IN THE HIGH COURT OF KERALA AT ERNAKULAM
Crl.MC.No. 2746 of 2008()
1. USHA SANGHI, W/O. SUDHIR SANGHI,
... Petitioner
2. SIDDHARTH SANGHI, S/O. SUDHIR SANGHI,
Vs
1. DR. GEORGE JACOB,
... Respondent
2. STATE OF KERALA,
For Petitioner :SRI.V.G.SANKARAN
For Respondent :PUBLIC PROSECUTOR
The Hon'ble MR. Justice R.BASANT
Dated :26/09/2008
O R D E R
R.BASANT, J
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Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008
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Dated this the 26th day of September, 2008
ORDER
(i) Whether the complaints against the petitioners
deserve to be quashed for the reason that sufficient averments
are not there to attract liability under Section 138 r/w 141 of the
Negotiable Instruments Act (the Act hereafter) ?
(ii) Whether the non compliance with the mandate of
amended Section 202 Cr.P.C – to necessarily conduct an enquiry
before issuing process to an accused person residing outside the
jurisdiction of the Magistrate, vitiates the cognizance taken in
these cases ?
(iii) Whether the courts concerned have territorial
jurisdiction to entertain the complaints ?
2. These questions are raised in these petitions where 2
of the 6 accused persons in identical complaints filed by the
same complainant pending before two criminal courts seek
invocation of the extraordinary inherent jurisdiction under
Section 482 of the Code of Criminal Procedure to quash the
prosecution in so far as they relate to them.
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 2
3. To the vital facts first. The complainant alleged that
the 1st accused, a company, had issued the cheques involved in
these cases to him for the due discharge of a legally enforcible
debt/liability. There is no contention that either of the
petitioners had signed the cheques in question. It is alleged that
they were directors of the company. There are averments which
suggest that they have roles to play in the management and
affairs of the company. All the complaints were filed along with
affidavits under Section 145 Cr.P.C in lieu of sworn statement
under Section 200 Cr.P.C. No enquiry under Section 202 Cr.P.C
was conducted by the Magistrates in all these cases. Cognizance
was taken and process was issued against all the 6 accused
persons including the petitioners herein who are accused 3 and
4 in all the prosecutions.
4. Learned counsel for the petitioners (petitioners
appear through different counsel) have raised various
contentions and to resolve the contentions raised, the 3
questions initially raised will have to be answered. The
respondent/complainant has entered appearance. Counsel are at
variance as to what is the nature of the allegations that ought to
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 3
be raised in a complaint alleging complicity for the offence under
Section 138 r/w 141 Negotiable Instruments Act. The counsel
have practically repeated all the arguments that were raised
before this Court which were considered in Paul Mathew v.
Lab & General Exports Pvt. Ltd.[2008(3) KHC 462 ie. 2008(3)
KLT 599]. I shall not be dragged further into that controversy
afresh. Suffice it to say that after considering all the arguments
that are raised before me now, the conclusion has been reached
in para.14 of that decision which I extract below:
“What is the final outcome ? A careful
consideration of all these decisions appears make it
clear that in the complaint specific assertions must be
made to attract the play of Section 141 of the N.I Act.
It has to be pleaded as a fact that the indictees
concerned are in charge of and responsible to the
company for the conduct of its affairs. Once that
allegation is specifically raised, it is for the
complainant to adduce evidence in support of such
assertion later. A ritualistic incantation of the words
of the Statute may not be expected or insisted. But it
has got to be effectively conveyed as a matter of fact
that the accused persons were in charge of and
responsible to the company for the conduct of its
affairs on the date of the offence. Such averments, if
they are there, they can be attempted to be supported
later at the stage of enquiry under Section 200/202 of
the Cr.P.C or at the later stages of the trial. It is trite
in the law of pleadings that what is to be pleaded is
the facts and not evidence to be adduced in support of
such facts.”
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 4
I have no reason to come to any different conclusion on the
above aspect even after hearing the detailed arguments in these
cases.
5. The next question is whether sufficient averments to
satisfy the law as understood in para.14 extracted above are
there in these complaints. All the complaints are identical
complaints. I have gone through the averments in the
complaints in detail. It is averred that “all affairs of the 1st
accused company are carried on by accused 2 to 6”. It is further
asserted that “in all business affairs of the 1st accused company,
accused 2 to 6 have responsibility”. The above averments in
para.2 are capped with the final sentence in that paragraph that
“in the day to day activities of the company, accused 2 to 6 have
equal participation”. I am not adverting to the other averments
which are there in para.3. Suffice it to say that the above
specific averments made, do according to me, satisfy the
mandate of law as understood by me in para.14 of Paul Mathew
(supra) extracted above. It is true that further details are not
pleaded as to how and in what manner they perform their duties
as directors. That aspect was also considered in Paul Mathew
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 5
(supra) and the observation in S.M.S Pharmaceuticals Ltd. v.
Neeta Bhalla [2007(3) KLT 672 SC] that Sarojkumar Poddar
v. State [2007 (2) KLT 1030] does not lay down any general law
that the pleadings must show how and in what manner the
directors were, liable, was specifically noted in para.13. It is
also true that in the complaint in the instant case there is no
ritualistic repetition of the specific words of the statue “that the
directors are in charge of and responsible to the company for the
conduct of its affairs”. The question is not whether the words of
the statues have been repeated. The question is only whether
sufficient averments to attract liability under Section 141 of the
Negotiable Instruments Act have been raised or not. I have no
hesitation to agree that they have been.
6. Sri.Harikrishnan, counsel in some of these matters,
argues that there is no specific averment that the 1st accused
company is quilty. In the absence of such averment, Section 141
of the Act can have no application whatsoever, contends counsel.
The law of pleadings is of course not merely technical alone. The
question is whether sufficient averments to notify the adversary
of the stand taken by the party are there in the pleadings or not.
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 6
It is a question of natural justice. The adversary must know the
case of the party. He must have effective and reasonable
opportunity to know, understand, respond, meet and disprove
the case of his opponent. This is the rationale underlying the law
of pleadings. It is not a matter of mere technicality. I am
certainly convinced on a complete and exhaustive reading of the
complaint that sufficient averments to notify all the accused that
the 1st accused is principally liable and consequently the others
are alleged to be liable are there. If one reads the complaints
completely and exhaustively and does not perceive this assertion,
he is definitely missing the woods for the trees. I am hence not
able to accept the contention that the complaint must fail for the
reason that it is not specifically alleged, in those words, that the
1st accused company is liable.
7. Sri.Babu.S.Nair, learned counsel for the accused in
some matters contends that there is significant absence of a
specific averment that the accused persons are in charge of and
responsible to the company for the conduct of its affairs “at the
time the offence was committed.” Here again, I think that
acceptance of that argument would be succumbing to
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 7
meaningless technicality as, in effect and in substance, the
averments eminently convey that accused 2 to 6 were in charge
of and responsible to the company for the conduct of its affairs
on the date of the offence. Even in the absence of a ritualistic
repetition of those words, the conclusion appears to be
irresistible that the averments relate only to the time of the
offence.
8. There is, of course, a dispute as to what would be the
precise time of the offence. I shall not embark on a more
detailed discussion on that controversy. In Kairali Marketing
and Processing Co-op.Society Ltd.v. Pullengadi Service Co-
op.Society Ltd. [2007(1)KLT 287] it has been held that it is
the date of dishonour of the cheque which will be crucial while
ascertaining the point of time for application of Section 141 of
the Act. The offence under Section 138 of the N.I.Act takes
place on the date of dishonour of the cheque, it was held. There
is no dispute in this case that all the accused persons were
directors on the date of dishonour of the cheques. That
contention is thus found to be of no avail.
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 8
9. I must, in these circumstances, come to the conclusion
that the first question raised has got to be answered against the
petitioners. Sufficient averments to attract liability under
Section 138 read with 141 of the N.I.Act are there in the
complaints, I hold.
10. Coming to question No.2, argument is advanced that
no enquiry under Section 202 Cr.P.C has been conducted by the
learned Magistrate though cognizance was taken after
23/6/2006, the date on which the amended Section 202 Cr.P.C
came into effect. After the amendment, Magistrates are obliged,
in a case where the accused resides at a place beyond the area in
which the Magistrate exercises his jurisdiction, to conduct an
enquiry under Section 202 Cr.P.C. Admittedly, such an enquiry
has not been conducted. Whether the Magistrate is bound
ritualistically to conduct such an enquiry in every case did come
up for consideration before this court and this court in H.D.F.C
v. Jaleel [2008(3) KLT 869] has come to the specific
conclusion that the Magistrate is obliged to conduct such an
enquiry, even in a prosecution under Section 138 of the
Negotiable Instruments Act, though the mere non-compliance
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 9
with that stipulation may not vitiate cognizance taken by such
Magistrate. A contention was raised in that case that the
amended Section 202 Cr.P.C cannot have any application to
prosecutions under Section 138 of the Negotiable Instruments
Act. After detailed consideration, the question was answered
vide clauses viii, ix, x and xi of paragraph 31 which I extract
below:
“viii) S.202 Cr.P.C as amended applies to prosecutions
under S.138 of the N.I.Act also in the light of S.4(2) of
the Code and in the absence of any specific contra
provisions in S.138 of the N.I.Act.
ix) But ordinarily in a prosecution under S.138 of the
N.I.Act, if a proper complaint is filed supported by
necessary documents and a proper affidavit is filed
under S.145 of the N.I.Act it may not be necessary for
the Magistrate to proceed to hold the enquiry under
S.202 Cr.P.C as the requisite satisfaction can be
entertained at the end of the enquiry under S.200
Cr.P.C itself.
x) But in a case where there is possibility of dispute
regarding territorial jurisdiction, or dispute regarding
complicity alleged with the help of S.141 of the
N.I.Act, it will be proper, necessary and advisable for
the Magistrate to hold enquiry under S.202 Cr.P.C, if
requisite satisfaction is not induced by the materials
placed before it under clause (ix) above.
xi) Even in such enquiry under S.202 Cr.P.C in a
prosecution under S.138 of the N.I.Act, it is not
invariably necessary to examine a complainant and his
witnesses personally on oath. They can be directed to
file affidavit or additional affidavit under Section 145
of the N.I.Act on the specific aspects where materials
are found necessary or the Court entertains doubts.
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 10
S.145 of the N.I.Act as explained in the decision in
Vasudevan v. State of Kerala (2005(1)KLT 220) shall
apply to the stage of enquiry under S.202 Cr.P.C also.
Courts must be specifically cognisant of the need for
expedition in a prosecution under S.138 of the
N.I.Act.”
11. It therefore is evident that though failure/omission to
conduct an enquiry under Section 202 Cr.P.C in a prosecution
under Section 138 of the N.I.Act will not ipso facto vitiate the
cognizance taken, it is necessary in a case where accused
persons are sought to be saddled with liability under Section 141
of the N.I.Act to conduct such an enquiry. In the facts and
circumstances of this case, I have no hesitation to agree that the
learned Magistrates must necessarily have conducted an enquiry
under Section 202 Cr.P.C to ascertain whether materials are
there to justify the allegation that the accused persons, including
the petitioners herein, were in charge of and responsible to the
company for the conduct of its affairs. On that aspect, in respect
of the accused persons who are residing at Hyderabad, the
pointed attention of the court must have been riveted imbibing
the motivations and persuasions that prompted the
legislature to bring in the amendment to Section 202 Cr.P.C.
That has not been done by the learned Magistrate and that
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 11
inadequacy, according to me, justifies the challenge raised by the
petitioners.
12. Sri.Shamsudeen, learned counsel for the complainant
argues that it is not necessary for the court to insist on anything
more than averments in the complaint to satisfy the mandate of
S.M.S.Pharmaceuticals Ltd. v. Neeta Bhalla [2005(4) KLT
209(SC)]. In support of this contention, the learned counsel for
the complainant relies on the decision in Mymoonath Beevi v.
State of Kerala [2005(4) KLT 174]. A Division Bench of this
court in that judgment had disapproved certain observations
which were there in the earlier decision of Biju Jacob v. Annie
Mathew [2004(2) KLT 634] and had taken the view that at
the threshold, if sufficient averments are there, it is not
necessary to insist on any further material. Learned counsel for
the complainant hence contends that in the light of the
conclusion on question No.1 above that there are sufficient
averments to attract culpability under Section 138 read with 141
of the Negotiable Instruments Act, it was not necessary for the
Magistrate to insist on any further material. Learned counsel
relies on the observations in paragraph 18 of the decision in
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 12
Mymoonath Beevi (Supra).
“Where the allegations in the complaint are
found to satisfy the requirement of S.141 of the Act, it
may not be necessary to insist on any further material
at the threshold stage of taking cognizance of the
complaint. Where the complaint does contain the
necessary averment falling either under sub-s.(1) or
under sub-s.(2) of S.141, we are of the view that it
may not be necessary to insist on any further material
at the threshold stage by drawing a distinction
between “signatory” and “non-signatory” to the
cheque in respect of which the prosecution is
launched.”
13. Learned counsel for the petitioners in this context
contends that Mymoonath Beevi (Supra) was delivered at a
time when amendment to Section 202 Cr.P.C had not come into
existence. The very purpose of the amendment to Section 202
Cr.P.C is to insist that in respect of that category of persons who
reside beyond the jurisdiction of the Magistrate, the Magistrate
must be more careful before issuing process. It is not sufficient,
if averments in the complaint satisfy the requirement. It is
further necessary that an enquiry must be conducted under
Section 202 Cr.P.C for the Magistrate to be satisfied that there is
materials to justify the allegations. Only if that satisfaction is
entertained need cognizance be taken and process issued.
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 13
Unless the amendment to Section 202 Cr.P.C is understood in
that light, the very purpose of the amendment would be defeated.
It is not any more sufficient that necessary averments are there
in the complaint. The Magistrate must be satisfied by sworn
statements recorded under Section 200 Cr.P.C and enquiry
conducted under Section 202 Cr.P.C that cognizance can be
taken against an accused residing outside the jurisdiction of the
Magistrate which would expose such accused to graver
consequences, contend counsel.
14. I find merit in that contention. After the amendment
to Section 202 Cr.P.C in so far as accused persons residing
outside the jurisdiction of the Magistrate are concerned, not only
the averments in the complaint but also materials collected at the
enquiry under Section 200 and 202 Cr.P.C must be available to
persuade the Magistrate to take the view that there are sufficient
grounds to issue process against the accused under Section 204
Cr.P.C. The purpose of the amendment to Section 202 Cr.P.C is
obviously to rule out the possibility of undeserved vexation for
persons residing outside the jurisdiction of the Magistrate
inflicted on them by a complainant by unjustified resort to
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 14
criminal adjudicatory process. Skillful drafting of the complaint
cannot defeat this purpose. The very purpose of enquiry under
Section 200 and 202 of the Code is to check and verify whether
the allegations in the complaint are justified and supported by
material. After the amendment to Section 202 Cr.P.C in 2006, it
cannot at any rate be held that satisfactory averments in a
complaint skilfully drafted shall ipso facto entail issue of process
under Section 204 Cr.P.C. The Magistrate must be satisfied
before issue of process not only that the complaint contains the
requisite averments but also that such averments are, on the face
of it, supported by sufficient material collected in the enquiry
under Section 200 and 202 Cr.P.C. Thus cognizance taken in this
case against the petitioners must certainly be held to be bad for
the reason that no enquiry under Section 202 Cr.P.C was
conducted despite the mandate of the amended Section 202
Cr.P.C.
15. Sri.Harikrishnan points out that this contention is all
the more relevant in the case because the reply notices issued by
the accused persons had clearly conveyed to the complainant
that they were not in charge of and responsible to the company
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 15
for the conduct of its affairs. I agree that the need for a proper
enquiry under Section 202 Cr.P.C is all the more prominent and
relevant in the facts and circumstances of this case particularly
in the light of the stand taken in the reply notice. Question No.2
is, in these circumstances, answered in favour of the petitioners
and against the complainant. The court below must be directed
to conduct a proper enquiry under Section 202 Cr.P.C afresh to
decide the question of issue of process against the accused.
16. We now come to question No.3. The prosecutions are
pending before two different courts. The complainant appears to
have chosen to file the complaints before two courts though the
allegations raised in the two complaints are substantially
identical though relating to different cheques. The complaints
before the learned J.F.C.M, Perinthalmanna are filed alleging
jurisdiction at the place where the complainant resides and the
payment was to be effected whereas the complaints filed before
the learned J.F.C.M, Nilambur are filed asserting that that court
has jurisdiction because the cheques were presented for
collection before the banks within the jurisdiction of that court.
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 16
17. The decision in Santhosh Kumar v. Mohanan [2008
(3) KLT 461] has laid down that the court within the
jurisdiction of which the collecting bank is situated, does not for
that reason have jurisdictional competence to entertain the
complaint. The learned J.F.C.M, Nilambur cannot, in these
circumstances, be held to have jurisdiction. The case pending
before that court can be directed to be sent over to the court of
the J.F.C.M-II, Perinthalmanna. The third question is answered
thus.
18. I do note that more accused than the petitioners are
there in all these cases. The benefit of the view taken by me that
the cognizance is bad for the reason that no enquiry under
Section 202 Cr.P.C has been conducted must certainly enure to
all the accused persons even though they have not come before
this court. Appropriate directions shall hence have to be issued.
19. In the result:
a) These Crl.M.Cs are allowed.
b) Cognizance taken against the petitioners as also the
co-accused in all these cases is set aside.
Crl.M.C. Nos.2746, 2883, 3137, 3155,
3156, 3157, 3166, 3091, 3094,
3097 & 3217 of 2008 17
c) The learned J.F.C.M, Nilambur is directed to forthwith
transmit the records in S.T.No.192, 576, 578, 191,577 and 192 of
2008 to the court of the learned J.F.C.M-II, Perinthalmanna. The
learned J.F.C.M-II, Perinthalmanna shall consider the complaints
afresh in accordance with law, conduct necessary enquiry under
Section 202 Cr.P.C and pass appropriate orders.
20. The learned J.F.C.M, Nilambur is directed to transmit
the records forthwith to the learned J.F.C.M, Perinthalmanna.
The complainant shall appear before the learned J.F.C.M-2,
Perinthalmanna on 03/11/2008 to continue the proceedings.
(R.BASANT, JUDGE)
rtr/-