In the High Court of Judicature at Madras
Dated: 28/11/2003
Coram
The Honourable Mr. Justice M.THANIKACHALAM
Crl.O.P.No. 32072 of 2002
1. S.Karthick Perumal
2. Dr.B.Sivanthi Adithyan
3. M.Uttam Reddy
4. R.N.Bansal
5. T.K.Roy ..... Petitioners
-Vs-
M/s.Sterling Business Services Private Ltd.
Rep. by its Director A.Ramnarayan
62, Priya Flat, 1st Lane, Pantheon Road,
Chennai-8. ..... Respondent
Petition under section 482 Cr.P.C. to call for the records
relating to C.C. No.9398/2002 on the file of XIV Metropolitan Magistrate,
Emgore, Chennai and quash the same.
For petitioners :: Mr.R.Regupathy
For Respondents :: ---
:O R D E R
Accused 3 to 7 in C.C. No.9398/2002 on the file of XIV
Metropolitan Magistrate Court, Egmore, Chennai have filed this petition to
quash the proceedings against them, since no case is made out even as per the
averments in the complaint.
2. M/s.Sterling Business Service Pvt. Ltd.,-respondent
herein filed a complaint against the petitioners arraying them as accused 3 to
7 in addition to against two accused. One of the accused, that is the first
accused, is the firm called M/s.Aruna Sunrise Hotels Limited and the second
accused Mr.M.Sivaraman appears to be the Managing Director of the said
company. According to the respondent/ complainant the accused have issued
three cheques bearing Nos.404353, 404351, 404352 dated 10.6.2002, 10.7.2002
and 10.8.2002 respectively each for Rs.6,00 ,000/- as per the directions from
M/s.Soundararajan & Company Pvt. Ltd., who have to pay legitimate debt to the
complainant. It seems the respondent/complainant tendered the cheques for
realisation and before the cheques are being realised, the drawer of the
cheques had communicated to the bank where they are having their account, not
to pay the amount or stop payment. In view of this, the cheques issued by the
first accused represented by the second accused were not honoured.
Thereafter, the complainant issued notice to all the accused requesting them
to pay the amount, threatening prosecution also on their failure to pay the
cheques amount. The notice also failed to evoke any positive result and
therefore, a private complaint was filed against all the accused seeking
appropriate punishment under section 138 read with 141 of the Negotiable
Instruments Act.
3. The accused/petitioners are the Directors of the first
accused company. According to them there was no debtor-creditor relationship
between the company and the respondent and therefore, the non payment of the
amount for the cheques issued by the first accused would not attract the penal
provisions of the Negotiable Instruments Act. It is the further case of the
petitioners that the allegations in the private complaint are insufficient to
make out a case against the petitioners and therefore, they should be relieved
of from facing the ordeal of trial unnecessarily. In this view, questioning
the criminal proceedings initiated against them they have filed the petition
to quash the proceedings as aforementioned, which is opposed.
4. Learned counsel for the petitioners submit that there was
no debtor-creditor relationship between the company and the respondent and for
the stop payment valid reason was given and in this view the
accused/petitioners are not liable to pay the cheques amount and therefore, in
the absence of cause of action the criminal prosecution shall not lie. The
second contention is that there is no specific allegation in the complaint
against the petitioners and as such these petitioners being non executive
ordinary directors, not involved in the dayto-day affairs of the company, are
not liable to be prosecuted.
5. Learned counsel for the respondent/complainant opposing
the above contention would submit that admittedly the petitioners are also the
directors of the first accused company and as such they are also bound to
discharge the liability for which cheques were issued and in the absence of
non compliance after the demand by notice, cause of action had arisen and in
this view they are also liable to be prosecuted. To appreciate the facts in
issue and to decide whether the petitioners could be made prima facie liable
to be prosecuted, we have to see the provisions of sections 138 as well as 141
of the Negotiable Instruments Act in addiction to the facts involved in this
case.
6. M/s.Soundararajan & Company Pvt. Ltd. borrowed money
from the complainant. The first accused acquired property from M/s.
Soundararajan & Company Pvt. Ltd. Since M/s.Soundarajan & Company Pvt.
Ltd., has to pay some amount to the complainant herein, it appears M/s.
Soundararajan & Company advised the first accused firm to issue cheques in
favour of the respondent herein in order to discharge their legitimate debt.
Only in this way three cheques bearing Nos.404353, 404351 and 40 4352 dated
10.6.2002, 10.7.2002 and 10.8.2002 were issued each for Rs.6,00,000/- in
favour of the respondent. Admittedly when those cheques were tendered for
collection, they were not honoured because of the instruction issued by the
drawer of the cheques not to pay the amount thereby stopping payment. Even
after the notice also admittedly the drawer of the cheques namely, the
directors of the first accused company have not paid the amount. As
aforementioned, a private complaint is filed as if the directors are also
liable to pay the amount. It seems there was some dispute between the first
accused and M/s. Soundararajan & Company Pvt. Ltd., in their dealings with
the immovable property. According to the petitioners, M/s.Soundararajan &
Company has not complied with the agreement or some thing like that and
therefore, stop payment was issued for cheques issued by them. In this
petition we are not concerned about the dispute between the petitioners and
M/s.Soundararajan & Company Pvt. Ltd. If it is proved that in order to
discharge the liability cheques were issued, then probably Section 138 will
operate against the petitioners also subject to other conditions.
7. The contention of the learned counsel for the petitioners
that there is no debtor-creditor relationship between the first accused
company and the respondent appears to be unacceptable in view of the wordings
incorporated in Section 138 of the Negotiable Instruments Act. Section 138
reads,
“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…..”
A plain reading of the above section would indicate that there need not be
always debtor-creditor relationship between the drawer of the cheque and the
holder of the same. If the cheques were issued for any other liability, the
same also should attract section 138 of the Negotiable Instruments Act in view
of the fact it says specifically ” other liability”. The further contention
of the learned counsel for the petitioners that there is no liability or debt
between the first accused company and the complainant also would not survive
because of the wordings employed in the section. The section does not say
that the cheques should have been drawn for the discharge of any debt or other
liability of the drawer towards the payee, whereas it says, where any cheque
drawn by a person on an account maintained by him with a bank, 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. It further says
if that cheque is returned by the bank unpaid, then the drawer is liable for
the subsequent action. Therefore, the plain reading of the section makes it
crystal clear that the debt or other liability may be due from any person. It
is not always mandatory that the liability should be due from the drawer. The
purpose of enacting this section is to give protection to the holder of the
cheque, in order to enhance the credibility or the acceptability of the
cheques. Therefore, it is immaterial that the cheque was issued for the
discharge of the drawer’s own debt or liability and it is sufficient to hold
that the cheque was issued for the discharge of another man’s debt or
liability also. In this view, if the cheques in question have been issued by
the first accused in order to discharge the liability of another, then the
company and its Managing Director would be answerable, in addition to the
Directors also subject to their involvement in the business which I will
discuss infra.
8. It is the specific case of the respondent/ complainant
that M/s.Soundararajan & Company Pvt. Ltd. borrowed money from the
complainant and as such with intent to discharge the said legitimate debt due
to the complainant, M/s.Soundararajan & Company Pvt. Ltd. in turn instructed
the accused to part with a portion of the sale consideration directly to the
complainant. Only in this way the first accused company also agreeing to
issue cheques addressed a letter to the complainant that they are acquiring
immovable properties from M/s.Soundararajan & Company Pvt. Ltd., who had
advised the first accused company to pay the complainant directly a sum of
Rs.18,00,000/-. Thus, it is prima facie seen the liability or the debt
payable by M/s.Soundararajan & Company to the respondent to the tune of
Rs.18,00,000/- was undertaken by the first accused company to be discharged by
the issue of cheques. Only in this way admittedly also three cheques were
issued by the second accused representing the first accused. This act would
squarely come within the meaning of issuing cheques for the discharge of debt
or liability, whether it is payable by the first accused to the respondent or
not. Here the first accused undertook to discharge Rs.18,0 0,000/- payable by
M/s.Soundararajan & Company to the respondent and in this view the cheques
issued by the first accused company squarely come within the four walls of
section 138. Therefore, I am of the considered opinion that irrespective of
the fact that there was no debtor-creditor relationship between the first
accused and the respondent, they are liable to pay the amount since they have
undertaken to discharge and in this way cheques were also issued. If for any
reasons for the non-compliance of certain conditions by M/s.Soundararajan &
Company Pvt. Ltd., the firt accused company is not liable to pay the amount
then the same has to be agitated and established, if possible, before the
trial court and this could not be decided by this court under section 482
Cr.P.C. Prima facie to proceed against the accused especially against the
first accused and the second accused there are sufficient materials available
by way of pleadings and therefore, it is impossible to conclude that the
private complaint itself is not maintainable. Thus, concluding the cheques
were issued to discharge the liability, whether it is the liability of the
petitioners or not, we have to see further whether the petitioners are liable
to be prosecuted.
9. Learned counsel for the petitioners submits that the
petitioners are non executive ordinary directors and they were not in the
dayto-day affairs of the company being incharge of the business and therefore,
as such without a specific allegation in the complaint against the
petitioners, the prosecution will not lie. From the reading of the averments
contained in the complaint as well as going through section 141 of the
Negotiable Instruments Act coupled with judicial precedent, I am unable to say
no to the above said submission. Any petition of this nature to quash the
proceedings, this Court has to see the prima facie allegations, if not
rebutted, whether would lead to the conviction and it should not be the
endeavour of this Court whether the allegations levelled would sustain the
conviction. In this context we have to see the pleadings.
10. It is not in dispute that accused 3 to 7 are the
Directors of the first accused company. According to them they are only non
executive ordinary directors. When a notice was issued after the return of
the cheques, this fact was informed to the respondent/complainant. Despite
that fact, the respondent has not specifically averred in the complaint
implicating the petitioners/accused 3 to 7 also though they have denied the
averments in the reply notice. Paragraph 7 of the complaint reads thus:
“The first respondent/first accused as the company and other accused as
Directors are jointly and severally liable for the illegal acts perpetrated
against the complainant herein.”
Except the above averments, as pointed out by the either counsel, I am unable
to see any other allegations, clinchingly implicating the petitioners
indicating that as Directors these people are also liable to discharge for the
specified reasons. Having the above pleadings in mind, we have to see the
section and the law prevailing as on this date.
11. Section 141 of the Negotiable Instruments Act deals with
the offences committed by the companies. The company is arrayed as the first
accused and the Managing Director, who issued the cheque is arrayed as the
second accused. In this petition the proceedings against them are not
questioned. If the Directors of the first company are also held to be
responsible, then they should be shown that the Directors were responsible to
the company for the conduct of the business of the company involving
themselves in the day-to-day affairs. The proviso is very clear that
sub-section (1) shall not render any person liable to punishment if he proves
that the offence was committed without his knowledge or he had exercised all
due diligence to prevent the commission of such offence. Clause 2 says if it
is proved that the offence has been committed with the consent or connivance
or is attributable to any neglect on the part of any Director, Manager,
Secretary or other officers of the company, then they also shall be deemed to
be guilty of that offence. Thus it is clear from the reading of the section
that (1) ordinary directors or the non executive directors, as the case may
be, would be made liable to be punished if it is shown that they were incharge
of the day-to-day business or they were responsible for the conduct of the
business of the company, (2) that the offence was committed by the company
with the consent or connivance of the Directors. In order to say that these
two ingredients are available there must be pleadings prima facie. If not, no
useful purpose would be served in trying a case against those persons, against
whom no allegations are levelled in the petition. I have already pointed out
about the non availability of the specific averments attracting the above said
ingredients under section 141. In this view, it appears to my mind that as
such even as per the allegations in the complaint the accused/petitioners
could not be made liable for the issue of the cheques by the second accused
representing the first accused. The fact that the petitioners are having some
interest in the first accused company or in the properties acquired by the
company would not lead to the inference that they should be made criminally
liable unless the requirements of section 141 are complied with, which are
absent here.
12. Learned counsel for the petitioners submits relying on a
decision reported in 107 Company Cases 600 (Techno Futura International Ltd.
v. T.S.Anthony Samy) that the petitioners 3 to 7 being the Directors
interested in the first accused company are also liable to be prosecuted. As
seen from this decision, it seems in the complaint it is clearly stated that
the accused therein 3 to 8 were responsible for the conduct of the business of
the company and therefore, in that view this Court has held question of
quashing the proceedings would not arise. Here, as pointed out, it is not
even stated in the complaint that these petitioners are responsible for the
conduct of the business of the company. Therefore, applying the above dictum
retaining the petitioners as accused in C.C. No.9398/2002 may not be proper,
that too in view of the dictum laid down by the Apex Court of this land.
13. Learned counsel for the petitioners submits that there
are no required and sufficient averments in the complaint so as to attract the
offence under the Act and as such the proceedings against the petitioners are
bound to be dropped placing reliance in S.N.Bangur & Others v. M/s.Klen &
Marshalls Mfrs. And Exporters Pvt. Ltd. (2002-2-L.W. (Crl.) 724). This
Court, considering the previous decision of the Apex Court ruled that in the
absence of sufficient averments proceeding against those accused is not
proper.
14. In Katta Sujatha v. Fertilizers & Chemicals Travancore
Ltd. (20 03 SCC (Cri) 151) it is ruled as follows:
“In short the partner of a firm is liable to be convicted for an offence
committed by the firm if he was in charge of and was responsible to the firm
for the conduct of the business of the firm or if it is proved that the
offence was committed with the consent or connivance of, or was attributable
to any neglect on the part of the partner concerned.”
The ruling in K.P.G.Nair v. Jindal Menthol India Ltd. (2000(6) Scale 578)
was confirmed in the above case. In the case involved in the above decision
also it seems that there was no allegation that the Director was involved in
any of the transactions referred to in the complaint and it is also not stated
that he was incharge of the business and responsible for the conduct of the
business of the firm in terms of section 141 of the Act. It seems there was
no other allegations made against the accused that he had connivance with any
other partner in the matter of issue of cheque. Exactly more or less the
facts also fits in with our present case. As quoted supra, there is no
allegation against the petitioners stating that these petitioners involved in
any of the transactions or they have connived with the accused Nos.1 and 2 or
the offence was committed with the consent of these petitioners or
attributable to any neglect act on the part of the petitioners etc. In the
absence of any such allegations, if we take the complaint as such I should see
no case is made out against the petitioners to proceed further under section
138 read with 141 of the Negotiable Instruments Act. On this ground, I am of
the opinion the proceedings against the accused 3 to 7 namely, the petitioners
has to be dropped.
15. In the light of the above discussions, I conclude the
proceedings as against the petitioners namely, accused 3 to 7 are liable to be
dropped and accordingly dropped allowing this petition to the above said
extent. The trial court is directed to dispose the case against the other
accused. Consequently, Crl.M.P.No.13018/2002 is closed.
Index: Yes.
Website: Yes.
ns.
To
1. XIV Metropolitan Magistrate,
Egmore, Chennai.
2. -do- through the Chief Metropolitan
Magistrate, Chennai.
M.THANIKACHALAM, J.