2022 (11) TMI 555 - HC - Indian Laws

Convictions under Section 138 for Company and Director's Cheque Issuance

The court found a single complaint maintainable for cheques issued on behalf of a company and personal cheques. The existence of a legally enforceable ... Dishonor of Cheque - insufficiency of funds - existence of legally enforceable debt or not - Whether a single complaint in respect of a cheque issued on behalf of the first accused company and two other cheques relating to the personal bank account of the 2nd accused is maintainable? HELD THAT:- Section 143 of N.I.Act contemplates summary trial of the cases, and according to section 262 of Cr.P.C., the procedure prescribed for trial of summons cases is to be followed. Charge is not framed in the trial of summons cases or summary trials, only substance of accusation is stated to the accused. But, for the purpose of analysis, reference may be made to sections 219, 220(1) and 223(a) Cr.P.C. Section 219(1) provides for charging and trial of a person who is accused of committing more offences of the same kind within a space of twelve months, but a single trial for more than three offences is not permitted - If this analysis is applied to the factual situation in the instant case, the transaction in connection with which cheques were issued can be said to be the same. The transaction pertains to loan liability of the first accused-company. Therefore what is deducible is, second accused who stands in dual capacity can be tried together for the dishonour of the cheque of the company and two cheques of his personal bank account. A single demand notice was enough and a single complaint is maintainable. Existence of legally enforceable debt or not - HELD THAT:- There is no effective cross-examination of PW.1 on Ex.P.22. One suggestion found is that the complainant has misused Ex.P.22. That means accused No. 2 does not dispute execution of Ex.P.22 and according to him it was misused. Therefore if on 5.2.2009, Ex.P.22 came into existence nullifying the MoU and other agreements, Ex.D7,D.8 and D.9 can hardly have any effect. If this is the picture obtainable from documentary evidence, the findings of the Magistrate cannot be sustained. A clear conclusion can be drawn that the cheques were issued for discharging part of the liability of the company - It is admitted that the cheques were dishonoured for insufficiency of funds in the bank accounts. Demand notice was issued within the prescribed time. Demand was not fulfilled and thereby penal consequences under Section 138 of N.I. Act ensued. For these reasons, the findings of the Magistrate cannot be sustained. The acquittal judgment requires to be set aside. In regard to dishonour of cheque as per Ex.P.1, the first accused is to be convicted and in terms of section 141 of N.I.Act, accused No. 2 who is its Managing Director is to be sentenced. And in regard to cheques as per Ex.P.2 and Ex.P.3, accused is to be held guilty and sentenced for the offence under section 138 of N.I.Act - Appeal allowed. Issues Involved:1. Maintainability of a single complaint for cheques issued on behalf of a company and personal cheques.2. Whether the complainant proved the existence of a legally enforceable debt.3. The appropriate order to be passed.Issue-wise Detailed Analysis:1. Maintainability of a Single Complaint:The primary legal issue was whether a single complaint regarding a cheque issued on behalf of a company and two other cheques from the personal account of the second accused is maintainable. The court noted that the second accused acted in dual capacities'both as the Managing Director of the company and in his individual capacity. All three cheques were issued in connection with the company's liability, which was undisputed. Under Section 138 of the N.I. Act, the drawer of the cheque is liable for prosecution. The court referred to Sections 219, 220(1), and 223(a) of Cr.P.C., which allow for the joint trial of offences committed in the same transaction. The Supreme Court's judgment in 'Expeditious Trial of Cases under section 138 of N.I.Act' was cited, emphasizing that offences committed as part of the same transaction can be tried jointly. The court concluded that the cheques were issued for the same transaction, i.e., the company's loan liability, making a single complaint maintainable. Thus, Point No. (i) was answered in the affirmative.2. Existence of Legally Enforceable Debt:The court examined whether the complainant proved the existence of a legally enforceable debt. The complainant's evidence included the issuance of cheques by the second accused in both capacities. The defense argued that the complainant, having taken over the company's management, lost the right to enforce the liability. The defense relied on Ex.D.4 (MoU dated 14.2.2008) and other documents to show that the complainant had taken over the company. However, Ex.P.22, a letter dated 5.2.2009, nullified the MoU and confirmed the company's liability. The second accused did not dispute the execution of Ex.P.22 but claimed it was misused. The court found that Ex.P.22 established the company's outstanding liability and the issuance of cheques to discharge part of this liability. The cheques were dishonored due to insufficient funds, and the demand notice was issued within the prescribed time. The court concluded that the findings of the Magistrate were incorrect and that the cheques were issued for discharging part of the company's liability. Point No. (ii) was answered in the negative.3. Appropriate Order:Given the conclusions on Points (i) and (ii), the court set aside the acquittal judgment. The first accused (company) and the second accused (Managing Director) were convicted for the offence under Section 138 of the N.I. Act. The second accused was directed to pay a fine of Rs. 2 Crore for the conviction against the company, with Rs. 1,99,75,000/- as compensation to the complainant and Rs. 25,000/- for prosecution expenses. For the conviction in his personal capacity, the second accused was fined Rs. 75,000/-, with Rs. 70,000/- as compensation to the complainant and Rs. 5,000/- for prosecution expenses. In default of payment, the second accused would serve simple imprisonment for six months and one month, respectively.ORDER:The appeal was allowed, setting aside the judgment of acquittal. Convictions were recorded against the first accused (company) and the second accused (Managing Director) under Section 138 of the N.I. Act, with specified fines and compensation.