1 REPORTABLE IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NOS. 1413-1414 OF 2011 (Arising out of S.L.P.(Crl.) Nos.1830-1831 of 2009) Anil Sachar &Anr. .....Appellants Versus M/s. Shree Nath Spinners P.Ltd. & Ors. etc. .....Respondents J U D G M E N T
ANIL R. DAVE, J.
1. Leave granted.
2. Being aggrieved by the common Judgment delivered in Criminal Appeal
Nos.379-MA of 2007 and 381-MA of 2007 dated 16th December, 2008 by the High
Court of Punjab and Haryana at Chandigarh, the original complainants have filed
these appeals. By virtue of the aforestated judgment and order, the High Court has
confirmed the Orders dated 4th May, 2007 passed in Criminal Complaint Nos. 46 and
99 of 1999 by the Judicial Magistrate, First Class, Ludhiana whereby the accused in
the aforestated complaints had been acquitted of the charges levelled against them.
3. The facts leading to the present litigation in a nut shell are as under:
4. On 23rd February, 1999, Respondent no.4 – Munish Jain, a Director of M/s.
A.T. Overseas Ltd. had given in all four cheques for different amounts to Anil
Sachar, partner of M/s. Rati Woolen Mills who are appellant Nos. 1 and 2
respectively. According to the case of the complainants, the said cheques were given
to M/s. Rati Woolen Mills, of which appellant no.1 is a partner, in consideration of
supply of goods to M/s. Shree Nath Spinners Pvt. Ltd.
5. The aforestated cheques, which had been given by Munish Jain as Director of
M/s. A.T. Overseas Ltd., had not been honoured and due to dishonour of the said
cheques, the complainant, namely, Anil Sachar, as a partner of M/s. Rati Woolen
Mills had issued notice as required under the provisions of Section 138 of the
Negotiable Instruments Act (hereinafter referred to as `the Act’). In spite of the said
notice, the complainant was not paid the amount covered under the aforestated
cheques and, therefore, complaints had been filed against the present respondents.
6. The case of the present respondents before the trial court as well as before the
High Court was that the dispute was of a civil nature and with an oblique motive it
was given a colour of criminal litigation. The said reply had been given especially in
view of the fact that the complaint had also been filed making out a case against the
accused under the provisions of Sections 406 & 420 of the Indian Penal Code.
7. The case of the complainants was that M/s. A.T. Overseas Ltd. is a sister
concern of M/s. Shree Nath Spinners Pvt. Ltd. and the aforestated cheques were
given by Munish Jain towards dues of M/s. Shree Nath Spinners Pvt. Ltd. as a
Director of M/s. A.T. Overseas Ltd. After considering the evidence adduced and the
arguments made before the trial court, the trial court acquitted the accused for the
reason that the goods had been supplied by the complainants to M/s. Shree Nath
Spinners Pvt. Ltd. and the cheques had not been given by M/s. Shree Nath Spinners
Pvt. Ltd. but they had been given by M/s. A.T. Overseas Ltd. As M/s. Shree Nath
Spinners Pvt. Ltd. and M/s. A.T. Overseas Ltd. are two different legal entities and as
there was nothing on record to show that the cheques were given by M/s. A.T.
Overseas Ltd. in consideration of goods supplied by the complainants to M/s. Shree
Nath Spinners Pvt. Ltd., the conclusion was that there was no liability of M/s. A.T.
Overseas Ltd. and, therefore, dishonour of the aforestated cheques would not make
signatory of the cheques from the account of M/s. A.T. Overseas Ltd. liable under
the provisions of the Act.
8. Being aggrieved by the orders passed by the learned Judicial Magistrate, First
Class, Ludhiana, dated 4th May, 2007, criminal appeals were filed before the High
Court of Punjab and Haryana at Chandigarh, but the said appeals have been
dismissed and, therefore, the original complainants have approached this Court by
way of these appeals.
9. It may be noted here that during the pendency of the proceedings, Mohinder
Jain, accused/respondent no.3 expired and, therefore, deleted from the array of
10. Mr. Nidhesh Gupta, learned Senior Counsel appearing for the complainants
mainly submitted that the learned Judicial Magistrate as well as the High Court
committed an error by acquitting the accused simply because the goods had been
supplied to M/s. Shree Nath Spinners Pvt. Ltd. whereas the cheques were given by
M/s. A.T. Overseas Ltd. He submitted that both the concerns, referred to
hereinabove, are sister concerns having common Directors and, therefore, the courts
below ought to have lifted the corporate veil so as to find out the realities. He also
submitted that Munish Jain, who had signed the aforesaid cheques was Director in
both the sister concerns viz. M/s. Shree Nath Spinners Pvt. Ltd. and M/s. A.T.
Overseas Ltd. Moreover, he submitted that once the cheques had been issued by the
accused, as per provisions of Section 139 of the Act, burden was on the accused to
show that there was no consideration. So as to substantiate his aforestated
submission, the learned counsel relied upon the Judgments delivered by this Court
in ICDS Ltd. v. B
eena Shabeer and Anr. [2002(6) SCC 426], K.K. Ahuja v. V
Vora and Anr., [2009(10) SCC 48] and K.N. Beena v. Muni yappan and Anr. [2001(8) SCC 458].
11. For the aforestated reasons, the learned counsel strenuously submitted that the
High Court had erred in confirming the orders of acquittal because upon lifting the
corporate veil, the correct position could have been revealed and the correct position
according to the learned counsel was that the cheques had been given by a sister
concern, namely, M/s. A.T. Overseas Ltd. in consideration of the goods supplied to
M/s Shree Nath Spinners Pvt. Ltd. The learned counsel also drew our attention to
the fact that there were several inter se transactions between the above-named two
sister concerns and, therefore, the courts below ought to have believed that the
payment had been made by one company for another company and the courts below
ought to have believed that there was a consideration behind issuance of the
aforestated two cheques. He also draw our attention to the relevant evidence which
was adduced by the complainants to establish the aforestated facts.
12. On the other hand, the learned counsel appearing for the respondents
supported the reasons recorded by the courts below while acquitting the accused. He
mainly submitted that the cheques had been issued by M/s. A.T. Overseas Ltd. to
whom no goods had been supplied by the complainants and, therefore, there was no
consideration. In absence of any consideration, according to the learned counsel, the
accused could not have been held guilty and, therefore, the courts below rightly
acquitted the respondents. The learned counsel relied upon the judgments delivered
in Indowind Energy Ltd. v. Wescare (India) Ltd. and Anr. [2010(5) SCC 306] and in
Rahul Builders v. Arihant Fertilizers & Chemicals and Anr. [2008(2) SCC 321].
According to him, even if two companies are having common Directors, both
companies would remain different legal entities and, therefore, the submission made
on behalf of the appellants that both the companies are sister concerns and,
therefore, one company should be made liable for the dues of another company
cannot be sustained. He further submitted that there was nothing to substantiate the
submission that M/s. A.T. Overseas Ltd. had made payment in consideration of goods
supplied to M/s. Shree Nath Spinners Pvt. Ltd. He, therefore, submitted that the
appeals be dismissed.
13. Upon hearing the learned counsel appearing for the parties and upon perusal
of the record pertaining to the cases and the impugned judgment delivered by the
High Court confirming the order passed by the trial court and upon considering the
judgments cited by the learned counsel, we are of the view that the decision rendered
by the courts below cannot be sustained.
14. Upon perusal of the record, we find that the complainants had established
before the trial court that there was an understanding among the complainants and
the accused that in consideration of supply of goods to M/s. Shree Nath Spinners Pvt.
Ltd., M/s. A.T. Overseas Ltd. was to make the payment. The aforestated
understanding was on account of the fact that directors in both the aforestated
companies were common and the aforestated companies were sister concerns. In the
circumstances, it can be very well said and it has been proved that in consideration
of supply of goods to M/s. Shree Nath Spinners Pvt. Ltd., M/s. A.T. Overseas Ltd.
had made the payment. In view of the above fact, in our opinion, the trial court was
not right when it came to the conclusion that there was no reason for M/s. A.T.
Overseas Ltd. to give the cheques to the complainants. The aforestated facts are very
well reflected in the statement made in the complaint and in the evidence by the
complainant which have not been controverted. Paras 2 and 3 of the complaint are
reproduced herein below:
“2. That the accused had business dealings with the complainant and
supply of the goods which duly supplied by my client vide separate bills
from time to time which was duly acknowledged by the accused no. 5
Varun Jain director of the accused no. 1.
3. That in order to discharge the liability of making the payment, the
accused issued following two cheques in favour of the complainant
through their sister concern M/S A.T. Overseas Ltd. i.e. Accused No. 1
and the cheques were duly signed by Mr. Munish Jain one of its
15. The trial court materially erred while coming to a conclusion that in criminal
law no presumption can be raised with regard to consideration as no goods had
been supplied by the complainants to M/s. A.T. Overseas Ltd.. The trial court ought
to have considered provisions of Section 139 of the Act, which reads as under:-
“139. Presumption in favour of holder – 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.”
16. According to the provisions of the aforestated section, there is a presumption
with regard to consideration when a cheque has been paid by the drawer of the
cheque. In the instant case, M/s. A.T. Overseas Ltd. paid the cheque which had
been duly signed by one of its Directors, namely, Munish Jain. Munish Jain is also a
Director in M/s. Shree Nath Spinners Pvt. Ltd.. As stated hereinabove, both are sister
concerns having common Directors. Extracts of books of accounts had been
produced before the trial court so as to show that both the companies were having
several transactions and the companies used to pay on behalf of each other to other
parties or their creditors. The above fact strengthens the presumption to the effect
that M/s. A.T. Overseas Ltd. had paid the cheques to the complainants, which had
been signed by Munish Jain, in consideration of goods supplies to M/s Shree Nath
Spinners Pvt. Ltd. Of course, the presumption referred to in Section 139 is
rebuttable. In the instant case, no effort was made by Munish Jain or any of the
Directors of M/s. A.T. Overseas Ltd. for rebuttal of the aforestated presumption and,
therefore, the presumption must go in favour of the holder of the cheques.
Unfortunately, the trial court did not consider the above facts and came to the
conclusion that there was no consideration for the cheques which had been given by
M/s. A.T. Overseas Ltd. to the complainants.
17. It is true that a limited company is a separate legal entity and its directors are
different legal persons. In spite of the aforestated legal position, in view of the
provisions of Section 139 of the Act and the understanding which had been arrived
at among the complainants and the accused, one can safely come to a conclusion
that the cheques signed by Munish Jain had been given by M/s. A.T. Overseas Ltd. to
the complainants in discharge of a debt or a liability, which had been incurred by
M/s Shree Nath Spinners Pvt. Ltd.
18. We may also refer to the judgment delivered by this Court in the case of
ICDS Ltd. (supra). In the said judgment this Court has referred to the nature of
liability which is incurred by the one who is a drawer of the cheque. If the cheque is
given towards any liability or debt which might have been incurred even by someone
else, the person who is a drawer of the cheque can be made liable under Section 138
of the Act. The relevant observation made in the aforestated judgment is as under:
” The words “any cheque” and “other liability” occurring in Section 138
are the two key expressions which stand as clarifying the legislative
intent so as to bring the factual context within the ambit of the provisions
of the statute. These expressions leave no manner of doubt that for
whatever reason it may be, the liability under Section 138 cannot be
avoided in the event the cheque stands returned by the banker unpaid.
Any contra-interpretation would defeat the intent of the legislature. The
High Court got carried away by the issue of guarantee and guarantor’s
liability and thus has overlooked the true intent and purport of Section
138 of the Act.
The language, however, has been rather specific as regard the intent of
the legislature. The commencement of the section stands with the words
“where any cheque”. The above noted three words are of extreme
significance, in particular, by reason of the user of the word “any” –
the first three words suggest that in fact for whatever reason if a cheque
is drawn on an account maintained by him with a banker in favour of
another person for the discharge of any debt or other liability, the
highlighted words if read with the first three words at the
commencement of Section 138, leave no manner of doubt that for
whatever reason it may be, the liability under this provision cannot be
avoided in the event the same stands returned by the banker unpaid. The
legislature has been careful enough to record not only discharge in whole
or in part of any debt but the same includes other liability as well. This
aspect of the matter has not been appreciated by the High Court, neither
been dealt with or even referred to in the impugned judgment.”
19. Looking to the facts of the case and law on the subject, we are of the view that
all the four cheques referred to in both the complaints are presumed to have been
given for consideration. The presumption under Section 139 of the Act has not
been rebutted by the accused and, therefore, we are of the view that the trial court
wrongly acquitted the accused by taking a view that there was no consideration for
which the cheques were given by Munish Jain to the complainants. The aforesaid
incorrect view was wrongly confirmed by the High Court. We, therefore, set aside
the acquittal order and convict accused Munish Jain under Section 138 of the Act.
20. In view of the aforestated facts and legal position, in our opinion, the accused
ought to have been held guilty, especially accused no. 4, Munish Jain who had signed
all the cheques for M/s A.T. Overseas Ltd. We, therefore, hold Munish Jain,
accused no. 4 and respondent no. 4 herein, in both the cases guilty of the offence
under Section 138 of the Act.
21. Accused Munish Jain was acquitted by the trial court and the High Court has
confirmed the acquittal, which is being set aside by this Court by allowing these
appeals. In the circumstances, as per the provisions of Section 235(2) of the Criminal
Procedure Code, this Court will have to give an opportunity of being heard to him on
the question of sentence. We, therefore, adjourn the case to 2.8.2011 for hearing the
accused Manish Jain on the question of sentence. If on that day he fails to appear
before this Court, we shall hear his counsel on the question of sentence.
(Dr. MUKUNDAKAM SHARMA)
(ANIL R. DAVE)
19th July, 2011.
IN THE SUPREME COURT OF INDIA REPORTABLE CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NOS. 1413-1414 OF 2011 Anil Sachar &Anr. .....Appellants Versus M/s. Shree Nath Spinners P.Ltd. & Ors. Etc. .....Respondents O R D E R
We have heard the learned counsel appearing for the parties on the
question of sentence. Having gone through the records, we find that Mr.
Munish Jain, against whom the notice was issued on the question of sentence has
died. Accordingly, so far he is concerned, the matter stands abated.
There is yet one more accused in the case, apart from the company, who
was also impleaded as a party in the present proceedings. The said Director of
the company is Mr. Varun Jain.
We have heard the learned counsel appearing for the parties on the
question of sentence. Considering the provisions of Section 138 of the Negotiable
Instruments Act, we consider that imposition of fine of an amount of Rs.
10,00,000/- (Rupees ten lacs only) would meet the ends of justice in the present
case. Considering the facts and circumstances of the case, we, therefore, impose
a fine of Rs. 10,00,000/- (Rupees ten lacs only) on the respondent payable to the
appellants/complainants by way of compensation.
At this stage, the counsel appearing for the respondent has handed over
drafts amounting to Rs. 10,00,000/-, payable to the appellants/complainants, to
the counsel appearing for the appellants/complainants, who receives the said
amount which is imposed as fine and payable to the appellants. Fine having been
paid and received brings the litigation to an end.
In that view of the matter, nothing further survives in these appeals, which
stand disposed of.
(Dr. MUKUNDAKAM SHARMA)
(ANIL R. DAVE)
AUGUST 17, 2011