel appearing for the petitioner contends that since the cheque has been issued by the accused in the capacity of the President of the Society, in the absence of the Society the present complaint cannot be maintained.
5. The learned Counsel appearing for the respondent contends that under Section 141 of the Act either the Company or the person who at the time of the offence was committed was in-charge and responsible to the Company, is liable and, therefore, there is no inflexible rule that the Company as well as the person in-chargc of the affairs of the Company shall be impleaded simultaneously and either the Company or the person in-charge can be impleaded, and similarly the Society here. In support of his contention, the learned Counsel appearing for the respondent seeks to rely upon two judgments of this Court in R. Ramachandran v. Yerram Sesha Reddy and another, 1997 (1) ALD (Crl.) 169 and in L Rajakrishna Reddy v. Satwik Drugs Ltd and another,. In the former case, the Chairman of the Company, who has drawn the cheque and issued, which cheque was later dishonoured, was sought to be prosecuted without impleading the Company as a party-accused. Notwithstanding the same, it was held that the complaint was maintainable even if it was filed against the Chairman of the Company without impleading the Company as a party-accused. It has been specifically observed in Para 5 at Page 172 of the said judgment as follows:
"What the section says is Company as well as such person are both liable for punishment. Therefore, their liability is independent. Each of them is independently liable for punishment."
Relying upon the said judgment, this Court in the latter judgment has endorsed the same view. In Para 9 of the judgment, it is held as follows:
"This Court rightly held that the Company, as well as the person incharge and responsible for the conduct of its business can both be prosecuted or any one alone can be prosecuted. The interpretation of Section 141 of the Act by this Court in R. Ramachandran's case (supra) is in conformity with the scheme of the Act and the purposes for which Sections 138 to 142 were enacted. There is absolutely no justification whatsoever for taking a different view."
6. However, there is a latest Judgment of this Court in D. Chandra Reddy v. Ghorisetti Prabhakar, 2000 (2) ALT (Crl.) 17 (AP). In this judgment, this Court held that when the petitioner was sought to be prosecuted in his personal capacity, whereas the cheque in question was drawn by the Company through its Managing Director although the petitioner was the Managing Director of the Company and signed the cheque in such capacity, he could not be mulcted with criminal liability on the basis of a cheque which was drawn on the account of the company and not on his personal account. There appears to be some cleavage of opinion in this regard, as can be seen from these three judgments. However, in the third judgment, the earlier two judgments have not been referred to. Perhaps they have not been placed before the learned Judge while inviting a judgment on the point. In view of this cleavage of opinion, it is apposite here to consider Section 138 of the Act since that Section has been interpreted by the learned Judge in Chandra Reddy's case. Section 138 of the Act insofar it is relevant for the present purposes may be extracted hereunder thus:
"138. Dishonour 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 extend to one year, or with fine which may extend to twice the amount of the cheque, or with both:"
7. A bare perusal of the said section shows that if a person draw a cheque on the account maintained by him with the Banker for payment of any money to another person from out of that account for discharging the existing legally enforceable debt and if the cheque is dishonoured, he is deemed to have committed an offence which is punishable under Section 138 of the Act. Therefore, what is required is that the person should draw a cheque on an account maintained by him with the Bank. Section 138 does not speak of the capacity of the person whoever draws on his account in whatever capacity he is, he is liable when the cheque is disonoured as enjoined under Section 138 of the Act.
8. It is also apposite here to consider Section 141 of the Act, which is germane in the context for consideration. Section 141 of the Act reads thus:-
"141. Offence by companies :--(1) If the person committing an offence under Section 138 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 to deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly."
9. A mere glance at the said section shows that it refers to three categories of persons namely (i) the Company which committed the offence; (ii) every person, who was in-charge of and was responsible for the business of the Company; and (iii) any other person, who is a Director or a Manager or a Secretary or Officer of the Company with whose connivance or due to whose neglect the Company has committed the offence. On a holistic view of both the Sections 138 and 141 of the Act together, it is obvious that the drawer of the cheque alone is liable under Section 138 of the Act. However, on an overall consideration of the scheme and content of the Act, Section 141 of the Act casts liability on other persons connected with the Company if the Company is the accused. Excepting this provision, the Act has not envisaged any vicarious liability. On a close scrutiny of sub-section (1)of Section 141 of the Act, it is obvious that every person who is in-charge of and is responsible to the Company as well as the Company shall be deemed to be guilty. The emphasis can be laid on the phrase "as well as". Infact the Apex Court in Anil Halda v. Indian Acrylic Ltd., 1999 (7) Scale 209, had an occasion to consider these provisions and held in Para 13 thus:
"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 the other persons who fall within the second and the third categories mentioned. No doubt a finding that the offence was committed by the company 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 persons cannot, on that score alone, escape from the penal liability created through the legal fiction envisaged in Section 141 of the Act,"
10. The Apex Court in Bilakchan Gyanchand Co. v. A. Chinnaswami, 1999 (5) SCC 639, earlier held in Para 4 thus:
"In our opinion, the High Court erred in quashing the complaint. It is evident that proceedings were initiated by the appellant against A. Chinnaswami who happened to be the Managing Director of Shakti Spinners Ltd. The cheques in question which were dishonoured were singed by him. The process was issued by the Judicial Magistrate in his name. We see no infirmity in the notice issued under Section 138 addressed to A. Chinnaswami, who was a signatory of the said cheques. The High Court, in our opinion, clearly fell in error in allowing the petilion under Section 482 Cr.PC and in quashing the complaint and setting aside the proceedings pending before the Judicial Magistrate."
It is a short judgment. On the ground that no legal notice was issued to the Company, the complaint was quashed by the High Court. However the Apex Court has not upheld that the same. In view of this authoritative pronouncement by the Apex Court, the judgment of this Court in Chandra Reddy's case refereed to supra becomes per incuriam.
11. In view of this clear legal position, the contention of the learned Counsel appearing for the petitioner that the complainant failed to implead by Society as a party accused merits no consideration. The contention of the learned Counsel appearing for the petitioner is that even in such an event, it is legitimately expected of from the complainant to specifically aver in the complaint as to why the Society has not been impleaded or as to why the person in his individual capacity is being impleaded. Such things do not go to the root of the matter. A fortiori in a petition for quash proceedings filed under Section 482 of the Code since what is germane for consideration is as to whether on the face of the averments made in the complaint the offence punishable under Section 138 of the Act is made out or not.
12. It must be remembered before adverting to the respective contentions raised on either side that it is an application filed under Section 482 of the Criminal Procedure Code (for brevity 'the Code') seeking to quash the proceedings on the premise that it is nothing but an abuse of the process of the Court. Section 138 of the Act is a relevant provision, which makes an act of the drawer of a cheque punishable if the cheque is not honoured by the Bank either on account of insufficiency of funds or the amount covered by the cheque exceeds the arrangement made. If the averment made in the complaint does not disclose the necessary ingredients constituting the offence, it is liable to be quashed. That is a settled position of law. It is, therefore, apposite here to see whether the necessary ingredients which constitute the offence punishable under Section 138 of the Act have been mentioned in the complaint or not. All the ingredients that constitute the offence are emanating from the averments made in the complaint, since it is specifically averred that there has been legally conforceable debt exists and the cheque has been issued in discharge of that debt, which cheque has been dishonoured.
13. Although the Society has not been arrayed as accused since the liability of the President of the Society is independent and as both the Company as well as the Managing Director are liable under Section 141 of the Act, for the mere omission to array the Society as accused, the President who is independently liable cannot escape the liability on that score. Therefore, there is no defect in the complaint.
14. For the foregoing reasons, the criminal petition cannot be sustained and the proceedings cannot be thrown out at the threshold by invoking inherent jurisdiction of this Court. Consequently the criminal petition is dismissed.