{"id":256206,"date":"2003-11-28T00:00:00","date_gmt":"2003-11-27T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/s-karthick-perumal-vs-ms-sterling-business-services-on-28-november-2003"},"modified":"2015-03-11T05:10:52","modified_gmt":"2015-03-10T23:40:52","slug":"s-karthick-perumal-vs-ms-sterling-business-services-on-28-november-2003","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/s-karthick-perumal-vs-ms-sterling-business-services-on-28-november-2003","title":{"rendered":"S.Karthick Perumal vs M\/S.Sterling Business Services … on 28 November, 2003"},"content":{"rendered":"
Madras High Court<\/div>\n
S.Karthick Perumal vs M\/S.Sterling Business Services … on 28 November, 2003<\/div>\n
       \n\n  \n\n  \n\n \n \n In the High Court of Judicature at Madras\n\nDated: 28\/11\/2003\n\nCoram\n\nThe Honourable Mr. Justice M.THANIKACHALAM\n\n\nCrl.O.P.No. 32072 of 2002\n\n\n\n1. S.Karthick Perumal\n2. Dr.B.Sivanthi Adithyan\n3. M.Uttam Reddy\n4. R.N.Bansal\n5. T.K.Roy                       .....               Petitioners\n\n-Vs-\n\nM\/s.Sterling Business Services Private Ltd.\nRep. by its Director A.Ramnarayan\n62, Priya Flat, 1st Lane, Pantheon Road,\nChennai-8.                       .....                Respondent\n\n\n\n                Petition under section 482<\/a> Cr.P.C.  to call  for  the  records\nrelating to  C.C.    No.9398\/2002  on the file of XIV Metropolitan Magistrate,\nEmgore, Chennai and quash the same.\n\n\nFor petitioners ::  Mr.R.Regupathy\n\n\nFor Respondents ::  ---\n\n:O R D E R\n<\/pre>\n
                Accused 3 to 7 in C.C.    No.9398\/2002  on  the  file  of  XIV
\nMetropolitan  Magistrate  Court,  Egmore,  Chennai have filed this petition to
\nquash the proceedings against them, since no case is made out even as per  the
\naverments in the complaint.\n<\/p>\n
                2.  M\/s.Sterling   Business  Service  Pvt.    Ltd.,-respondent
\nherein filed a complaint against the petitioners arraying them as accused 3 to
\n7 in addition to against two accused.  One of the accused, that is  the  first
\naccused,  is  the  firm called M\/s.Aruna Sunrise Hotels Limited and the second
\naccused Mr.M.Sivaraman appears  to  be  the  Managing  Director  of  the  said
\ncompany.   According  to  the  respondent\/ complainant the accused have issued
\nthree cheques bearing Nos.404353, 404351, 404352  dated  10.6.2002,  10.7.2002
\nand  10.8.2002 respectively each for Rs.6,00 ,000\/- as per the directions from
\nM\/s.Soundararajan & Company Pvt.  Ltd., who have to pay legitimate debt to the
\ncomplainant.  It seems the respondent\/complainant  tendered  the  cheques  for
\nrealisation  and  before  the  cheques  are  being realised, the drawer of the
\ncheques had communicated to the bank where they are having their account,  not
\nto pay the amount or stop payment.  In view of this, the cheques issued by the
\nfirst   accused   represented   by  the  second  accused  were  not  honoured.
\nThereafter, the complainant issued notice to all the accused  requesting  them
\nto  pay  the  amount, threatening prosecution also on their failure to pay the
\ncheques amount.  The notice also failed  to  evoke  any  positive  result  and
\ntherefore,  a  private  complaint  was  filed  against all the accused seeking
\nappropriate punishment under section 138<\/a>  read  with  141  of  the  Negotiable
\nInstruments Act<\/a>.\n<\/p>\n
                3.   The  accused\/petitioners  are  the Directors of the first
\naccused company.  According to them there was no debtor-creditor  relationship
\nbetween  the  company and the respondent and therefore, the non payment of the
\namount for the cheques issued by the first accused would not attract the penal
\nprovisions of the Negotiable Instruments Act<\/a>.  It is the further case  of  the
\npetitioners  that the allegations in the private complaint are insufficient to
\nmake out a case against the petitioners and therefore, they should be relieved
\nof from facing the ordeal of trial unnecessarily.  In this  view,  questioning
\nthe  criminal  proceedings initiated against them they have filed the petition
\nto quash the proceedings as aforementioned, which is opposed.\n<\/p>\n
                4.  Learned counsel for the petitioners submit that there  was
\nno debtor-creditor relationship between the company and the respondent and for
\nthe   stop   payment   valid   reason   was   given   and  in  this  view  the
\naccused\/petitioners are not liable to pay the cheques amount and therefore, in
\nthe absence of cause of action the criminal prosecution shall not  lie.    The
\nsecond  contention  is  that  there is no specific allegation in the complaint
\nagainst the petitioners and as such  these  petitioners  being  non  executive
\nordinary  directors, not involved in the dayto-day affairs of the company, are
\nnot liable to be prosecuted.\n<\/p>\n
                5.  Learned counsel for  the  respondent\/complainant  opposing
\nthe above contention would submit that admittedly the petitioners are also the
\ndirectors  of  the  first  accused  company and as such they are also bound to
\ndischarge the liability for which cheques were issued and in  the  absence  of
\nnon  compliance  after the demand by notice, cause of action had arisen and in
\nthis view they are also liable to be prosecuted.  To appreciate the  facts  in
\nissue  and  to decide whether the petitioners could be made prima facie liable
\nto be prosecuted, we have to see the provisions of sections 138<\/a> as well as 141
\nof the Negotiable Instruments Act<\/a> in addiction to the facts involved  in  this
\ncase.\n<\/p>\n
                6.  M\/s.Soundararajan &  Company  Pvt.    Ltd.  borrowed money
\nfrom the  complainant.    The  first  accused  acquired  property  from   M\/s.
\nSoundararajan & Company  Pvt.    Ltd.    Since  M\/s.Soundarajan & Company Pvt.
\nLtd., has to pay some amount  to  the  complainant  herein,  it  appears  M\/s.
\nSoundararajan  &  Company  advised  the first accused firm to issue cheques in
\nfavour of the respondent herein in order to discharge their  legitimate  debt.
\nOnly  in  this  way three cheques bearing Nos.404353, 404351 and 40 4352 dated
\n10.6.2002, 10.7.2002 and 10.8.2002  were  issued  each  for  Rs.6,00,000\/-  in
\nfavour of  the  respondent.    Admittedly when those cheques were tendered for
\ncollection, they were not honoured because of the instruction  issued  by  the
\ndrawer of  the  cheques  not to pay the amount thereby stopping payment.  Even
\nafter the notice also  admittedly  the  drawer  of  the  cheques  namely,  the
\ndirectors of  the  first  accused  company  have  not  paid  the  amount.   As
\naforementioned, a private complaint is filed as  if  the  directors  are  also
\nliable to  pay  the amount.  It seems there was some dispute between the first
\naccused and M\/s.  Soundararajan & Company Pvt.  Ltd., in their  dealings  with
\nthe immovable  property.    According  to the petitioners, M\/s.Soundararajan &
\nCompany has not complied with the  agreement  or  some  thing  like  that  and
\ntherefore, stop  payment  was  issued  for  cheques  issued  by them.  In this
\npetition we are not concerned about the dispute between  the  petitioners  and
\nM\/s.Soundararajan & Company  Pvt.    Ltd.    If  it is proved that in order to
\ndischarge the liability cheques were issued, then probably  Section  138<\/a>  will
\noperate against the petitioners also subject to other conditions.\n<\/p>\n
                7.   The contention of the learned counsel for the petitioners
\nthat there is  no  debtor-creditor  relationship  between  the  first  accused
\ncompany  and the respondent appears to be unacceptable in view of the wordings
\nincorporated in Section 138<\/a> of the Negotiable Instruments Act.    Section  138<\/a>
\nreads,
\n“Where  any  cheque  drawn  by a person on an account maintained by him with a
\nbanker for payment of any amount of money to another person from out  of  that
\naccount  for  the  discharge,  in  whole  or  in  part,  of  any debt or other
\nliability…..”\n<\/p>\n
A plain reading of the above section would indicate that  there  need  not  be
\nalways  debtor-creditor  relationship between the drawer of the cheque and the
\nholder of the same.  If the cheques were issued for any other  liability,  the
\nsame also should attract section 138<\/a> of the Negotiable Instruments Act in view
\nof the  fact  it says specifically ” other liability”.  The further contention
\nof the learned counsel for the petitioners that there is no liability or  debt
\nbetween  the  first accused company and the complainant also would not survive
\nbecause of the wordings employed in the section.  The  section  does  not  say
\nthat the cheques should have been drawn for the discharge of any debt or other
\nliability  of  the drawer towards the payee, whereas it says, where any cheque
\ndrawn by a person on an account maintained by him with a bank, for payment  of
\nany  amount  of  money  to  another  person  from  out of that account for the
\ndischarge in whole or in part of any debt or other liability.  It further says
\nif that cheque is returned by the bank unpaid, then the drawer is  liable  for
\nthe subsequent  action.   Therefore, the plain reading of the section makes it
\ncrystal clear that the debt or other liability may be due from any person.  It
\nis not always mandatory that the liability should be due from the drawer.  The
\npurpose of enacting this section is to give protection to the  holder  of  the
\ncheque,  in  order  to  enhance  the  credibility  or the acceptability of the
\ncheques.  Therefore, it is immaterial that  the  cheque  was  issued  for  the
\ndischarge  of  the drawer’s own debt or liability and it is sufficient to hold
\nthat the cheque was  issued  for  the  discharge  of  another  man’s  debt  or
\nliability also.   In this view, if the cheques in question have been issued by
\nthe first accused in order to discharge the liability  of  another,  then  the
\ncompany  and  its  Managing  Director  would be answerable, in addition to the
\nDirectors also subject to their involvement  in  the  business  which  I  will
\ndiscuss infra.\n<\/p>\n
                8.   It  is  the  specific case of the respondent\/ complainant
\nthat M\/s.Soundararajan &  Company  Pvt.    Ltd.    borrowed  money  from   the
\ncomplainant  and as such with intent to discharge the said legitimate debt due
\nto the complainant, M\/s.Soundararajan & Company Pvt.  Ltd.  in turn instructed
\nthe accused to part with a portion of the sale consideration directly  to  the
\ncomplainant.   Only  in  this  way  the first accused company also agreeing to
\nissue cheques addressed a letter to the complainant that  they  are  acquiring
\nimmovable properties  from  M\/s.Soundararajan  &  Company  Pvt.  Ltd., who had
\nadvised the first accused company to pay the complainant  directly  a  sum  of
\nRs.18,00,000\/-.   Thus,  it  is  prima  facie  seen  the liability or the debt
\npayable by M\/s.Soundararajan & Company  to  the  respondent  to  the  tune  of
\nRs.18,00,000\/- was undertaken by the first accused company to be discharged by
\nthe issue  of  cheques.    Only in this way admittedly also three cheques were
\nissued by the second accused representing the first accused.  This  act  would
\nsquarely  come within the meaning of issuing cheques for the discharge of debt
\nor liability, whether it is payable by the first accused to the respondent  or
\nnot.  Here the first accused undertook to discharge Rs.18,0 0,000\/- payable by
\nM\/s.Soundararajan  &  Company  to  the respondent and in this view the cheques
\nissued by the first accused company squarely come within  the  four  walls  of
\nsection 138<\/a>.    Therefore, I am of the considered opinion that irrespective of
\nthe fact that there was no  debtor-creditor  relationship  between  the  first
\naccused  and the respondent, they are liable to pay the amount since they have
\nundertaken to discharge and in this way cheques were also issued.  If for  any
\nreasons  for  the  non-compliance of certain conditions by M\/s.Soundararajan &
\nCompany Pvt.  Ltd., the firt accused company is not liable to pay  the  amount
\nthen  the  same  has  to  be agitated and established, if possible, before the
\ntrial court and this could not be decided by  this  court  under  section  482<\/a>
\nCr.P.C.   Prima  facie  to  proceed against the accused especially against the
\nfirst accused and the second accused there are sufficient materials  available
\nby  way  of  pleadings  and  therefore,  it is impossible to conclude that the
\nprivate complaint itself is not maintainable.  Thus,  concluding  the  cheques
\nwere  issued  to  discharge  the liability, whether it is the liability of the
\npetitioners or not, we have to see further whether the petitioners are  liable
\nto be prosecuted.\n<\/p>\n
                9.   Learned  counsel  for  the  petitioners  submits that the
\npetitioners are non executive ordinary directors and  they  were  not  in  the
\ndayto-day affairs of the company being incharge of the business and therefore,
\nas   such   without  a  specific  allegation  in  the  complaint  against  the
\npetitioners, the prosecution will not lie.  From the reading of the  averments
\ncontained  in  the  complaint  as  well  as  going  through section 141<\/a> of the
\nNegotiable Instruments Act coupled with judicial precedent, I am unable to say
\nno to the above said submission.  Any petition of this  nature  to  quash  the
\nproceedings,  this  Court  has  to  see  the  prima  facie allegations, if not
\nrebutted, whether would lead to the  conviction  and  it  should  not  be  the
\nendeavour  of  this  Court  whether the allegations levelled would sustain the
\nconviction.  In this context we have to see the pleadings.\n<\/p>\n
                10.  It is not  in  dispute  that  accused  3  to  7  are  the
\nDirectors of  the  first accused company.  According to them they are only non
\nexecutive ordinary directors.  When a notice was issued after  the  return  of
\nthe cheques,  this  fact  was informed to the respondent\/complainant.  Despite
\nthat fact, the respondent  has  not  specifically  averred  in  the  complaint
\nimplicating  the  petitioners\/accused  3 to 7 also though they have denied the
\naverments in the reply notice.  Paragraph 7 of the complaint reads thus:
\n“The first respondent\/first accused  as  the  company  and  other  accused  as
\nDirectors  are  jointly  and severally liable for the illegal acts perpetrated
\nagainst the complainant herein.”\n<\/p>\n
Except the above averments, as pointed out by the either counsel, I am  unable
\nto   see  any  other  allegations,  clinchingly  implicating  the  petitioners
\nindicating that as Directors these people are also liable to discharge for the
\nspecified reasons.  Having the above pleadings in mind, we  have  to  see  the
\nsection and the law prevailing as on this date.\n<\/p>\n
                11.   Section 141<\/a> of the Negotiable Instruments Act deals with
\nthe offences committed by the companies.  The company is arrayed as the  first
\naccused  and  the  Managing  Director, who issued the cheque is arrayed as the
\nsecond accused.  In  this  petition  the  proceedings  against  them  are  not
\nquestioned.   If  the  Directors  of  the  first  company  are also held to be
\nresponsible, then they should be shown that the Directors were responsible  to
\nthe  company  for  the  conduct  of  the  business  of  the  company involving
\nthemselves in the  day-to-day  affairs.    The  proviso  is  very  clear  that
\nsub-section  (1) shall not render any person liable to punishment if he proves
\nthat the offence was committed without his knowledge or he had  exercised  all
\ndue diligence  to prevent the commission of such offence.  Clause 2 says if it
\nis proved that the offence has been committed with the consent  or  connivance
\nor  is  attributable  to  any  neglect  on  the part of any Director, Manager,
\nSecretary or other officers of the company, then they also shall be deemed  to
\nbe guilty  of  that offence.  Thus it is clear from the reading of the section
\nthat (1) ordinary directors or the non executive directors, as  the  case  may
\nbe, would be made liable to be punished if it is shown that they were incharge
\nof  the  day-to-day  business  or they were responsible for the conduct of the
\nbusiness of the company, (2) that the offence was  committed  by  the  company
\nwith the  consent  or connivance of the Directors.  In order to say that these
\ntwo ingredients are available there must be pleadings prima facie.  If not, no
\nuseful purpose would be served in trying a case against those persons, against
\nwhom no allegations are levelled in the petition.  I have already pointed  out
\nabout the non availability of the specific averments attracting the above said
\ningredients under  section  141<\/a>.   In this view, it appears to my mind that as
\nsuch even as per the allegations  in  the  complaint  the  accused\/petitioners
\ncould  not  be  made liable for the issue of the cheques by the second accused
\nrepresenting the first accused.  The fact that the petitioners are having some
\ninterest in the first accused company or in the  properties  acquired  by  the
\ncompany  would  not  lead to the inference that they should be made criminally
\nliable unless the requirements of section 141<\/a> are  complied  with,  which  are
\nabsent here.\n<\/p>\n
                12.   Learned counsel for the petitioners submits relying on a
\ndecision reported in 107 Company Cases 600 (Techno Futura  International  Ltd.
\nv.   T.S.Anthony  Samy<\/a>)  that  the  petitioners  3  to  7  being the Directors
\ninterested in the first accused company are also liable to be prosecuted.   As
\nseen  from  this decision, it seems in the complaint it is clearly stated that
\nthe accused therein 3 to 8 were responsible for the conduct of the business of
\nthe company and therefore, in that  view  this  Court  has  held  question  of
\nquashing the  proceedings  would  not  arise.  Here, as pointed out, it is not
\neven stated in the complaint that these petitioners are  responsible  for  the
\nconduct of  the business of the company.  Therefore, applying the above dictum
\nretaining the petitioners as accused in C.C.  No.9398\/2002 may not be  proper,
\nthat too in view of the dictum laid down by the Apex Court of this land.\n<\/p>\n
                13.   Learned  counsel  for the petitioners submits that there
\nare no required and sufficient averments in the complaint so as to attract the
\noffence under the Act and as such the proceedings against the petitioners  are
\nbound to  be  dropped  placing  reliance in S.N.Bangur & Others v.  M\/s.Klen &
\nMarshalls Mfrs<\/a>.  And Exporters Pvt.  Ltd.  (2002-2-L.W.  (Crl.)  724).    This
\nCourt,  considering  the previous decision of the Apex Court ruled that in the
\nabsence of sufficient  averments  proceeding  against  those  accused  is  not
\nproper.\n<\/p>\n
                14.  In  Katta  Sujatha v.  Fertilizers & Chemicals Travancore
\nLtd<\/a>.  (20 03 SCC (Cri) 151) it is ruled as follows:\n<\/p>\n
“In short the partner of a firm is liable  to  be  convicted  for  an  offence
\ncommitted  by  the firm if he was in charge of and was responsible to the firm
\nfor the conduct of the business of the firm  or  if  it  is  proved  that  the
\noffence  was  committed with the consent or connivance of, or was attributable
\nto any neglect on the part of the partner concerned.”\n<\/p>\n
The ruling in K.P.G.Nair v.  Jindal Menthol India Ltd<\/a>.   (2000(6)  Scale  578)
\nwas confirmed  in  the above case.  In the case involved in the above decision
\nalso it seems that there was no allegation that the Director was  involved  in
\nany of the transactions referred to in the complaint and it is also not stated
\nthat  he  was  incharge of the business and responsible for the conduct of the
\nbusiness of the firm in terms of section 141<\/a> of the Act.  It seems  there  was
\nno  other allegations made against the accused that he had connivance with any
\nother partner in the matter of issue of cheque.   Exactly  more  or  less  the
\nfacts also  fits  in  with  our  present  case.   As quoted supra, there is no
\nallegation against the petitioners stating that these petitioners involved  in
\nany  of the transactions or they have connived with the accused Nos.1 and 2 or
\nthe  offence  was  committed  with  the  consent  of  these   petitioners   or
\nattributable to  any  neglect  act on the part of the petitioners etc.  In the
\nabsence of any such allegations, if we take the complaint as such I should see
\nno case is made out against the petitioners to proceed further  under  section
\n138<\/a> read  with 141 of the Negotiable Instruments Act<\/a>.  On this ground, I am of
\nthe opinion the proceedings against the accused 3 to 7 namely, the petitioners
\nhas to be dropped.\n<\/p>\n
                15.  In the light of the above  discussions,  I  conclude  the
\nproceedings as against the petitioners namely, accused 3 to 7 are liable to be
\ndropped  and  accordingly  dropped  allowing  this  petition to the above said
\nextent.  The trial court is directed to dispose the  case  against  the  other
\naccused.  Consequently, Crl.M.P.No.13018\/2002 is closed.\n<\/p>\n
Index:  Yes.\n<\/p>\n
Website:  Yes.\n<\/p>\n
ns.\n<\/p>\n
To\n<\/p>\n
1.  XIV Metropolitan Magistrate,
\nEgmore, Chennai.\n<\/p>\n
2.  -do- through the Chief Metropolitan
\nMagistrate, Chennai.\n<\/p>\n
M.THANIKACHALAM, J.\n<\/p>\n
\n","protected":false},"excerpt":{"rendered":"
Madras High Court S.Karthick Perumal vs M\/S.Sterling Business Services … on 28 November, 2003 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. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,13],"tags":[],"class_list":["post-256206","post","type-post","status-publish","format-standard","hentry","category-high-court","category-madras-high-court"],"yoast_head":"\nS.Karthick Perumal vs M\/S.Sterling Business Services ... on 28 November, 2003 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/s-karthick-perumal-vs-ms-sterling-business-services-on-28-november-2003\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"S.Karthick Perumal vs M\/S.Sterling Business Services ... on 28 November, 2003 - 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