AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2023 (9) TMI 704
X X X X Extracts X X X X
X X X X Extracts X X X X
....cts of the case:- C/22365/2011 3. The opposite party No. 2 as complainant filed a complaint under Section 138/141 of the Negotiable Instruments Act alleging, inter alia, that in discharge of existing date and liability the accused No. 2 to 4 issued two account payee cheques being No. 045737 dated 1st June, 2011 and 045738 dated 16th June, 2011 for Rs. 65 lakhs each, total being Rs. 1,30,00,000/- drawn on Punjab and Sind Bank, 8 Old Court House Street, Kol-700001. The complainant/company deposited the said cheques to its banker within its validity period on 21st June, 2011. However, the said cheques were dishonoured on the ground that payments were stopped by the drawer. Dishonour of cheque was followed by a demand notice issued by the complainant/company requiring the petitioner and others to repay the cheque amount within statutory period of time. As the accused persons failed to make payment of the said sum, the petitioner/company lodged the aforesaid complaint before the learned Chief Metropolitan Magistrate, Kolkata. The Chief Metropolitan Magistrate transferred the case to the Metropolitan Magistrate, 16th Court, Kolkata who issued process against the accused persons und....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., Kolkata. The Chief Metropolitan Magistrate transferred the case to the Metropolitan Magistrate, 16th Court, Kolkata who issued process against the accused persons under Section 200 of the Cr.P.C without making any inquiry under Section 202 of the Cr.P.C though the petitioner is a permanent resident of Ahmedabad in the State of Gujarat. C/32561/2010 6. The opposite party No. 2 as complainant filed a complaint under Section 138/141 of the Negotiable Instruments Act alleging, inter alia, that in discharge of existing date and liability the accused No. 2 to 4 issued five account payee cheques being No. 760913 dated 30.04.2010 for Rs. 50 lakhs; No. 760914 dated 30.04.2010 for Rs. 50 lakhs; No. 760915 dated 30.04.2010 for Rs. 60 lakhs; No. 760916 dated 05.05.2010 for Rs. 50 lakhs and No. 760917 dated 07.05.2010 for Rs. 50 lakhs, total being Rs. 2,60,00,000/- drawn on Punjab and Sind Bank, 8 Old Court House Street, Kol-700001. The complainant/company deposited the said cheques to its banker within its validity period on 31.07.2016. However, the said cheques were dishonoured on the ground that payments were stopped by the drawer. Dishonour of cheque was followed by a demand notice ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wever, the said cheques were dishonoured on the ground that payments were stopped by the drawer. Dishonour of cheque was followed by a demand notice issued by the complainant/company requiring the petitioner and others to repay the cheque amount within statutory period of time. As the accused persons failed to make payment of the said sum, the petitioner/company lodged the aforesaid complaint before the learned Chief Metropolitan Magistrate, Kolkata. The Chief Metropolitan Magistrate transferred the case to the Metropolitan Magistrate, 16th Court, Kolkata who issued process against the accused persons under Section 200 of the Cr.P.C without making any inquiry under Section 202 of the Cr.P.C though the petitioner is a permanent resident of Ahmedabad in the State of Gujarat. C/23841/2011 9. The opposite party No. 2 as complainant filed a complaint under Section 138/141 of the Negotiable Instruments Act alleging, inter alia, that in discharge of existing date and liability the accused No. 2 to 4 issued two account payee cheque being No.045719 dated 07.09.2010 for Rs. 65 lakhs drawn on Punjab and Sind Bank, 8 Old Court House Street, Kol-700001. The complainant/company deposited t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing date and liability the accused No. 2 to 4 issued four account payee cheques being No. 045749 dated 01.12.2011 for Rs. 65 lakhs, cheque being No. 045750 dated 16.12.2011 for Rs. 65 lakhs, cheque being No. 045751 dated 31.12.2011 for Rs. 65 lakhs, cheque being No. 045752 dated 15.01.2012 for Rs. 65 lakhs total being Rs. 2,60,00,000/- drawn on Punjab and Sind Bank, 8 Old Court House Street, Kol-700001. The complainant/company deposited the said cheques to its banker within its validity period on 17.01.2012. However, the said cheques were dishonoured on the ground payments were stopped by the drawer. Dishonour of cheque was followed by a demand notice issued by the complainant/company requiring the petitioner and others to repay the cheque amount within statutory period of time. As the accused persons failed to make payment of the said sum, the petitioner/company lodged the aforesaid complaint before the learned Chief Metropolitan Magistrate, Kolkata. The Chief Metropolitan Magistrate transferred the case to the Metropolitan Magistrate, 16th Court, Kolkata who issued process against the accused persons under Section 200 of the Cr.P.C without making any inquiry under Section 202 of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The purpose of postponing the issuance of process for the purposes of an enquiry or an investigation is to determine whether or not there is sufficient ground for proceeding. Sub-Section (1) of Section 202 further states that it is obligatory for the Magistrate to conduct an inquiry or direct an investigation in a case where the accused resides at a place beyond the area in which the Magistrate exercises jurisdiction. In such case, the Magistrate was duty bound to postpone the issuance of process. Section 203 stipulates that if the Magistrate is of the opinion on considering the statement on oath, if any, of the complainant and all the witnesses and the result of the enquiry or investigation, if, any under Section 202 that there is no sufficient ground for proceeding, he shall dismiss the complaint recording briefly his reasons for doing so. The requirement of recording reasons which is specifically incorporated in Section 203 does not find place in Section 202. Section 204 which deals with the issuance of process stipulates that if in the opinion of the Magistrate taking cognizance of an offence, there is sufficient ground for proceeding, he may issue (a) in a summons case, a summ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... satisfaction as to the sufficiency of the grounds for proceeding under Section 202. 16. The Hon'ble Supreme Court had got the scope to further elaborate the issue as to why the inquiry under Section 202 of the Code is required to be held in a proceeding under Section 138 of the N.I Act in Sunil Todi & Ors. vs. State of Gujarat & Anr. reported in 2021 (14) SCALE 486. It is observed in Sunil Todi that Section 202 was introduced by Act 25 of 2005 with effect from 23rd June, 2006 the rational for amendment is based on the recognition by parliament that false complaints are filed against the persons residing at far off places as an instrument of harassment. In Birla Corporation Limited vs. Advent Investments and Holdings reported in (2019) 16 SCC 610, the scope of inquiry under Section 202 of the Cr.P.C is held to be extremely restricted onto finding out the truth or otherwise of the allegations made in the complaint in order to determine whether process should be issued or not under Section 204 Cr.P.C or whether the complaint should be dismissed by resorting to Section 203 Cr.P.C on the footing that there is no sufficient ground for proceeding on the basis of the statement of the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hajan Lal & Ors. reported in AIR 1992 SC 604, the history of personal liberty is largely the history of insistence on observance of procedure. Observance of procedure has been the bastion against wanton assaults on personal liberty over the years. Under our Constitution, the only guarantee of the personal liberty for a person is that he shall not be deprived of it except in accordance with the procedure established by law. Thus, it is contended by Mr. Bhattacherjee on behalf of the petitioner that the learned Magistrate failed to conduct inquiry under Section 202 of the Cr.P.C. Such an inquiry is mandatory in connection with the said complaint case as the petitioner resides outside the territorial jurisdiction of the learned Magistrate. 20. Mr. Phiroze Edulji, learned Advocate on behalf of the opposite party, on the other hand submits that for the conduct of inquiry under Section 202 of the Cr.P.C, evidence of witnesses on behalf of the complainant is permitted to be taken on affidavit. In suitable cases, the Magistrate can restrict the inquiry to examination of documents without insisting for examination of witnesses. The above observation was made by the Hon'ble Supreme Court ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....overnment or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.] (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.-For the purposes of this section, - (a) "company" means anybody corporate and includes a firm or other association of individuals; and (b) "director", in relation to a firm, means a partner in the firm." 50. Section 141 of the NI Act stipulates that if a company is alleged to have committed an offence under Section 138, then every person who 'was in charge of, and responsible to, the company for the conduct of the business of the company' shall also ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uticals v. Neeta Bhalla, a three judge Bench while construing the provisions of Section 141 of the Negotiable Instruments Act 1881, has noted that the position of a Managing Director or a Joint Managing Director of a company is distinct since persons occupying that position are in charge of and responsible for the conduct of the business. It was observed that though there is a general presumption that the Managing Director and Joint Managing Director are responsible for the criminal act of the company, the director will not be held liable if he was not responsible for the conduct of the company at the time of the commission of the offence. The Court observed: "9. The position of a managing director or a joint managing director in a company may be different. These persons, as the designation of their office suggests, are in charge of a company and are responsible for the conduct of the business of the company. In order to escape liability such persons may have to bring their case within the proviso to Section 141(1), that is, they will have to prove that when the offence was committed they had no knowledge of the offence or that they exercised all due diligence to prevent t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 141 of the MMDR Act have been fulfilled is a matter of trial. There are sufficient averments in the complaint to raise a prima facie case against them. It is only at the trial that they could take recourse to the proviso to Section 141 and not at the stage of issuance of process. 54. In the present case, it is evident that the principal grounds of challenge which have been set up on behalf of the appellants are all matters of defence at the trial. The Magistrate having exercised his discretion, it was not open to the High Court to substitute its discretion. The High Court has in a carefully considered judgment, analysed the submissions of the appellants and for justifiable reasons has come to the conclusion that they are lacking in substance." 22. Mr. Edulji also refers to an unreported decision of the Hon'ble Supreme Court in Vishwakalyan Multistate Credit Co. Op. Society Ltd. vs. Oneup Entertainment Pvt. Ltd. (Criminal Appeal No. 2484 of 2023) wherein the Hon'ble Supreme Court was pleased to modify the judgment passed by the High Court and directed the trial court to proceed from the stage of Section 202 of the Cr.P.C. While doing so, the learned Magistrate is direc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iry under Section 202 of the Cr.P.C before issuance of process, it is already recorded that the impugned order does not contain any statement to the effect that the learned Magistrate perused the complaint under Section 138/141 of the N.I Act, considered the affidavit of the complainant under Section 145(1) of the N.I Act and examined the documents. Thereafter, he issued process against the accused persons including the petitioner. 26. This Court has already held that Section 202 of the Cr.P.C was introduced in the statute book in order to prevent lodging of false complaint only to cause harassment of innocent persons who reside outside the jurisdiction of the court of the learned Magistrate. When the learned Magistrate on scrutiny of record prima facie came to a decision that process ought to have been issued even against a person who resides outside the jurisdiction of the court of the learned Magistrate and passed an order under Section 204 of the Cr.P.C, it is obvious that the learned Magistrate also took into account the provision under Section 202 of the Cr.P.C. 27. There is another aspect of the matter which this Court is inclined to record. In the petition of complain....