Criminal Application No.6197 of 2013,Criminal Application Nos.6198-6200 of 2013

22nd April, 2014

Petitioner Counsel: Shri S.V. SURYAWANSHI, Shri C.V. BHADANE
Respondent Counsel: Shri N.B. SURYAWANSHI, Mrs. S.G. CHINCHOLKAR

Cases Cited:
Harshendra Kumar D. Vs. Rebatilata Koley & Ors., 2011 ALL MR (Cri) 955 (S.C.)=(2011) 3 SCC 351 [Para 8,9]
Laxmi Dyechem Vs. State of Gujarat & Ors., 2014 ALL MR (Cri) 721 (S.C.)=2013 AIR (SCW) 3468 [Para 9,13]

JUDGMENT

JUDGMENT :- The present criminal applications have been filed under Section 482 of the Code of Criminal Procedure against issue of process under Section 138 of the Negotiable Instruments Act, 1881. The parties are common and the process issued is being challenged on similar grounds. The matters have been argued together and thus, by this common judgment, the same are being disposed.

2. Rule. Rule made returnable forthwith. Heard finally with consent of counsel for both sides.

Criminal Application No.6197/2013 is arising out of issue of process in S.C.C. No.936/2011, pending before Judicial Magistrate, First Class, Shirpur, Taluka Shirpur, District Dhule.

Criminal Application No.6197/2013 is arising out of issue of process in S.C.C. No.936/2011, pending before Judicial Magistrate, First Class, Shirpur, Taluka Shirpur, District Dhule.

Criminal Application No.6199/2013 is arising out of issue of process in S.C.C. No.934/2011, pending before Judicial Magistrate, First Class, Shirpur, Taluka Shirpur, District Dhule.

Criminal Application No.6200/2011 is arising out of issue of process in S.C.C. No.933/2011, pending before Judicial Magistrate, First Class, Shirpur, Taluka Shirpur, District Dhule.

3. Respondent No.1- Garg Distilleries Private Ltd. (hereinafter referred to as complainant) has filed criminal cases against petitioner No.1 Gatrod Agro Bio-Fuels Private Ltd. (accused No.1) and applicant Nos.2 to 4) (accused Nos.2 to 4) (hereinafter referred to as accused).

4. For the convenience of reference, and unless mentioned otherwise, I will refer to the documents from the record of Criminal Application No.6197/2013.

5. The complaint under Section 138 of the Negotiable Instruments Act shows that the complainant Company filed the complaint claiming that accused No.1 Company was doing business of sale and purchase of Lead Ingots. Accused No.2 is Director/ Managing Director of accused No.1 Company and accused Nos.3 and 4 are authorised Directors of the accused No. 1 Company and that accused Nos.2 and 3 are incharge and responsible for day-to-day affairs. It is averred in the complaint that the accused No.1 Company, through its Managing Director purchased from the complainant Lead Ingots on credit. Earlier some amount was paid as part payment. Still, further amount is due from accused Nos.1 to 4. The amount due in the four complaints is a total of Rs.1,38,32,200/-. The complaints claim that, the accused No.2 himself and on behalf of accused No.1 executed agreement in favour of the complainant Company giving surety about the payment of the balance amount with interest and for the purpose, executed agreement as Managing Director of the Company and also on behalf of two other sister Companies. He also executed one agreement, taking personal liability to pay the amount. The agreements were executed on 5.11.2008 and notarised on 12.11.2008. At the time of executing the agreements, the accused No.2, Director/ Managing Director of accused No.1 issued four cheques as mentioned in the complaint, without date on behalf of the accused No.1 Company, duly signed and filled in by him as Director. The cheques were issued by accused No.2 for discharge of legal liability of accused No.1 towards the complainant. The complainant gave details of the cheques and the amounts. According to the complaints, accused No.2 as Director had given express authority and consent to the complainant to put the dates on the cheques as and when presented for encashment. When the dues were not cleared, complainant informed the accused that the complainant is going to present the four cheques for encashment in the middle of March 2011. Respective complaints refer to the cheques which were then presented in the Bank and how the cheques were returned on the ground that joint signatures are required and thus, were referred to drawer. The complaints give details as to issue of notice regarding dishonour of the cheques and non payment in spite of service of the notice. Complainant claimed that, the accused Nos.2 to 4 had knowledge that the cheques will not be honoured for want of joint signatures and still gave the cheques with dishonest intention to cheat the complainant when there was no balance in their Account. Thus, the complaints had been filed under section 138 of the Negotiable Instruments Act.

6. Against the orders of issue of process, present criminal applications have been filed. Learned counsel for the applicants in all these applications made common arguments. It has been argued for the applicants- accused that the cheques issued were not for legally enforceable debt. The cheques were returned as joint signature was not there. According to the learned counsel, Section 138 of Negotiable Instruments Act gets attracted only if the cheque is dishonoured for the reasons mentioned. Relevant part of Section 138 referred to by the counsel for applicants (as it now stands) is as under :

"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 provision 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." (Emphasis supplied)

7. Referring to the underlined portion, the learned counsel submitted that, if the cheque is returned either because 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, only in such two contingencies Section 138 would be attracted. It has been argued that the cheque was returned for want of joint signature with an endorsement of "Don't P.A." i.e. "Don't present again." Thus, it was argued that, there is no case made out under Section 138 of the Negotiable Instruments Act as the cheque was incomplete for want of joint signatures. It was then submitted that, in addition to the accused Nos.2 to 4, there was one more Director introduced on 15.1.2008 namely Kamalkishor Rathi. The said Mr. Rathi was not arrayed as accused in the complaint. The application claims that, said Kamalkishor is Director in about 13 Companies and influential person. Accused No.2 used to keep blank signed cheques of accused No.1 with Mr. Rathi to make daily expenses. Accused No.2 had signed some documents and on the asking of Mr. Rathi, accused No.2 signed on two documents which were later on notarised on 12.11.2008. It is claimed that, the accused No.2 was told by Mr. Rathi that he needs the same for some other purpose. (?) According to applications filed, Mr. Rathi is also Director of respondent No.1- complainant Company. The agreements got executed mention that there was supply of Lead Ingots and details of post dated cheques were also mentioned. As per the applicants- accused, transaction referred in the complaint and notarised agreement never took place. The alleged transaction does not reflect in the income tax returns and final accounts of the Company. It is claimed that, it cannot be said that cheques had been issued to discharge legal debt/ liability. Applicants-accused are trying to show that in 2007-2008, no legal Lead Ingots were imported. Apart from the criminal case filed, there is also Special Civil Suit No.135/2011 filed for recovery of the amounts. The contention of the applicants- accused is that the complainant misused the blank cheques and signed documents with the help of Mr. Rathi and continuing such proceedings would be abuse of the process.

8. Learned counsel relied on the case of Harshendra Kumar D. Vs. Rebatilata Koley & ors., reported in (2011) 3 SCC 351 : [2011 ALL MR (Cri) 955 (S.C.)] to submit that even at the stage of issue of process, this Court can look into the documents which are beyond suspicion and doubt and the defence being raised.

9. Per contra, learned counsel for respondent No.1- complainant submitted that the arguments that cheque was returned for want of joint signature, and so Section 138 is not attracted, is not tenable. The counsel relied on the case of Laxmi Dyechem Vs. State of Gujarat & ors., reported in 2013 AIR (SCW) 3468 : [2014 ALL MR (Cri) 721 (S.C.)] and submitted that the Hon'ble Supreme Court has considered the aspect regarding two contingencies mentioned in Section 138 and it has been held that, the material aspect is the dishonour of the cheque and reasons such as account is closed or payment stopped or refer to drawer are only species of the genus. According to the learned counsel, the arguments regarding how and why the agreement was executed and, whether the goods concerned were imported in the country or not, or transaction reflected in income tax returns or not, are aspects which are matter of evidence and raising such grounds, at present stage, the process issued cannot be quashed. According to the learned counsel, the documents being referred to by the applicants- accused in these applications are disputed documents and ratio in the matter of "Harshendra Kumar", [2011 ALL MR (Cri) 955 (S.C.)] (supra) is not applicable.

10. The applicants are referring to document Exhibit C (Page 64 in Criminal Application No.6197/2013) to claim that Mr. Kamalkishor Rathi was Director in the Company of applicants- accused as well as in the company of respondent No. 1- Complainant. However, the contention that, on the say of Mr. Rathi accused No.2 had signed the agreement, and the cheques is disputed by the counsel for respondent No.1- complainant. Merely by pointing out that there was a person who was common Director, at present it cannot be said that the process needs to be quashed. The document Exhibit C shows Mr. Rathi to be Director in as many as 13 Companies. The contents of the applications in para 5 claim that Mr. Rathi obtained signatures of accused No.2 on two documents which were later on notarised and that Mr. Rathi told accused No.2 that said agreement is just a draft and he needs it for "some other purpose" is surprising and I do not think that the documents being referred in the proceedings are of the nature which were referred, in the matter of Harshendra Kumar. In that matter, interalia material document was resignation of Director which was informed to the Registrar of Companies on 2.3.2004 while disputed cheque issued were of 30.4.2004. In that matter, the proceeding was filed against Director who had resigned prior to the offence allegedly committed by the Company. Para 20 of the judgment shows that the Company had informed Registrar of Companies in Form No.32 about the resignation from the post of Director of the Company and thus, change amongst Directors. The facts of that matter are clearly different.

11. In the present applications, the complaints clearly spell out that towards price of Lead Ingots amounts were due and for the purpose, cheques were given and agreements were executed. The defence raised in present applications by the accused with reference to Mr. Rathi and the further arguments that the transaction did not reflect in accounts or income tax returns are matters of evidence which cannot be gone into at present. It has been argued by learned counsel for respondent No.1 that, in the trial Court the matter is at the stage of evidence and affidavit of examination-in-chief has already been filed by the complainant.

12. The argument of the learned counsel for applicants that when the cheques had come back with endorsement that joint signature is required, it was incomplete cheque and so Section 138 would not get invoked, has no substance. It is rightly argued by learned counsel for respondent No.1 that the complainant did not know that joint signature would be required and the accused persons cannot avoid liability by issuing cheque with only one signature when joint signatures were required.

13. In the matter of "Laxmi Dyechem", [2014 ALL MR (Cri) 721 (S.C.)] (supra), the question regarding the two contingencies referred in Section 138 was considered. In para 7, it was observed as under:

"7. The question that falls for our determination is whether dishonour of a cheque would constitute an offence only in one of the two contingencies envisaged under Section 138 of the Act, which to the extent the same is relevant for our purposes reads as under :

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 provision of this Act, be punished with imprisonment of a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both."

14. The Hon'ble Supreme Court then considered various earlier authorities with reference to this aspect and Section 139 was considered which provides that it shall be presumed unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section 138, for the discharge, in whole or in part of any debt or other liability.

In para 15, Hon'ble Supreme Court held as under "

"15. The above line of decisions leaves no room for holding that the two contingencies envisaged under Section 138 of the Act must be interpreted strictly or literally. We find ourselves in respectful agreement with the decision in NEPC Micon Ltd. (supra) that the expression amount of money ...... is insufficient appearing in Section 138 of the Act is a genus and dishonour for reasons such as account closed, payment stopped, referred to the drawer are only species of that genus. Just as dishonour of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138, so also dishonour on the ground that the signatures do not match or that the image is not found, which too implies that the specimen signatures do not match the signatures on the cheque would constitute a dishonour within the meaning of Section 138 of the Act. This Court has in the decisions referred to above taken note of situations and contingencies arising out of deliberate acts of omission or commission on the part of the drawers of the cheques which would inevitably result in the dishonour of the cheque issued by them. For instance this Court has held that if after issue of the cheque the drawer closes the account it must be presumed that the amount in the account was nil hence insufficient to meet the demand of the cheque. A similar result can be brought about by the drawer changing his specimen signature given to the bank or in the case of a company by the company changing the mandate of those authorised to sign the cheques on its behalf. Such changes or alteration in the mandate may be dishonest or fraudulent and that would inevitably result in dishonour of all cheques signed by the previously authorised signatories. There is in our view no qualitative difference between a situation where the dishonour takes place on account of the substitution by a new set of authorised signatories resulting in the dishonour of the cheques already issued and another situation in which the drawer of the cheque changes his own signatures or closes the account or issues instructions to the bank not to make the payment. So long as the change is brought about with a view to preventing the cheque being honoured the dishonour would become an offence under Section 138 subject to other conditions prescribed being satisfied. There may indeed be situations where a mismatch between the signatories on the cheque drawn by the drawer and the specimen available with the bank may result in dishonour of the cheque even when the drawer never intended to invite such a dishonour. We are also conscious of the fact that an authorised signatory may in the ordinary course of business be replaced by a new signatory ending the earlier mandate to the bank. Dishonour on account of such changes that may occur in the course of ordinary business of a company, partnership or an individual may not constitute an offence by itself because such a dishonour in order to qualify for prosecution under Section 138 shall have to be preceded by a statutory notice where the drawer is called upon and has the opportunity to arrange the payment of the amount covered by the cheque. It is only when the drawer despite receipt of such a notice and despite the opportunity to make the payment within the time stipulated under the statute does not pay the amount that the dishonour would be considered a dishonour constituting an offence, hence punishable. Even in such cases, the question whether or not there was a lawfully recoverable debt or liability for discharge whereof the cheque was issued would be a matter that the trial Court will examine having regard to the evidence adduced before it and keeping in view the statutory presumption that unless rebutted the cheque is presumed to have been issued for a valid consideration."

15. Looking to the above observations of the Hon'ble Supreme Court, even if the cheques had returned with endorsement that joint signature was required, Section 138 would still get attracted and the applicants- accused cannot avoid responsibility. At present, as per Section 139, it will have to be presumed that they were towards discharge of debt or other liability of the applicants- accused. Contrary can be proved by applicants- accused at the time of trial. The defence being raised in these applications would be matter of evidence and I do not think that any interference is called for in the orders of process issued.

16. For reasons mentioned above, these Criminal Applications are dismissed. The trial Court shall expedite hearing of the complaints.

Applications dismissed.