Kerala High Court
P.C. Achankunju vs House Of Tiles on 29 May, 2017
Author: Alexander Thomas
Bench: Alexander Thomas
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS
MONDAY, THE 29TH DAY OF MAY 2017/8TH JYAISHTA, 1939
Crl.MC.No. 4681 of 2016
------------------------
CC 218/2016 OF JUDICIAL FIRST CLASS MAGISTRATE COURT,
KOOTHATTUKULAM
....
PETITIONER(S)/2ND ACCUSED:
-------------------------
P.C. ACHANKUNJU, S/O.CHACKO,
PULLOLICKAL HOUSE, THODUPUZHA.
BY ADVS.SRI.P.V.JAYACHANDRAN
SRI.NIDHI BALACHANDRAN
SMT.G.N.DEEPA
RESPONDENT(S)/COMPLAINANT & STATE:
----------------------------------
1. HOUSE OF TILES, KOOTHATUKULAM,
M.C. ROAD, KOOTHATTUKULAM P.O.
2. HOUSE OF TILES, KOOTHATTUKULAM,
REP. BY PROPRIETOR RENNY GEO VARGHESE,
S/O.VARGHESE, 38 YRS, KUNNUMMEL HOUSE,
EDAYAR P.O., KOOTHATTUKULAM.
3. STATE OF KERALA,
REPRESENTED BY THE PUBLIC PROSECUTOR,
HIGH COURT OF KERALA, ERNAKULAM-682 031.
* ADDITIONAL R4 IMPLEADED
4. REGISTRAR OF COMPANIES, COMPANY LOW BHAVAN,
BMC ROAD ,THRIKKAKARA-682 021.
* IS IMPLEADED AS ADDL.R4 AS PER ORDER DTD.3.2.2017 IN
CRL.MA.1322/2017 IN CRL.MC.468/2016
R3 BY PUBLIC PROSECUTOR SRI.SAIGI JACOB PALATTY
R4 BY ADV. SRI.N.NAGARESH, ASSISTANT SOLICITOR GENERAL
THIS CRIMINAL MISC. CASE HAVING COME UP FOR ADMISSION
ON 29-05-2017, THE COURT ON THE SAME DAY PASSED THE
FOLLOWING:
msv/
Crl.MC.No. 4681 of 2016
-----------------------
APPENDIX
PETITIONER(S)' ANNEXURES
-------------------------
ANNEXURE A1 A COPY OF THE NOTICE DT. 8.12.15
ANNEXURE A2 A COPY OF THE REPLY NOTICE DT. 16.12.15
ANNEXURE A3 COPY OF THE MINUTES DT. 3.1.15
ANNEXURE A4 COPY OF THE PROCEEDINGS OF REGISTRAR OF COMPANIES
ANNEXURE A5 COPY OF THE NOTICE DT. 5.3.16
ANNEXURE A6 CERTIFIED COPY OF THE COMPLAINT IN C.C.218/16
PENDING BEFORE THE LEARNED JFCM COURT,
KOOTHATTUKULAM.
RESPONDENT(S)' ANNEXURE
-----------------------
ANNEXURE R3(a): TRUE COPY OF FORM DIR - 11
ANNEXURE R3(b): TRUE COPY OF FORM DIR - 12
//TRUE COPY//
P.S.TO JUDGE
Msv/
"C.R"
ALEXANDER THOMAS, J.
-----------------------------
Crl.M.C.No.4681 Of 2016
---------------------------------
Dated this the 29th day of May, 2017.
O R D E R
The petitioner is accused No.2 in C.C.No.218/2016 on the file of the Judicial First Class Magistrate Court, Koothattukulam, instituted on the basis of a complaint filed by respondents 1 & 2 alleging offence punishable under Sec.138 of the Negotiable Instruments Act. Anx.A-6 is the copy of the impugned complaint. Accused No.1 therein is a chit company. The petitioner and another person, who are alleged to be the Directors of the alleged chit company, have been arrayed as accused Nos.2 & 3. The gist of the allegations in the impugned Anx.A-6 complaint is that towards the amounts, which are owed by the 1st accused chit company to the complainant in the chit transactions entered into by him with the company, the cheque in question for an amount of Rs.33 lakhs dated 24.11.2015 drawn from the account maintained by the 1st accused company has been issued and executed by accused Nos.2 & 3, who are the Directors and signatories of the said cheque. It is also alleged in the said complaint that the 1st accused chit company was closed some time in August, 2015, and that the police ::2::
Crl.M.C.No.4681 Of 2016 authorities of Koothattukulam, had initiated criminal proceedings against the company and its officials and that the matter was discussed and settled between the complainant and accused and it is thereafter that the said cheque for Rs.33 lakhs dated 24.11.2015 has been issued from the accused-company's account and the same has been executed and signed by accused Nos.2 & 3 as the Directors of the company and who are the signatories of the cheque, etc. It is alleged in para 4 of the complaint that the cheque in question dated 24.11.2015 was dishonoured by the bank concerned as per memo intimating dishonour dated 15.2.2016 and that statutory demand notice under Sec.138(b) was issued by the complainant to the accused on 5.3.2016 which has been received by the 2nd accused on 8.3.2016 and which was returned unclaimed by the 3rd accused, etc. The main contention urged by Sri.P.V.Jayachandran, learned counsel appearing for the petitioner- accused No.2, is that the petitioner had demitted from the office of the Director of the company on 3.1.2015 and that the company had duly intimated about the resignation of the petitioner from the company to the Registrar of Companies and that he was not the Director of the company either at the time of the issuance of the cheque on 24.11.2015 or at the time of dishonour of the cheque on 15.2.2016 and therefore ::3::
Crl.M.C.No.4681 Of 2016 he cannot be mulcted with the vicarious liability as per Sec.141 of the N.I.Act as he was no longer a Director at the time of dishonour of the cheque, etc. This Court had ordered the petitioner to implead the Registrar of Companies, Kochi, who is the functionary of the Government of India in terms of the provisions contained in the Companies Act as an additional respondent in this case. Accordingly, Registrar of Companies, Kochi, was impleaded as additional R-4 in the present Crl.M.C. The learned Assistant Solicitor General has taken notice for the said additional R-4 and has filed a detailed affidavit dated 14.2.2017 regarding the factual aspects in the averments about the resignation of the petitioner from the Directorship of the 1st accused-
company.
2. Though notice has been duly served on R-1 & R-2, there is no appearance for those parties. This aspect has been clearly endorsed by the Registry as per endorsement dated 27.11.2016. Thereafter the matter has been adjourned repeatedly to ensure whether those parties are entering appearance before this Court. Till now, none has appeared for R-1 & R-2.
3. Heard Sri.P.V.Jayachandran, learned counsel appearing for the petitioner-2nd accused, Sri.Saigi Jacob Palatty, learned Prosecutor ::4::
Crl.M.C.No.4681 Of 2016 appearing for R-3 State and Sri.N.Nagaresh, learned Assistant Solicitor General, appearing for additional 4th respondent-ROC, Kochi.
4. It will be profitable to refer to Secs.138 & 141 of the Negotiable Instruments Act, which read as follows:
"Sec.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 provisions 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) 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 in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by 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 cheque 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 purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.' ::5::
Crl.M.C.No.4681 Of 2016 'Sec.141.Offences 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.
Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Governemnt or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.
(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 deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation: For the purposes of this Section,-
(a) "company" means any body corporate and includes a firm or other association of individuals; and
(b) "director", in relation to a firm, means a partner in the firm.' Therefore, from a mere reading of Sec.141 of the N.I.Act, it is crystal clear that the company officials concerned could be arrayed as accused in such a complaint only if such person was in charge of and responsible for the conduct of the business of the company at the time the offence was committed. The main contention urged by ::6::
Crl.M.C.No.4681 Of 2016 Sri.P.V.Jayachandran, learned counsel appearing for the petitioner (A-2) is that the Apex Court and this Court have laid down the clear legal position that the offence under Sec.138 of the N.I.Act is committed at the time of dishonour of the cheque. But that the other conditions laid down in the proviso to Sec.138 of the N.I.Act should also be fulfilled for initiating a valid complaint before the criminal court. Even as per the admitted averments in the impugned Anx.A-6 complaint (para 4 thereof), dishonour of the cheque has taken place on 15.2.2016 or immediately one or two days immediately before that, as the dishonour memo issued by the bank was on 15.2.2016. The petitioner would also place reliance on the judgment of this Court in the case Kairali Marketing and Processing C-op. Society Ltd. v. Pullengadi Service Co-op. Society Ltd. reported in 2007 (1) KLT 287, wherein this Court has held that the offence under Sec.138 of the N.I.Act must be held to be committed on that day when the bank on which the cheque is drawn returns the cheque unpaid for the reasons referred to in Sec.138 and that is the specific date/time of commission of the offence and the person who has signed the cheque as the Secretary who was admittedly not the ::7::
Crl.M.C.No.4681 Of 2016 Secretary on the date on which the cheque was returned unpaid by the bank cannot be held to be in charge of and responsible for the conduct of its affairs on the date when the offence was committed and that the signatory/the then Secretary cannot be prosecuted. It would be profitable to refer paras 24 & 25 of the abovesaid decision of this Court which read as follows:
"24. So reckoned, the offence under S.138 of the N.I.Act must be held to be committed on that date when the bank on which the cheque is drawn returns the cheque unpaid for the reasons referred to in S.138. That is the specific date/time of commission of the offence. Any interpretation which will make the date of commission of the offence uncertain is bound to create confusion when we attempt to work the law by interpreting S.138 and 141 of the N.I.Act. I therefore come to the conclusion that the offence under S.138 of the N.I.Act can be held to be committed only on the date when the cheque is returned unpaid by the bank.
25. If that be so, the person who has signed the cheque as the Secretary who was admittedly not the Secretary on the date on which the cheque was returned unpaid by the bank cannot be held to be in charge of and responsible to the company for the conduct of its affairs on the date when the offence was committed. Therefore the signatory/the then Secretary cannot be prosecuted under S.138 read with S.141 of the N.I.Act. The petitioners herein can hence claim no benefit or advantage on account of the conduct of the complainant not prosecuting the then Secretary/signatory of the cheque. The challenge raised on this ground must hence fail."
It is also noted that the Apex Court in the Three Judge Bench decision in Dasarath Rupsingh Rathod v. State of Maharashtra & anr. reported in (2014) 9 SCC 129 has placed reliance on the said decision of this Court in Kairali Marketing and Processing Co-op. Society Ltd. v. Pullengadi Service Co-op. Society Ltd. reported in 2007 (1) KLT 287, as can be seen ::8::
Crl.M.C.No.4681 Of 2016 from a reading of paras 57 & 58 of the Apex Court decision in Dasarath Rupsingh Rathod 's case which read as follows:
'57. The High Court of Kerala has, in our view, correctly interpreted Section 138 of the Act in Kairali Mktg. & Processing Coop. Society Ltd. v. Pullengadi Service Coop. Society Ltd. when it said: (KLT pp. 293 & 295-96, paras 18 & 23) "18. It is evident from the language of Section 138 of the NI Act that the drawer is deemed to have committed the offence when a cheque issued by him of the variety contemplated under Section 138 is dishonoured for the reasons contemplated in the section. The crucial words are `is returned by the bank unpaid'. When that happens, such person shall be deemed to have committed the offence. With the deeming in the body of Section 138, the offence is already committed or deemed to have been committed. A careful reading of the body of Section 138 cannot lead to any other conclusion. Proviso to Section 138 according to me only insists on certain conditions precedent which have to be satisfied if the person who is deemed to have committed the offence were to be prosecuted successfully. The offence is already committed when the cheque is returned by the bank. But the cause of action for prosecution will be available to the complainant not when the offence is committed but only after the conditions precedent enumerated in the proviso are satisfied. After the offence is committed, only if the option given to avoid the prosecution under the proviso is not availed of by the offender, can the aggrieved person get a right or course of action to prosecute the offender. The offence is already deemed and declared but the offender can be prosecuted only when the requirements of the proviso are satisfied. The cause of action for prosecution will arise only when the period stipulated in the proviso elapses without payment. Ingredients of the offence have got to be distinguished from the conditions precedent for valid initiation of prosecution.
* * *
23. ...The stipulations in the proviso must also be proved certainly before the offender can be successfully prosecuted. But in the strict sense they are not ingredients of the deemed offence under the body of Section 138 of the NI Act, though the said stipulations must also be proved to ensure and claim conviction. It is in this sense that it is said that the proviso does not make or unmake the offence under Section 138 of the NI Act. That is already done by the body of the sections.
This dispute as to whether the stipulations of the proviso are conditions precedent or ingredients/components of the offence under Section 138 of the NI Act may only be academic in most cases. Undoubtedly the ingredients stricto sensu as also the conditions precedent will have to be established satisfactorily in all cases. Of course in an appropriate case it may have to be considered whether substantial compliance with the conditions precedent can be reckoned to be sufficient to justify a conviction. Be that as it may, the distinction between the ingredients and conditions precedent is certainly real and existent. That distinction is certainly vital while ascertaining complicity of an indictee who faces indictment in a prosecution under Section 138 with the aid of Section 141 of the NI Act. That is how the ::9::
Crl.M.C.No.4681 Of 2016 question assumes such crucial significance here." (emphasis in original)
58. To sum up:
58.1. An offence under Section 138 of the Negotiable Instruments Act, 1881 is committed no sooner a cheque drawn by the accused on an account being maintained by him in a bank for discharge of debt/liability is returned unpaid for insufficiency of funds or for the reason that the amount exceeds the arrangement made with the bank.
58.2. Cognizance of any such offence is however forbidden under Section 142 of the Act except upon a complaint in writing made by the payee or holder of the cheque in due course within a period of one month from the date the cause of action accrues to such payee or holder under clause (c) of proviso to Section 138.
58.3. The cause of action to file a complaint accrues to a complainant/payee/holder of a cheque in due course if
(a) the dishonoured cheque is presented to the drawee bank within a period of six months from the date of its issue,
(b) if the complainant has demanded payment of cheque amount within thirty days of receipt of information by him from the bank regarding the dishonour of the cheque, and
(c) if the drawer has failed to pay the cheque amount within fifteen days of receipt of such notice.
58.4. The facts constituting cause of action do not constitute the ingredients of the offence under Section 138 of the Act.
58.5. The proviso to Section 138 simply postpones/defers institution of criminal proceedings and taking of cognizance by the court till such time cause of action in terms of clause (c) of the proviso accrues to the complainant.
58.6. Once the cause of action accrues to the complainant, the jurisdiction of the court to try the case will be determined by reference to the place where the cheque is dishonoured.
58.7. The general rule stipulated under Section 177 CrPC applies to cases under Section 138 of the Negotiable Instruments Act. Prosecution in such cases can, therefore, be launched against the drawer of the cheque only before the court within whose jurisdiction the dishonour takes place except in situations where the offence of dishonour of the cheque punishable under Section 138 is committed along with other offences in a single transaction within the meaning of Section 220(1) read with Section 184 of the Code of Criminal Procedure or is covered by the provisions of Section 182(1) read with Sections 184 and 220 thereof."
::10::
Crl.M.C.No.4681 Of 2016 The Apex Court has clearly upheld the correctness of the reasonings of this Court in the judgment in Kairali Marketing and Processing Co-op. Society Ltd. v. Pullengadi Service Co-op. Society Ltd. reported in 2007 (1) KLT 287. Thus it is crystal clear that offence under Sec.138 of the N.I.Act is committed at the time of the dishonour of the cheque by the bank from which the cheque is drawn.
5. Additional R-4 (ROC, Kochi) has filed a detailed affidavit dated 14.2.2017 in which it has been stated in para 6 thereof that though the petitioner has claimed that he has resigned from the Directorship of the company on 3.1.2015, it is seen from the verification of the documents by the ROC that the said submission made by the petitioner is not correct as the Form DIR-11 regarding the resignation from the company has received by the ROC only on 17.7.2015 as required under the proviso to Sec.168(1) r/w the relevant rules framed thereunder. Anx.R-3(a) is the copy of the DIR-11 Form intimating resignation of the petitioner. Therefore, from a reading of the said affidavit filed by the 4th respondent, it can be seen that the petitioner has ceased to be a Director of the company atleast with effect from 11.7.2015. The said materials produced by R-4 (ROC) are materials of unimpeachable and sterling quality and same could be ::11::
Crl.M.C.No.4681 Of 2016 relied on by the Court in a criminal proceedings under Sec.482 of the Cr.P.C inasmuch as the ROC is a statutory functionary, who functions as per the provisions of the Companies Act, enacted by the Parliament.
In Anx.A-6 complaint it is stated that dishonour memo dated 15.02.2016 has been issued by the bank. It is an unimpeachable material of sterling quality furnished by R-4 (ROC) that the petitioner has ceased to be a Director of the company from 11.7.2015. Therefore, as the dishonour of the cheque is in February, 2016, the petitioner then was no longer the Director of the company at the time of the commission of the alleged offence under Sec.138 of the N.I.Act.
Therefore, in this view of the matter, the petitioner cannot be mulcted with vicarious liability as per Sec.141 of the N.I.Act in view of the above said legal principles laid down by this Court as well as by the Apex Court in the aforementioned rulings. Therefore, the further continuation of the criminal proceedings against the petitioner would be an abuse of the process of the court. Accordingly, it is ordered in the interest of justice that the impugned criminal proceedings in Anx.A-6 complaint which has led to C.C.No.218/2016 on the file of the Judicial First Class Magistrate Court, Koothattukulam, to the extent it has arrayed the petitioner as accused No.2 therein will stand quashed. It is made clear that the proceedings ::12::
Crl.M.C.No.4681 Of 2016 in Anx.A-6 complaint will continue as against the other accused persons in accordance with law.
With these observations and directions, the Crl.M.C stands finally disposed of.
ALEXANDER THOMAS, Judge.
bkn/-