Cri. P. No. 1497 of 1988

21st July, 1998

Petitioner Counsel: M/s. P. KAMALAKER, C. DAMODAR REDDY, G. PEDDABABU and Public Prosecutor, Counsel for the appearing parties.

Cases Cited:
1998(3) Scale 383 [Para 9]
AIR 1983 SC 67 [Para 13]
1998 Cr. LJ 22 [Para 14]

JUDGMENT

JUDGMENT :- The question raised for consideration in all these criminal petitions is one and the same, except the names of the respondents and the cheque numbers and the amount involved therein. As such these petitions are heard together and are being disposed of by this common order. For the sake of convenience, the facts in criminal Petition No. 1497 of 1998 are taken into consideration for disposal of these petitions.

2. Criminal Petition No. 1497 of 1998 is an application filed under Section 482 of the Code of Criminal Procedure, 1973 (for short 'the Code') to quash the proceedings in CC No. 145 of 1997 on the file of the Munsif Magistrate, Chilakaluripeta, Guntur District. Accused Nos. 5, 6 and 7 are the petitioners herein and the first respondent is the complainant.

3. The allegations made in the complaint, inter alia are as follows :

The complainant, who is the first respondent herein is doing business in cotton having principal place of business at Chilakaluripeta. Accused No.2 is the General Manager, Accused No.3 is the Chairman and Accused Nos. 4 to 7 are the Directors of A1 company. The first respondent/complainant had supplied cotton bales worth about Rs.1,90,28,877-98 (Rs. One crore ninety lakh, twenty eight thousand eight hundred seventy seven and ninety eight paise only) from 10-4-1995 onwards for which A1 company had maintained Khata, made part payments and also issued cheques towards part payments. As on 12-3-1997 A1 company has to pay an amount of Rs. 63,32,702.20 (Rs. Sixty three lakh, thirty two thousand seven hundred and two and paise twenty only) as per the Khata of the first respondent-complainant firm. However, A1 company had issued cheques for Rs. 13,96,000/- (Rs. Thirteen lakh ninety six thousand only) towards part payment of Khata and the first respondent/complainant presented the aid cheques through their Bankers Indian Bank, Chilakaluripet. The first respondent/complainant had presented one cheque for Rs. 2,00,000/- on 28-11-1996 and on 29-2-1997 he accordingly informed the same to A1. Likewise, the first respondent/complainant had presented three cheques dated 21-11-1996; 19-12-1996 and 26-12-1996 for Rs. 1,50,000/-; Rs.1,75,000/- and Rs. 1,71,000/- respectively on 20-2-1997 and accordingly informed the same to the A1 company. Likewise the first respondent/complainant had also presented another four cheques dated 5-12-1996; 12-12-1996; 2-1-1997 and 3-3-1997 for a sum of Rs. 2,00,000/-; Rs. 2,00,000/-; Rs. 1,50,000/- and Rs. 1,50,000/- respectively and informed the same to A1 company. The A1 company failed to honour the said cheques and returned all the cheques as "exceeds arrangements". It is alleged by the first respondent/complainant that A1 company knowing fully well that there are no funds with their bankers, in their account, issued the cheques and also informed the first respondent/complainant to present the cheques and made the first respondent/complainant to believe that all the cheques will be honoured, as if A1-company had cash in the Bank. The first respondent/complainant presented the cheques believing A1-company; but, the cheques were dishonoured due to non-availability of funds. As such the bankers of the first respondent/complainant had returned all the cheques to the first respondent/complainant on 10-3-1997. Immediately, the complainant got issued a legal notice on 15-3-1997 demanding A1 company to pay the due amount immediately. A1-company having received the same got issued a reply notice admitting issuance of cheques for Rs. 13,96,000/- and requested time for payment of the amount through its Law Officer.

4. It is further alleged that A2 to A7 are fully aware of the business transactions of A1-company and all of them are jointly and severally liable for the transaction of A1-company, as they are fully aware of the issuance of cheques without balance in the account. They are also aware that the cheques would be dishonoured. It is further alleged that all the accused with an intention to deceive and defraud the first respondent/complainant had issued the cheques and directed the first respondent/complainant to present the cheques on different occasions. Though the first respondent/complainant had presented the said cheques at the request of the accused, the accused did not choose to honour them. The accused by way of reply notice requested the first respondent/complainant to permit them to pay the amount in four instalments with an intention to deceive and defraud the first respondent/complainant and make the cheques barred by limitation.

5. In this application to quash the proceedings, the petitioners/A5, A6 and A7 contend that they were not in charge of, and were responsible to the company for the conduct of the business of the company and, therefore, they have not committed any offence whatsoever and are not liable to be proceeded against under Section 138 of the Negotiable Instruments Act, 1881 (fort short 'the Act'). It is their case that the two accused, N. Thiagarajan is the Director-cum-General Manager and was incharge and was responsible to the company for the conduct of the business of the company and issued cheques on behalf of the company. The complaint ought to have been filed only against A1 and A2 viz., the company and N. Thiagarajan, Director-cum-General Manner of the A1 company. The allegations made against the petitioners do not constitute any offence and they cannot be proceeded against them.

6. Sri E. Manohar, learned senior Counsel appearing on behalf of the petitioners-accused submits that the complaint filed against the petitioners/accused under Section 138 of the Act is not maintainable and in any way the petitioners/accused could be made responsible for the offences, if any, may have been committed by the company under Section 138 of the Act.

7. Sri C. Padmanabha Reddy, learned senior counsel appearing for the petitioners in Cri. P. Nos. 1819, 1820 and 1823 of 1998 adopted the submissions made by Sri E. Manohar, learned senior Counsel and would further submit that the complaint as filed by the first respondent/complainant, is hit by Section 219 of the Code and accordingly the same is liable to be rejected.

8. The learned Counsel appearing on behalf of the first respondent-complainant submits that the case on hand falls under sub-section (2) of Section 141 and not under sub-section (1) of Section 141 of the act and, therefore, it is immaterial as to whether there is any allegation that the petitioners-accused were incharge and responsible to the company for the conduct of the business of the company.

9. There is no difficulty whatsoever to hold that the vicarious liability of a person for being prosecuted for an offence committed under Section 138 of the Act, by a company arises if at the material time he was incharge of and was responsible to the company for the conduct of its business. It is true that simply because a person is a director of the company it does not necessarily mean that he satisfies the twin requirements so as to make him liable for the offence committed by the company. The law is well settled. (See State of Haryana v. Brij Lal Mittal, 1998(3) Scale 383).

10. It is also true that there is no allegation in the complaint whatsoever alleging that the petitioners herein were incharge of and were responsible to the company for the conduct of the business of the Company. It may be noticed that the petitioners herein are not being prosecuted by the first respondent/complainant on the ground that they were incharge of and were responsible for the conduct of the business of the company. It is the specific case of the first respondent/complainant that the petitioners herein are fully aware of the business transaction of the A1 firm and were also aware of the issuance of the cheques knowing fully well that the cheques would be dishonoured. It is the case of the first respondent/complainant that all the accused with an intention to deceive and defraud the first respondent/complainant issued the cheques and directed the first respondent/complainant to present them on different occasions. It is here that sub-section (2) of Section 141 of the Act would be relevant and it may be noticed :

S. 141. Offences by companies :

(1) ..............

Provided ........

(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.

11. A bare reading of sub-section (2) of Section 141 of the Act would make it clear that where the offence 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 or officer of the company they shall also be deemed to be guilty of that offence and shall be liable to be proceeded against. The offence alleged to have been committed by the company whether it is attributable to or whether it is on account of any neglect on the part of any director, the manager or other officer of the company, is a question of fact. The same can be proved and established only during the inquiry and trial. But the immediate question that would arise for consideration is as to whether there is any such allegation in the complaint which would attract the ingredients of sub-section (2) of Section 141. In my considered opinion, clear and unambiguous allegations are levelled against the petitioners herein by the first respondent/complainant about their connivance and neglect in the offence committed by A1 company. The offence alleged to have been committed by A1 company is clearly attributed to the petitioners herein. There is absolutely no ambiguity whatsoever insofar as it relates to making of allegations in the complaint. But whether the first respondent-complainant would be in a position to prove the same as against the petitioners is a different aspect altogether and the Court cannot express any opinion about the same at this point of time. Therefore, the present case falls under sub-section (2) of Section 141 of the Act. The complaint cannot be quashed on the ground that there is no allegation that the petitioners were not incharge and were not responsible to the company for the conduct of its business.

12. It is, however, urged by learned senior Counsel, Sri E. Manohar that sub-section (2) of Section 141 would be attracted only after 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 the petitioners. According to the learned senior Counsel, the petitioners ought not to have been added as accused and criminal law should not have been set in motion against them at this stage. Learned senior Counsel laid emphasis on the expression "......it is proved that the offence has been committed ....." used in sub-section (2) of Section 141 of the Act. It is not possible to accede to the submission made by the learned senior Counsel and it does not merit any consideration. The question of proof does not arise without there being any allegation and charge. Proof cannot be in vacuum. Distinct allegation/charge, as the case may be, is the basic requirement before leading evidence for proving the commission of an offence. No allegation can be made against any person without impleading or arraying them as accused in a complaint. The question of proof would arise only after trial and inquiry. The construction of sub-section (2) of Section 141 sought to be placed by the learned senior Counsel is totally unacceptable.

13. Learned Senior counsel for the petitioners placed reliance upon a decision of the Supreme Court in Municipal Corporation of Delhi v. Ram Kishan Rohtagi, AIR 1983 SC 67. In the said decision, the Supreme Court referred to Section 319 of the Code dealing with the power to proceed against other person appearing to be guilty of offences and observed that the said provision gives ample powers to any Court to take cognizance and add any person not being an accused before it and try him along with the other accused, I fail to appreciate as to how the said judgment would support the contention of the learned senior Counsel. It is urged that during the course of inquiry and trial if there is any evidence against the petitioners, they could be tried along with A1, Company and A2, the General Manager. In my considered opinion, the aforesaid judgment does not support the case of the petitioners. The Supreme Court in the said judgment as an abundant caution observed that the prosecution can at any stage produce evidence which satisfies the Court that the other accused or those who have not been arrayed as accused or against whom proceedings have been quashed have also committed the offence, the Court can take cognizance against them and try them along with the other accused. The observations of the Apex Court are required to be understood in the background of the set of facts for which such observation was made. The Apex Court has gone to the extent of saying that even after quashing of the proceedings against the accused, if it is revealed during the course of inquiry and trial that even those accused against whom the proceedings are quashed are liable to be proceeded against, the Court can take cognizance against even such persons. It does not mean that the proceedings are to be quashed first and cognizance can be taken only after it is proved that the petitioners are also guilty of the offence. As already expressed, in my considered opinion, the case on hand clearly falls under sub-section (2) of Section 141 and the complaint satisfies the ingredients stated therein.

14. The submission made by the learned senior Counsel that the complaint is hit by Section 219 of the Code has also no substance. It is clearly stated in the complaint that the complainant presented one cheque dated 28-11-1996 on 29-2-1997 and informed the same to A1 company. Likewise, three cheques dated 21-11-1996; 19-12-1996 and 26-12-1996 were presented on 26-2-1997 and informed the same to A1. Likewise another four cheques dated 5-12-1996; 12-12-1996; 2-1-1997 and 28-2-1997 were presented on 3-3-1997 and the same was also informed to A1. The cheques may be many, but they were presented only on three different occasions and the bankers of the first respondent/complainant returned the cheques to the first respondent/complainant on 10-3-1997. The cheques were presented on three different occasions at the request of the petitioners and at any rate, the petitioners were accordingly informed. In my considered opinion the offence alleged to have been committed by the accused is in respect of a single transaction, but not in respect of different transactions. It may be noticed that though the different cheques issued by the accused were dishonoured, there was only one notice issued on behalf of the first respondent/complainant and replied by the petitioners/accused through only one reply notice. There was only one demand by the first respondent/complainant and one reply from A1 company. All the cheques were returned on only one day i.e., 10-3-1997. Therefore, the case on hand falls under Section 220 of the code. The facts of the case on hand are similar and the point raised is squarely covered by a decision of the Madras High Court in K. Govindaraj v. Aswhin Barai, 1998 Cr. LJ 22. In the said judgment it is held that :

"However, in the complaint the respondent/complainant would state that the accused required him to present all these six cheques together on 24-1-1992 and the complainant accordingly presented all the cheques together and they have been returned on the same date i.e. on 28-1-1992 with an endorsement "payment stopped". Therefore, each cheque will not give a separate cause of action in view of the request made by the petitioners/accused herein to present all the cheques on a particular date which was done by the respondent/complainant in this case and so Section 219(1) Cr.P.C. is not attracted to the facts of the present case for the simple reason that the petitioner/accused in this case advised or instructed the respondent/complainant to present all the cheques together on a single day i.e., on 24-1-1992 and all the cheques were together simultaneously presented and all the cheques were returned on 28-1-1992 simultaneously with an endorsement "payment stopped" and therefore the offence alleged to have been committed was in respect of single transaction and not in respect of different transactions.

Even otherwise Section 220(1) Cr.P.C. states that if one series of acts so connected together as to form the same transaction, more offences than one are committed by the same person, he may be charged with, and tried at one trial for every such offence. In the present case though the giving of six cheques by the petitioner/accused to the respondent/complainant may be on different dates but all those acts of giving these cheques were merged together to form the same transaction viz., the presentation of all these cheques together on one particular day as requested by the petitioner/accused herein. In other words even though different cheques were given on different dates, the presentation of all these cheques formed the same transaction on the instruction of the petitioner/accused herein given to the respondent/complainant. Further the demand was also made by the respondent/complainant on the dishonouring of the cheques by giving one lawyer's notice and not several demands made by the respondent/complainant for the payment of the dishonoured cheques."

15. Viewed from any angle. I do not find any merit in these criminal petitions and they are all accordingly dismissed.

16. The trial Court, however, shall proceed with the enquiry and trial strictly in accordance with law and uninfluenced by any of the observations made in this order, as such observations are confined only for the purpose of disposal of these petitions and they have no bearing whatsoever on the merits of the case.

Petitions dismissed