Calcutta High Court
Dilip Kumar Jaiswal vs Debapriya Banerjee on 14 March, 1991
Equivalent citations: [1992]73COMPCAS434(CAL), 96CWN90
JUDGMENT Mallick, J.
1. The petitioner who is accused No. 2 in the Case No. C/374 of 1989 under Section 138 of the Negotiable Instruments Act, 1881, as amended by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988, now pending before the learned Metropolitan Magistrate, 5th Court, Calcutta, has moved this court under Section 401, read with Section 482, of the Criminal Procedure Code, 1973, for quashing the said proceeding against him on the following allegations. On November 15, 1989, the opposite party being the Director (Commercial) of M/s. T. S. Foundry Equipment Pvt. Ltd. having its registered office at 2, Ganesh Chandra Avenue, filed a petition of complaint before the learned Additional Chief Metropolitan Magistrate, Calcutta, charging the petitioner with an offence punishable under Section 138, as amended by the Banking. Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988. In the aforesaid complaint, it was, inter alia, alleged-
"That accused No. 1, Dilip Jaiswal, who is the director of M/s. Hisco Steel Pvt. Ltd., accused No. 1, on behalf of his company placed an order on February 5, 1989, to the complainant's company for supplying various sizes of moulding boxes. Pursuant to the aforesaid order, the complainant's company, on two different dates, supplied a total of 45 numbers of moulding boxes to accused No. 1, under proper receipts on September 12 and 13, 1989. Thereafter, the complainant's company submitted two bills, one for Rs. 46,582.50 and another for Rs. 1,06,665.60 when, on October 12, 1989, accused No. 2, on behalf of his company, accused No. 1, issued a cheque in favour of the complainant's company towards the payment for the cost of the said articles. On the same day, accused No. 2 as the managing director of Hotel Hindusthan International, by a letter dated October 12, 1989, guaranteed the payment of the dues of the complainant's company amounting to Rs. 1,52,648.10 and issued a post-dated cheque for Rs. 1,52,648.10, on consideration that the said cheque be presented for encashment in the event the earlier cheque 'dated October 12, 1989, was dishonoured for any reason. The complainant presented the cheque dated October 12, 1989, to the banker for encashment. On October 17, 1989, the bank returned the said cheque unpaid with an endorsement "exceeds arrangement." Thereafter the complainant presented the cheque dated October 23, 1989, to the banker for encashment and the said cheque was also returned unpaid with an endorsement "payment stopped by drawer". It was further alleged that in the meantime, the accused company, by letter No. Hisco/Works/MK/89 dated October 14, 1989, written by the factory manager of accused No. 1 (HISCO), informed the complainant-company that those 45 numbers of moulding boxes were rejected and advised the complainant to collect the same within 48 hours from the date of receipt of the letter. The said letter was received by the complainant on October 19, 1989. The complainant's company by letter No. GEN/H-2/89-90/471, dated October 25, 1989, denied and disputed all the allegations made in the aforesaid letter. The complainant, by tetter No. TSF/HISCO/89 90, dated November 25, 1989, sent to the factory at 68, Jessore Road, Calcutta-55, as well as to the head office of the accused at 8, Rajendra Deb Road, Calcutta 700 007, under registered post with acknowledgment due in writing for the payment of the aforesaid dues of Rs. 1,52,648.10 being the unpaid price of 45 numbers of moulding boxes sold to the accused, within 15 days from the date of receipt of the said notice and were duly received by the accused. It is further alleged that both the accused despite the receipt of the aforesaid notice of demand dated October 25, 1989, failed and neglected to pay the said sum of Rs. 1.52,648.10 to the complainant's company within the stipulated time."
3. The learned Additional Chief Metropolitan Magistrate, on November 25, 1989, took cognizance of the offence and made over the case to the Metropolitan Magistrate, 5th Court, Calcutta, for enquiry and trial under Section 192, Criminal Procedure Code. On that date, the learned Metropolitan Magistrate, 5th Court, Calcutta, examined the complainant on oath and issued summons against the petitioner and Hisco Steel Pvt. Ltd., directing them to appear in court under Section 138 of the Negotiable Instruments Act, 1881. as amended by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988, and face the trial. The petitioner contends that the impugned prosecution against the petitioner as well as against Hisco Steel Pvt. Ltd. is wholly misconceived, that as the goods supplied by the company to the opposite party being defective and having been rejected, there could be no liability on the petitioner company to pay for the aforesaid sub-standard articles and consequently the dishonour of the cheque to pay for the said goods does not amount to an offence under Section 138 of the Negotiable Instruments Act. It is also submitted that, in any event, the prosecution of the petitioner under Section 138 of the Negotiable Instruments Act is wholly illegal inasmuch as, prior to the lodging of the complaint, no notice of demand was served upon him. It is, therefore, prayed that the Case No. C/374/89 be quashed.
4. The revision petition is opposed by the opposite party. It is submitted that the goods that were supplied were not of sub-standard quality, that no such complaint within thirty days of the receipt of the goods was ever made, that the impugned cheque was to be effective only after one month from the date of supply of the goods and that, admittedly, the cheque issued by Hisco Steel Pvt. Ltd. of which petitioner No. 2 being the director who was in charge of the company and issued the cheque on behalf of the company, was dishonoured by the bank on October 16, 1989, on the ground "exceeds arrangement" and this fact brings the case of the opposite party within the purview of Section 138 of the Negotiable Instruments Act, that notice as contemplated under Section 138 of the Act was duly served upon Hisco Steel Pvt. Ltd., that the petitioner being the director in charge being prosecuted along with the above company under Section 141 of the Negotiable Instruments Act and, consequently, there is no infirmity in the prosecution at the present stage for this court to interfere and to quash the proceeding.
5. It is revealed from the petition as well as from the copy of the petition of complaint lodged by the opposite party against the petitioner and Hisco Steel Pvt. Ltd. under Section 138 of the Negotiable Instruments Act that it appears that the present prosecution is for dishonour of cheque No. 598816 dated October 12, 1989, for Rs. 1,52,648.10. On October 16, 1989, with the endorsement of the bank "exceeds arrangement", it is also revealed from the record that a notice under registered post as contemplated under Section 138 of the Act dated October 25, 1989, was served upon M/s. Hisco Steel Pvt. Ltd. demanding payment of the amount of the cheque so dishonoured within 15 days from the date of service of the said notice. As no payment was made, the present prosecution was launched. In order to appreciate the contentions raised by the parties, it is necessary to reproduce Section 138 of the Negotiable Instruments Act. It is as follows :
"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 the amount of money standing to the credit of that account is insufficient to honour the cheque or it exceeds the amount arranged to be paid from that account by an agreement made with the 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 :
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 fifteen 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."
6. At the present stage on perusing the documents produced, we are prima facie satisfied that the cheque in question was dishonoured for insufficiency of funds in the account of the concerned limited company. On behalf of the petitioner, Mr. Balai Chandra Roy urged that the letters annexed to the petition would indicate that the liability for payment was not there as the goods were rejected and the opposite party was directed to take back the goods. On behalf of the opposite party, it is submitted that the same was done subsequent to the dishonour of the cheque and as a fraudulent motive to avoid prosecution under the Act, that the goods were not rejected within the period of one month of the date of supply and, therefore, at the present moment, it cannot be said prima facie that the company which is being prosecuted did not have the liability for which the cheque was issued and dishonoured. On considering the submissions made by learned advocates for both the parties, we are of the view that, at the present moment and without proper evidence been taken by the learned trial judge, it cannot be held at this stage that the accused company did not have liability for which the cheque was issued and admittedly dishonoured for insufficiency of funds in the accounts of the company. Therefore, the opposite party produced sufficient prima facie material to issue process. The first contention of the petitioner fails. The second contention of the petitioner is that the present petitioner was not served with a notice as contemplated under proviso (b) to Section 138 of the Negotiable Instruments Act, Proviso (b) to Section 138 of the Negotiable Instruments Act states that nothing in Section 138 shall apply unless 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 fifteen days of the receipt of the information by him from the bank regarding the return of the cheque as unpaid. It is contended on behalf of the petitioner that even though a notice was issued upon Hisco Steel Pvt. Ltd., no such notice was served upon the present petitioner and consequently the prosecution against the present petitioner under Section 138 of the Negotiable Instruments Act is not maintainable and the proceeding, so far as the petitioner is concerned, is liable to be quashed.
7. On behalf of the opposite party, it is submitted that the offence under Section 138 under the Negotiable Instruments Act was committed by the limited company and, therefore, the limited company was served with the notice as contemplated by proviso (b) to Section 138 of the Act, that the petitioner being the director-in-charge of the said company is being prosecuted along with the company in view of Section 141 of the Act and that under the Negotiable Instruments Act, for such a person who is being prosecuted under Section 141 of the Act along with the limited company who is alleged to have committed the offence, no separate notice is required to be given and, therefore, even if such a notice was not given to the petitioner, he can be prosecuted under Section 138 read with Section 141 of the Negotiable Instruments Act.
8. On a clear perusal of Clause (b) of the proviso to Section 138, we are of the view that, before instituting criminal proceedings under Section 138 of the Negotiable Instruments Act, the payee or the holder in due course of the cheque, as the case may be, has to make a demand for payment of the said amount of money by giving a notice in writing to the drawer of the cheque. Mr. Balai Roy submits that, in this particular case, the petitioner having signed the cheque was the drawer of the cheque. Therefore, a notice under the proviso was required to be given to him.
9. The expression "drawer of the cheque" has been defined in Section 7 of the Negotiable Instruments Act as follows :
"The maker of a bill of exchange or cheque is called the drawer."
10. Now, the question to be decided is as to who is the maker of the cheque in this particular case. The liability to make the payment to the present opposite party was that of Hisco Steel Pvt. Ltd. The cheque that was signed by the petitioner was issued by him for Hisco Steel Pvt. Ltd. as director. Therefore, the liability to make the payment being that of the limited company, it was the limited company which was the drawer of the cheque and not the petitioner who is one of its directors. The petitioner being, at the time of the issuing of the cheque, in charge of the business of the company he has issued the cheque for and on behalf of the limited company. Therefore, it was a cheque issued by the limited company and a limited company has to act through its instrumentality such as a director or a secretary or any other principal officer. The petitioner as. director signed that cheque. But that would not make him the maker of the cheque and the limited company in question must be held to be the maker of the cheque. The opposite party seeks to prosecute the present petitioner along with the company under Section 141 of the Act which reads as follows :.
"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.
(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 the 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."
11. We are of the view that the contention of the opposite party is correct. In the petition of complaint, the present petitioner being the director is being prosecuted under Section 141 of the Act along with the company. Therefore, we are unable to accept the submission of Mr. Roy that a separate notice upon the petitioner-director is required to be given under proviso (b) to Section 138 of the Negotiable Instruments Act for prosecuting him along with the company for the offence alleged to have been committed by the company under Section 138 of the Negotiable Instruments Act. In the result, we are unable to hold that there is any ground for this court to quash the proceeding even against the present petitioner. In the result, the revision petition fails.
Roy, J.
12. I agree.