Andhra HC (Pre-Telangana)
M.P. Murthy vs Sri Sathyanarayana Reddy And Anr. on 5 June, 2002
Equivalent citations: 2002(2)ALT(CRI)291, [2004]119COMPCAS691(AP)
JUDGMENT Ch.S.R.K. Prasad, J.
1. The petitioner who is accused No. 2 in the case invokes the inherent powers vested in this court under Section 482 of the Criminal Procedure Code, 1973, to quash the proceedings initiated against him in C. C. No. 29 of 1998 on the file of the Munsif Magistrate, Badvel, on the ground that he ceased to be the chairman of the company by the date of issuance of the dishonoured cheque and he had nothing to do with the management of the day-to-day affairs of the company.
2. In support of the said plea, learned counsel for the petitioner relied on an unreported judgment of this court in Crl Petition No. 2300 of 1997, dated November 28, 1997, whereunder the proceedings initiated against him in C. C. No. 232 of 1997 on the file of the IV Metropolitan Magistrate, Hyderabad were quashed.
3. The petitioner who is A-2 in the case has only filed this criminal petition. Therefore, I confine myself in this order only in respect of A-2.
4. Learned counsel for the petitioner has drawn my attention to para. 2 of the complaint, which reads as follows :
"The accused approached the complainant to purchase shares of their company. The complainant purchased the same with a condition to pay Rs. 6 per each share after maturity, i.e., June 29, 1997. After calculating the value of each share at Rs. 6 per each share with the consult and consent of accused Nos. 1 and 5 to 11, the third and fourth accused on behalf of the first accused issued a cheque for Rs. 40,000, dated June 29, 1997, bearing No. 268540 to be drawn at State Bank of India, Hyderabad."
5. It is also contended by learned counsel for the petitioner that it is not averred in the complaint that the petitioner A-2 was consulted and his consent was obtained at the time of issuance of the cheque. The attempt made by the petitioner's counsel is to show that the actual date of issuance of the cheque and dishonouring of the same, are not mentioned in the complaint.
6. The learned Public Prosecutor on the other hand contends that it is not a fit case where the inherent powers of this court can be exercised.
7. Admittedly the date of issuance of the cheque is not mentioned in the complaint, but the cheque, the memos issued by the banks, the office copy of the legal notice, returned postal covers and acknowledgements were filed along with the complaint and shown in the list of documents filed along with the complaint. As can be seen from the record, the cheque was dishonoured on January 2, 1998, and the legal notice was issued on January 7, 1998, Therefore, so far as the dishonouring of the cheque is concerned, it has no bearing, as the petitioner A-2 is said to have resigned from the post of chairman of the company much prior to the issuance of the dishonoured cheque, i.e., on September 18, 1996, itself. The cheque was said to have been drawn on June 29, 1997, at State Bank of India, Hyderabad for Rs. 40,000. By then the petitioner A-2 was ceased to be the chairman as can be seen from the resignation letter.
8. Section 138 of the Negotiable Instruments Act, reads as follows :
"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 extent 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." Section 141 of the Negotiable Instruments Act reads as under :
"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."
9. Section 141 of the Act, therefore, clearly mentions that if the offence is 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, they are liable for the offence.
10. Therefore, it has to be seen in this case, as to whether the petitioner has been acting as a chairman at the time of issuance of the dishonoured cheque. The petitioner is said to have ceased to be the chairman of the company, much prior to the issuance of the dishonoured cheque, viz., on September 18, 1996, itself. In view of the same, it cannot be said that the petitioner was chairman of the company at the time of issuance of the dishonoured cheque. The averments made in para. 2 of the complaint show that only accused Nos. 1 and 5 to 12 were only consulted. The petitioner A-2's name is not mentioned. In the absence of the averments made, the liability cannot be fastened on the petitioner by invoking Section 141 of the Negotiable Instruments Act as it contemplates the consent and connivance on the part of the petitioner. There is no prima facie material available on record to attribute consent or connivance to the petitioner. Hence Section 141 of the Act has no application. Moreover, in a similar case filed against the petitioner A-2 this court by an order dated November 28, 1997, in Criminal Petition No. 2300 of 1997 quashed the proceedings against the petitioner in C. C. No. 232 of 1997 on the file of the IV Metropolitan Magistrate, Hyderabad. In para. 2 of the above order, this court observed as follows :
"The petitioner stated that he is only a honorary chairman and external director of A-1 company. He did not issued the cheque which was dishonoured. As a chairman he only attends the board meetings and advises on the policy matters. He has nothing to do with the day-to-day business of the company. As a matter of fact, he has resigned and conveyed the same by post on September 18, 1996. By the time of issuance of the dishonoured cheque as he was not at all the member of the board of A-1 company. Therefore, in his submission, a stray reference to him in the complaint does not attract the provisions of Section 138 of the Negotiable Instruments Act."
11. Similarly, in this case also, the provisions of Sections 138 and 141 of the Negotiable Instruments Act are not attracted. It is rightly contended by learned counsel for the petitioner that the proceedings initiated against the petitioner A-2 have to be quashed, as he is not the chairman at the time of issuance of the dishonoured cheque and he has nothing to do with the management of the day-to-day affairs of the company.
12. In so far as the trial other accused in the case is concerned, it shall go on.
13. The criminal petition is accordingly, allowed and the proceedings initiated against the petitioner in C. C. No. 29 of 1998 on the file of the Munsif Magistrate, Badvel is hereby quashed. However, the trial in so far as the other accused is concerned in this case shall go on.