Sanction under section 197 and cheque dishonour complaints: threshold objections could not defeat prosecution, and discharge was set aside.
Sanction under section 197 CrPC was held unnecessary for employees and a director of a Government-owned company because their removal was not dependent solely on Government sanction. In the cheque dishonour complaints, the Court held that section 258 CrPC did not apply to private complaints, the complaints disclosed the ingredients of section 138 of the Negotiable Instruments Act, and preliminary objections on authorisation, alleged joint complaint, security cheques, and stop-payment instruction did not defeat prosecution at the threshold. The discharge order was therefore unsustainable, and the complaints were restored for trial on merits.
Issues: (i) Whether sanction under section 197 of the Code of Criminal Procedure, 1973 was required to prosecute the employees and director of a Government-owned company; (ii) whether the order of discharge passed in private complaints under section 138 of the Negotiable Instruments Act, 1881 could stand on the grounds relied on by the Magistrate, including alleged lack of authorisation, joint complaint, security character of the cheques, and stop-payment instruction.
Issue (i): Whether sanction under section 197 of the Code of Criminal Procedure, 1973 was required to prosecute the employees and director of a Government-owned company.
Analysis: The employees of the company, though treated as public servants within section 21 of the Indian Penal Code, 1860, were removable by the managing director and not only by Government sanction, so the statutory condition for invoking section 197 was absent. As to the director, appointment by the President of India did not by itself make him a Government servant; the relevant articles of association and section 284 of the Companies Act, 1956 showed that he could also be removed by ordinary resolution of the board, so the protection of section 197 was not attracted.
Conclusion: Sanction under section 197 of the Code of Criminal Procedure, 1973 was not required for any of the accused in the company proceedings.
Issue (ii): Whether the order of discharge passed in private complaints under section 138 of the Negotiable Instruments Act, 1881 could stand on the grounds relied on by the Magistrate, including alleged lack of authorisation, joint complaint, security character of the cheques, and stop-payment instruction.
Analysis: Section 258 of the Code of Criminal Procedure, 1973 was inapplicable to private complaints of the present kind, and the complaints themselves disclosed the ingredients of section 138 of the Negotiable Instruments Act, 1881. The complaint was not invalid merely because the company name appeared twice, because it did not amount to a joint complaint by different legal entities. The evidence of authorisation from a company official and the surrounding materials were sufficient to sustain the complaints at the threshold. The fact that the cheques were described as security did not by itself defeat the prosecution where the contractual condition for their presentation was alleged to have remained unfulfilled. A stop-payment instruction did not extinguish liability under section 138 in view of the controlling law on the statutory presumption. On that basis, the discharge order was unsustainable and the matters had to go back for trial on merits.
Conclusion: The discharge in the cheque dishonour complaints was set aside and the complaints were directed to be restored for trial on merits.
Final Conclusion: The revisions concerning sanction were rejected, while the revisions arising from the cheque dishonour complaints succeeded, resulting in restoration of those complaints for adjudication on merits.
Ratio Decidendi: Sanction under section 197 of the Code of Criminal Procedure, 1973 is required only where the accused public servant is removable from office only with Government sanction, and a discharge in a private complaint under section 138 of the Negotiable Instruments Act, 1881 cannot be sustained on preliminary objections that do not negate the statutory ingredients of the offence.
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AI Drafter ✕
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