Cri. Rev. No. 532 of 1999,Cri. Rev. No. 533 of 1999

20th July, 2000

Petitioner Counsel: Shri. AMIT VERMA
Other Counsel: Shri. N. K. MODI

Cases Cited:
Smt. Sharda Agarwal Vs. Addl. Chief Metropolitan Magistrate II, Kanpur, 1992 Cri. L.J. 1442 [Para 6,13]
M/s. Nakoda Laminators Vs. Sate of Rajasthan & Anr., 1998 Cr. L.J. 3525 [Para 6,13]
Rajkumar Mangla Vs. M/s. Indo-Lowenbrau Breweries Ltd., 1998 Cr. L.J. 332 [Para 6,13]
Mahendra Pratap Singh Ratra Vs. M/s. N. K. Metals, 1998 Cr. L.J. 4383 [Para 6,13]
Nucor Wires Ltd. Vs. HMT International, 1998 ISJ (Banking) 202 [Para 6,13]
B. Lakshmi Vs. Trishul Coal Service, 1998 ISJ (Banking) 123 [Para 6,13]
M. Inbarajan Vs. Baladhandapani, 1999 Cr. L.J. 75 [Para 6,13]
Sheoratan Agarwal Vs. State of M.P., (1984) 4 SCC 352 [Para 7,14]
Voltas Limited Vs. Hiralal Agarwalla, 1991(1) Cri. L.J. 609 [Para 7,15]
Iqbal Vs. Uthaman, 1994 (II) Crimes 72 [Para 7,16]
Montari Industries Ltd. Vs. State of Gujrat, 1998 Cr. L.J. 10 [Para 7,17]
K. M. Mathew Vs. State of Kerala, 1992 (I) M.P.W.N. Note 30 [Para 7,8]
Amarnath Vs. State of Haryana, AIR 1977 SC 2185 [Para 8]

JUDGMENT

JUDGMENT :- This order will also govern the disposal of Criminal Revision No. 533 of 1999 which is between the same parties involving common questions of law and fact.

2. Applicant/accused No. 1 is a limited Company. Applicant/accused No. 2 is its Managing Director. Applicants/accused Nos. 3 to 13 are other Directors of this Company. Applicants/accused Nos. 14 and 15 are its General Manager (Finance) and General Manager Procurement and Public Relations respectively.

3. Applicant Company had business dealings with the non-applicant Company. It used to purchase yarn from the non-applicant for manufacturing denim. On 3-4-1998, non-applicant Company filed a complaint under Section 138 of the Negotiable Instruments Act alleging that the cheque issued by applicant No. 2 for and on behalf of applicant No. 1 was dishonoured by the Bank and returned with the remark that the amount standing to the credit of the Company was insufficient. It was alleged that the non-applicant Company (hereinafter called 'the Complainant') sent registered notice dated 14-2-1998 to all the applicants/accused (hereinafter called the accused) informing them about the return of the cheque unpaid, and demanding payment. But the notice went unheeded.

4. After recording the statement of the Complainant under Section 200 Cr.P.C., the Additional Chief Judicial Magistrate passed an order registering the case under Section 138 of the Negotiable Instruments Act against accused Nos. I and 2 alone, observing that the remaining accused Nos. 3 to 15 were not shown to be in charge of and responsible to the Company for the conduct of its business.

5. This order was challenged by the Complainant before the Additional Sessions Judge, Bhopal who allowed the revision and directed that the case be registered against accused Nos. 3 to 15 also under Section 138 of the Negotiable Instruments Act. Against this order of the learned Additional Sessions Judge, Bhopal the accused filed a petition before the High Court under Section 482, Cr.P.C. for quashing the complaint and the order of the Additional C.J.M. for summoning the accused, and also for quashing the order of the Additional Sessions Judge. This petition was later permitted to be withdrawn with liberty of filing revision against the order of the Additional Sessions Judge dated 3-8-1998. Thereafter the accused persons filed this revision petition challenging the order of the Additional Sessions Judge.

6. It is urged on behalf of the accused that the complaint as well as the statement under Section 200 Cr.P.C. and the entire material before the Lower Court, do not contain any averments or allegations that accused Nos. 3 to 15 were looking after or were responsible for the conduct of business of the accused Company. Even if the Complainant's case is accepted in its entirety, it does not disclose that the accused Nos. 3 to 15 are in any way connected with the day-to-day business of the Company so as to constitute an offence under Section 138 of the Negotiable Instruments Act. Reliance was placed on the following cases:-

(1) Smt. Sharda Agarwal and others Vs. Additional Chief Metropolitan Magistrate II, Kanpur and another (1992 Cr.LJ. 1442).

(2) M/s. Nakoda Laminators and others Vs. State of Rajasthan and another (1998 Cr.LJ. 3525).

(3) Rajkumar Mangla Vs. M/s. Indo-Lowenbrau Breweries Limited (1998 Cr.LJ. 332).

(4) Mahendra Pratap Singh Ratra and another Vs. M/s. N.K. Metals and another (1998 Cr.LJ. 4383).

(5) Nucor Wires Ltd. Vs. HMT International (1998 ISJ (Banking) 202).

(6) B. Lakshmi Vs. Trishul Coal Service (1998 ISJ (Banking) 123).

(7) M. Inbarajan and another Vs. Baladhandapani (1999 Cr.LJ. 75).

7. The learned counsel for the complainant challenged the maintainability of the revision petition contending that the impugned order was of interlocutory nature against which a revision does not lie. It was also urged that accused Nos. 3 to 13 are Directors of the accused Company and accused Nos. 14 and 15 are General Manager (Finance) and General Manager Procurement and Public Relations respectively. They are responsible officers of the Company to whom notices were duly served informing them about the dishonour of the cheque and demanding payment, as required under Section 141 of the Negotiable Instruments Act. But they did not bother to take any action in this regard. These averments have clearly been made in the complaint as well as the statement under Section 200 Cr.P.C. There was therefore sufficient ground for issuing process against them all. In support of his contentions the learned counsel relied on the following cases :-

(i) Sheoratan Agarwal and another Vs. State of M.P. (1984) 4 SCC 352).

(ii) Voltas Limited and others Vs. Hiralal Agarwalla and others [1991 (1) Cr.LJ. 609].

(iii) Iqbal Vs. Uthaman [1994 (II) Crimes 72].

(iv) Montari Industries Ltd. and others Vs. State of Gujrat and others (1998 Cr.LJ. 10)

(v) K.M. Mathew Vs. State of Kerala [1992 (1) M.P.W.N. Note 30).

8. We will take up the question of maintainability of the revision petition at the outset. Section 397 (2) Cr.P.C. bars a revision against interlocutory order passed in any appeal, inquiry, trial or other proceeding. The question which arises is as to what is the connotation of the term "interlocutory order" appearing in Section 397 (2) Cr.P.C. This question arose in Amarnath and others Vs. State of Haryana (AIR 1977 SC 2185). The Court observed thus-

"It seems to us that the term "interlocutory order" in Section 397 (2) of the 1973 Code has been used in a restricted sense and not in any broad or artistic sense. It merely denotes orders of a purely interim or temporary nature which do not decide or touch the important rights or the liabilities of the parties. Any order which substantially affects the rights of the accused or decides certain rights of the parties cannot be said to be an interlocutory order so as to bar a revision to the High Court against that order, because that would be against the very object which formed the basis for insertion of this particular provision in Section 397 of the 1973 Code. Thus, for instance, orders summoning witnesses, adjourning cases, passing orders for bail, calling for reports and such other steps in aid of the pending proceeding, may no doubt amount to interlocutory orders against which no revision would lie under Section 397 (2) of the 1973 Code. But orders which are matters of moment and which affect or adjudicate the rights of the accused or a particular aspect of the trial cannot be said to be interlocutory order so as to be outside the purview of the revisional jurisdiction of the High Court."

9. Applying the above test we are satisfied that the impugned order was one which was a matter of moment and which involved a decision regarding the rights of accused/applicants 3 to 15. It is no comfortable thought for these applicants to be told that they could appear before the Magistrate to face the trial, whether or not the complaint and the preliminary evidence recorded make out a case against them. Valuable rights of the accused are clearly involved in the impugned order directing the trial Court to register the complaint against accused Nos. 3 to 15 and to proceed against them also. The revision petition is, therefore maintainable against this order.

10. The learned counsel for the complainant referred to K.M. Mathew Vs. State of Kerala (1992 (1) M.P.W.N. Note 30) in support of his contention that the order issuing process was an interlocutory order against which a revision does not lie. This argument is misconceived. The question which arose in that case was whether a Magistrate after taking cognizance of an offence and issuing a process in a summons case had the power to drop the proceedings, against the accused. The High Court took the view that the Magistrate had no such power and he was bound to proceed with the trial. There was no question of discharging the accused at an intermediate stage or dropping the proceedings against any accused. It was in this context that the Apex Court observed that the order issuing the process is an interim order and not a judgment and it could be varied or recalled. What was held was that since it was not a final order of the nature of a judgment, the Magistrate could exercise his judicial discretion to recall his order and to drop the proceedings. Here the expression "interim order" has been used in a broad sense and not in a restricted sense in which "interlocutory order" has to be read under Section 397 (2) of the Code.

11. This brings us to the question whether accused/applicants Nos. 3 to 15 can be proceeded against under Section 138 of the Negotiable Instruments Act (hereinafter called 'the Act') in a case against the accused Company. On this point it is necessary to look into Section 141 of the Act which reads as under:-

"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 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."

12. Sub-section (1) of Section 141 of the Act clearly provides that every person who 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 guilty of the offence mentioned above. It does not say that all the Directors or Officers of the company shall be deemed to be guilty of the offence under Section 138 of the Act. It only confines itself to the person "in charge of" and responsible to the company for the conduct of the business. The position becomes more clear from sub-section (2) of Section 141 of the Act which lays down that those Directors and other Officers of the company who may not be responsible for the conduct of business of the company, would be liable if the offence is committed with their consent or connivance or neglect.

13. In the instant case the cheque was issued by accused No. 2 who is the Managing Director of the company. The offence under Section 138 of the Act is therefore prima facie committed by the accused company as well as accused No. 2. So far as the other accused persons are concerned, there were no averments or allegations that they were responsible for the conduct of business of the company. It was not alleged that any of them was in charge of the company. There is no allegation at all that the offence was committed with their consent or connivance. From the facts emerging out of the complaint it cannot be said that accused/applicant Nos. 3 to 15 had anything to do with the bouncing of the cheque. There was thus no ground to proceed against them under Section 138 of the Act. We are fortified in our view by 1992 Cr.LJ. 1442, 1998 Cr.LJ. 3525, 1998 Cr.LJ. 332,1998 Cr.LJ. 4383,1998 ISJ (Banking) 202 and 1998 ISJ (Banking) 123 and 1999 Cr.LJ. 75, which are all squarely on point.

14. The learned counsel for the complainant has cited Sheoratan Agarwal and another Vs. State of Madhya Pradesh [(1984) 4 SCC 352]. This was a case under Section 10 of the Essential Commodities Act in which a complaint was filed against the Managing Director and the Production Manager of the Company for violations of Clauses 2 (c) (i) and 3 of the Madhya Pradesh Pulses, Edible Oil Seeds and Edible Oil Dealers Licensing Order, 1977 and Clause 3 of the Madhya Pradesh Essential Commodities (Price Exhibition and Price Control) Order, 1977 read with Sections 3 and 7 of the Essential Commodities Act. The accused /petitioner moved the High Court for quashing the proceedings against them on the ground that they could not be prosecuted unless the company itself was prosecuted. This contention was overruled by the High Court and the Supreme Court maintained that order holding that there was nothing in Section 10 of the Essential Commodities Act which bars such proceedings. This case obviously has no application to the facts before us.

15. Voltas Limited and others Vs. Hiralal Agarwalla and others (1991 Cr.LJ. 609) relied by the complainant is distinguishable because in the complaint filed in that case, there were allegations that all the accused/petitioners were and are in charge of and responsible for the day-to-day conduct of the business of the company. It was in these circumstances that existence of prima facie case was found against the accused/petitioner and the application was rejected.

16. Iqbal Vs. Uthaman (1994 (II) Crimes 72) also is distinguishable on facts. The cheque which was dishonoured was issued by the petitioner who was the Managing Director of the Company and all the ingredients of the offence could be made out from the complaint filed in that case.

17. Montari Industries Ltd. and others Vs. State of Gujrat and others (1998 Cr.LJ. 10) which has been cited by the complainant does not help him either. The observations made in Paragraph 14 of the judgment that the Director would be liable and no express allegations are required to be made against him, have to be read in the correct perspective. In this case, the cheques which were dishonoured were issued by this very Director for and on behalf of the Corporate body. It was under these circumstances that the primary liability of the Director was held by the Court. But this liability too was held to be "subject to effective participation, knowledge etc".

18. For the foregoing reasons we are of the view that in the absence of any allegations in the complaint that the applicants/ accused Nos. 3 to 15 were in charge of or responsible for the conduct of the business of the accused company in view of Sections 138 and 141 of the Act, the complainant was not entitled to initiate prosecution against them. The order of the learned Addl. Chief Judicial Magistrate dated 4-5-98 was correct and ought not to have been interfered with. The impugned order dated 3-8-1998 passed by the Additional Sessions Judge, Bhopal is therefore set aside and that of the Additional Chief Judicial Magistrate is hereby restored.

Criminal Revisions allowed.