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2024 (12) TMI 1231
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....fore the High Court ................................................................... 16 B. SUBMISSIONS ON BEHALF OF THE APPELLANT / COMPLAINANT ............................................................................................................................... 19 C. SUBMISSIONS ON BEHALF OF THE RESPONDENT / ACCUSED ........ 20 D. ANALYSIS ........................................................................................................... 22 i. Section 138 of the NI Act .................................................................................. 22 ii. Whether authorized signatory of a company falls within the ambit of the expression "drawer"? ......................................................................................... 29 iii. Meaning of the expression "on an account maintained by him" used in Section 138 of the NI Act ............................................................................................... 34 iv. Scope of the expression "any debt or other liability" appearing in Section 138 of the NI Act .......................................................................................................... 40 ....
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....s lent by him by way of a bearer cheque and Rs. 1,45,000/- was subsequently lent in cash. That is how the accused issued a cheque of Rs. 8,45,000/- for the purpose of discharging his debt towards the complainant. e. However, the said cheque was signed by him in his capacity as a Director of Shilabati Hospital Pvt. Ltd. and was drawn upon the bank account maintained in the name of the hospital. f. There is a stamp of Shilabati Hospital Pvt. Ltd. on the cheque and beneath the signature of the accused there is a stamp of the Director. g. It is not in dispute that the cheque in question came to be dishonoured for want of sufficient funds. h. In such circumstances, the complainant issued a statutory notice to the accused under Section 138 of the NI Act dated 14.08.2006 calling upon him to make the payment within 15 days of the receipt of the notice. 6. The statutory notice referred to above is reproduced herein below: " DATE: 14/8/2006 To Sri Paresh Manna C/o SHILABATI HOSPITAL PVT. LTD. P.O. CHATAL, Distt. Peschim Midnapur Dear Sir, Under the instructions of my client Sri Bijay Kumar M....
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....te complaint in the Court of the A.C.J.M. at Raghunathpur, District Purulia for the offence punishable under Section 138 of the NI Act which came to be registered as Complaint Case No. 39 of 2006. i. Proceedings before the Trial Court 9. As the facts of this case are little peculiar, we deem it necessary to reproduce the entire complaint as under: "In the Court of the A.C.J.M. at Raghunathpur, District Purulia. Complaint Case No. 39 of 2006. Bijoy Kumar Moni son of Sri Murari Mohan Moni, resident of Raghunathpur, P.O. & P.S. Raghunathpur, Dist. Purulia. ...Complainant -Versus- Paresh Manna son of not known c/o. Shilabati Hospital SLP(Crl.) No. 13133 of 2024 Page 7 of 59 Pvt. Ltd., P.O. Chatal, P.S. Ghatal, District East Midnapur. ...Accused Person Offence committed: U/s. 138 of Negotiable Instrument Act, 1881. Date of occurrence: Since August, 2006 onwards. Name of witnesses: 1. Sri Ashoke Mondal s/o. Naba Kumar Mondal, Manager of U.B.I Raghunathpur Branch, Dist. Purulia. 2. Sanjoy Ganguly s/o. Late Dhirendranath Ganguly. 3. Shyamapada Kumbhakar, s/o. Late Gopa....
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....ccused on 28.02.06. 6. That the accused withdrew the sum of Rs. 7,00,000/- and shortly thereafter the accused again approached the complainant for another sum of Rs. 1,45,000/- (One Lac forty five thousand) in presence of the witnesses Nos. 2 and 3. Complainant was hesitant to accede to such request of the accused but latter due to repeatedly insistence the complainant arranged for the sum on the promise of the accused to repay the entire sum very shortly. 7. That the complainant accordingly paid Rs. 1,45,000/- to the accused in presence of Witnesses Nos. 2 and 3 in the early part of March, 2006. 8. That the accused thereafter started avoiding the complainant. However, on 28.04.2006 the accused in discharge of his existing debt and liabilities issued in favour of the complainant at Raghunathpur a cheque bearing No. 997309 for Rs. 8,45,000/- (Eight Lac forty five thousand) on his A/C maintained in Chartered Bank, N.S. Road Kolkata. However the accused while handing over the said cheque requested the complainant not to present the same for encashment before third week of July, 2006. 9. That the complainant as per the instructions of the accused pre....
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....hort "the Cr.P.C."), the Trial Court put a specific question: "11; P.W.1 Sri Bijoy Kr Moni, has stated in his examination-in-chief that, since thereafter you started avoiding the complainant. However, on 28/04/06 you in discharge of your existing debts and liabilities issued a cheque bearing No. 997309 for Rs. 8,45,000/- on your account maintained in chartered Bank. N.S Road. Kolkata. Do you have anything to say about this statement?" 12. To the aforesaid Question No. 11, the accused replied that he had issued the cheque as a security towards a loan transaction. 13. The Question No. 21 in the further statement of the accused reads thus: "21) Qus:- P.W.1 Sri Bijoy Kumar Moni, further stated during in his evidence that, you have prevailed upon the complainant by gaining his confidence took Rs.8,45,000/- and thereafter issued cheque no. 997309 to him with the knowledge that there is no sufficient fund in the account. What do you have to say about his statement?" 14. To the aforesaid question, the answer of the accused was that the cheque was issued by the company as a security towards some mortgage. 15. Upon appreciation of the oral as well as documentary....
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....hroughout the trial the accused/appellant did not place any document or did not adduce any evidence that he, being the Director of Shilabati Hospital Private Ltd., had joint account with the company and that was operated by him for any transaction with that company. Being questioned about getting the confidence of the respondent/complainant to get the entire amount of Rs. 8,45,000/- and subsequent issuance of cheque bearing no. 997309 in discharging the liability of repayment, the accused/appellant took the plea that the said cheque was issued from the company as security of mortgage. But again to the utter surprise in course of trial no document of any mortgage was produced by him to establish the fact that the cheque bearing no. 997309 was issued in discharging the liability as security and the company was liable also for that ground. The appellant tried to shift the onus upon the respondent/complainant, but he could not succeed to that effect. In my considered opinion I am constrained to take into account the plea of the accused that the company was also the accused of that case ad thus the ruling relied upon by the accused/ appellant do not render any support to the contention ....
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....ce. Under the Evidence Act all presumptions must come under one or the other class of the three classes mentioned in the Act, namely, (1) 'may presume (rebuttable), (2) 'shall presume (rebuttable) and (3) 'conclusive presumptions' (irrebuttable). The term 'presumptions' is used to designate inference, affirmative or dis-affirmative of the existence of a fact, conveniently called the 'presumed fact drawn by a judicial tribunal, by a process of probable reasoning from some matter of fact, either judicially noticed or admitted or established by legal evidence to the satisfaction of the tribunal. Presumptions literally means 'taking as true without examination or proof...." (2009) 2 SCC 513. To disprove the presumption, the accused should bring on record such facts and circumstances, upon consideration of which, the Court may either believe that the consideration and the debt did not exist or there non existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. ....
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.... offence in terms of Section 141 of the NI Act, but only if the company was made an accused and held guilty. According to the High Court, as the company was not arraigned as an accused person, the accused as a Director of the said company could not be held vicariously liable for the offence. 20. The High Court placed reliance on the decision of this Court in Himanshu v. B. Shivamurthy and Another reported in (2019) 3 SCC 797 and held that in the absence of the company being arraigned as an accused, the complaint against the accused could not be held to be maintainable. It observed that although the complainant was entitled to the benefit of the presumption under Section 139 of the NI Act as the accused had failed in rebutting the presumption cast upon him, yet in the absence of compliance with the requirements necessary for the applicability of vicarious liability as provided under Section 141, the accused could not have been convicted as a sole accused in the absence of the company being arraigned as an accused and convicted as the principal offender first. The observations made by the High Court are reproduced hereinbelow: "27. The Company is neither a party nor was a....
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....he judgment and order passed by the High Court acquitting the accused of the alleged offence, has come up before this Court with the present appeal. B. SUBMISSIONS ON BEHALF OF THE APPELLANT / COMPLAINANT 23. Mr. Uddyam Mukherjee, the learned counsel appearing for the complainant, vehemently submitted that the High Court committed an egregious error in acquitting the accused on the ground that he could not have been held vicariously liable for the offence said to have been committed by the company in the absence of the company being prosecuted and punished. 24. According to the learned counsel, the transaction in question was between the accused and the complainant. The company was not at all in picture. He submitted that there is nothing on record to indicate that the accused had borrowed the amount for the company or on behalf of the company. 25. He submitted that although the cheque in question might have been issued by the accused containing a stamp of the hospital on it and signed by him in his capacity as a Director of the company, yet the said cheque was issued in discharge of his personal debt. 26. He further submitted that even before the Trial Court, it was....
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....f the NI Act, which consists of Sections 138 to 147, inter alia provides for penalties in case of dishonour of certain cheques for insufficiency of funds in the accounts. Paragraph (xi) of the Statement of the Objects and Reasons specifies the legislative intent behind introduction of Chapter XVII to the NI Act in the following words: "(xi) to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds in the accounts or for the reason that it exceeds the arrangements made by the drawer, with adequate safeguards to prevent harassment of honest drawers." 34. Section 138 of the NI Act reads as under: "138. Dishonour of cheque for insufficiency, etc., of funds in the account.- Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it....
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....an agreement made with the bank; (iv) the payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; (v) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice." 36. In the case on hand, the cheque in question came to be signed by the accused, in his capacity as the Director and Authorised Signatory of the Company Shilabati Hospital Pvt. Ltd., on the account maintained by the Company with the Standard Chartered Bank. Hence, the question that falls for our determination is whether the accused could be said to be covered by the expression "account maintained by him" as it appears in Section 138 of the NI Act. In other words, could it be said that the accused was "maintaining" the bank account upon which the dishonoured cheque had been drawn. 37. Section 6 of the NI Act inter alia defines a "cheque" as a bill of exchange d....
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.... point for decision in this appeal is whether a complaint under Section 138 of the 1881 Act would be maintainable against a person who was not the drawer of the cheque from an account maintained by him, which ultimately came to be dishonoured on presentation. xxx xxx xxx 13. From a reading of the said section, it is very clear that in order to attract the provisions thereof a cheque which is dishonoured will have to be drawn by a person on an account maintained by him with the banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part of any debt or other liability. It is only such a cheque which is dishonoured which would attract the provisions of Section 138 of the above Act against the drawer of the cheque. 14. In the instant case, the cheque which had been dishonoured may have been issued by Respondent 11 for discharging the dues of Appellant 1 Company and its Directors to Respondent 1 Company and the respondent Company may have a good case against Appellant 1 Company for recovery of its dues before other fora, but it would not be sufficient to attract the provisions of Section 138 of th....
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....company. ii. Whether authorized signatory of a company falls within the ambit of the expression "drawer"? 43. This Court in one of its recent decisions in the case of Shri Gurudatta Sugars Marketing (P) Ltd. v. Prithviraj Sayajirao Deshmukh and Others reported in 2024 SCC OnLine SC 1800 had the occasion to consider the issue of whether the authorised signatory of a company who had signed a cheque drawn on the bank account of the company and which got dishonoured subsequently could be held to be liable for the payment of interim compensation under Section 143A of the NI Act. This Court while answering the issue in the negative, applied the doctrine of separate corporate personality and held that it is only the drawer of the cheque who could be held to be liable for the payment of interim compensation under Section 143A of the NI Act and the authorised signatory of a company cannot be said to be the drawer of the cheque. The relevant observations made by the Court are reproduced hereinbelow: "13. The appellant has challenged the judgment and order of the High Court dated March 29, 2023 as well as the relied upon judgment and order dated March 8, 2023. The present appea....
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....pecifically to the issuer of the cheque, not the authorised signatories. 31. The principle of statutory interpretation, particularly in relation to sections 143A and 148, was also correctly applied by the High Court. The court emphasised that when statutory language is clear and unambiguous, it should be given its natural and ordinary meaning. The legislative intent, as discerned from the plain language of the statute, aims to hold the drawer accountable. The appellants' argument for a broader interpretation to include authorised signatories under section 143A contradicts this principle and would lead to an unjust extension of liability not supported by the statutory text." ( Emphasis supplied ) 44. In yet one another decision of this Court in the case of N. Harihara Krishnan v. J. Thomas reported in (2018) 13 SCC 663, while dealing with the issue of commission of an offence under Section 138 of the NI Act by a company, the Court observed that Section 138 only contemplates the drawer of the cheque to be responsible for the commission of the offence. It is only by virtue of Section 141 that certain persons other than the drawer of the cheque can be made liable f....
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....Dakshin did not make any grievance of such summoning. It is always open to Dakshin to raise the defence that the initiation of prosecution against it is barred by limitation. Dakshin need not necessarily challenge the summoning order. It can raise such a defence in the course of trial. xxx xxx xxx 27. By the nature of the offence under Section 138 of the Act, the first ingredient constituting the offence is the fact that a person drew a cheque. The identity of the drawer of the cheque is necessarily required to be known to the complainant (payee) and needs investigation and would not normally be in dispute unless the person who is alleged to have drawn a cheque disputes that very fact. The other facts required to be proved for securing the punishment of the person who drew a cheque that eventually got dishonoured is that the payee of the cheque did in fact comply with each one of the steps contemplated under Section 138 of the Act before initiating prosecution. Because it is already held by this Court that failure to comply with any one of the steps contemplated under Section 138 would not provide "cause of action for prosecution". Therefore, in the context of a p....
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....e the authority to manage the bank accounts of the company, issue and sign cheques on its behalf, etc. which may be delegated to an authorised signatory. However, such authorisation would not render the authorised signatory as the maker of those cheques. It is the company alone which would continue to be the maker of these cheques, and thus also the drawer within the meaning of Section 7 of the NI Act. 46. The authorised signatory is merely the physical limb that signs and makes the cheque on behalf of the company's incorporeal personality. The company, for all purposes, continues to remain the drawer of the cheques. If the interpretation as being canvassed by the complainant is accepted then even an employee of the Company, who on account of his being an authorized signatory signs a cheque issued by the Company towards discharge of the debt or other liability of the Company, would be liable to prosecution and conviction under Section 138 of NI Act even after he resigns from the company and is no more in its employment. This certainly could not have been the intention of the legislature. Even the vicarious liability created under Section 138 of NI Act would not be attracted in r....
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....as been construed by a learned Single Judge of the Kerala High Court in the case of P.N. Salim v. P.J. Thomas & Another reported in 2004 SCC Online Ker 269 to also include those cases where the cheque was issued by the drawer after the closure of the account maintained by him with the bank. The High Court said so having regard to the underlying object behind the enactment of Section 138. A similar view was taken by the Gujarat High Court in the case of Hashmikant M. Seth v. State of Gujarat & Anr. reported in 2004 SCC Online Guj 300. We are in agreement with both the High Courts on the understanding of the expression "on an account maintained by him". 49. We are in seisin of the fact that in the case at hand, the accused had allegedly borrowed the amount from the complainant on the pretext that he was in need of financial help regarding some infrastructure development project he was undertaking. Nothing was brought on record during the course of the trial which would suggest that there was some sort of an understanding between the complainant and the accused that the debt of the accused would be discharged by the Shilabati Hospital Pvt. Ltd. A perusal of the notice issued by the....
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....h the Explanation to the provision is wide enough to bring any debt or liability which is legally enforceable within its fold. Thus, the requirement under the provision is that the debt or any other liability has to be legally enforceable and the emphasis is not on the existence of such debt or other liability between the drawer and the payee. A number of decisions of this Court have clarified that even those cases where a person assumes the responsibility of discharging the debt of some other person, and in furtherance thereof draws a cheque on an account maintained by him, which subsequently gets dishonoured upon being presented before the drawee, would be covered by Section 138 if the payee is able to establish that there was some sort of an arrangement by way of which the debt was assumed by the drawer. 53. This Court in the case of Anil Sachar and Another v. Shree Nath Spinners Private Limited and Others reported in (2011) 13 SCC 148 observed thus: "15. Upon perusal of the record, we find that the complainants had established before the trial court that there was an understanding among the complainants and the accused that in consideration of supply of goods to M/s....
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....he presumption must go in favour of the holder of the cheques. Unfortunately, the trial court did not consider the above facts and came to the conclusion that there was no consideration for the cheques which had been given by M/s AT Overseas Ltd. to the complainants." ( Emphasis supplied ) 54. In another judgment delivered by this Court in ICDS Ltd. v. Beena Shabeer and Another reported in (2002) 6 SCC 426, reference was made to the nature of liability which is incurred by the one who is a drawer of the cheque and observed that if the cheque is given towards any liability or debt which might have been incurred even by someone else, the person who is the drawer of the cheque can be made liable under Section 138 of the Act. The relevant observations made therein are reproduced hereinbelow: "10. The language, however, has been rather specific as regards the intent of the legislature. The commencement of the section stands with the words "Where any cheque". The abovenoted three words are of extreme significance, in particular, by reason of the user of the word "any" - the first three words suggest that in fact for whatever reason if a cheque is drawn on an account ....
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....e debt. However, in the absence of the drawer of the cheque having been arraigned as an accused, it was rightly held by the High Court that no prosecution could have proceeded against the accused in his personal capacity. The only way by which the accused could be held liable was under Section 141 of the NI Act, however the same could not have been done in the absence of the company being arraigned as an accused. This position of law has been explained by a number of decisions of this Court. A three-Judge Bench of this Court in Aneeta Hada v. Godfather Travels and Tours Private Limited reported in (2012) 5 SCC 661 observed thus: "17. The gravamen of the controversy is whether any person who has been mentioned in Sections 141(1) and 141(2) of the Act can be prosecuted without the company being impleaded as an accused. To appreciate the controversy, certain provisions need to be referred to. xxx xxx xxx 58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words "as well as the company" appearing in....
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....on 482 of the CrPC in a case where the Director of the company was arraigned as the sole accused for the dishonour of a cheque drawn upon the bank account held in the name of the company. Reiterating the principles laid down in Aneeta Hada (supra), this Court upheld the decision of the High Court in quashing the complaint case. 58. In yet another decision of this Court in Mainuddin Abdul Sattar Shaikh v. Vijay D. Salvi reported in (2015) 9 SCC 622, the facts interestingly were virtually opposite to the facts of the case on hand. In the said case, the accused, who was the Managing Director of a company had issued a cheque drawn on his personal account in discharge of the liability of the company. The cheque later came to be dishonoured and a private complaint was lodged against the accused under Section 138 of the NI Act. Both the trial court and the High Court acquitted the accused on the ground that the company was not made a party to the proceedings. However, this Court set aside the order of acquittal and held the accused liable for the offence under Section 138. It was observed by this Court that as the cheque was drawn by the accused on an account maintained by him, the Com....
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....n offence by the company is an express condition precedent and only when the prosecution is maintainable against the Company that the persons mentioned in the other categories under Section 141 can be vicariously made liable for the offence committed under Section 138 of the NI Act. The relevant observations are reproduced hereinbelow: "53. It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant. xxx xxx xxx 58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words "as well as the company" appearing in the section make it absolutely unmistakably c....
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.... can be continued even in absence of the Company. We, accordingly, set aside that part of the impugned judgment dated 13-8-2007 [Visionaries Media Network v. Star India (P) Ltd., Criminal Misc. Case No. 2380 of 2004, decided on 13-8-2007 (Del)] passed by the High Court so far as it relates to the appellant and quash the summons and proceeding pursuant to Complaint Case No. 698 of 2001 qua the appellant." ( Emphasis supplied ) 61. This Court's decision in Ashok Shewakramani and Others v. State of Andhra Pradesh and Another reported in (2023) 8 SCC 473 acknowledged the normal rule that there cannot be any vicarious liability under a penal provision but however, held that Section 141 of the NI Act is an exception to this rule. It further stated that vicarious liability would only be fastened when the person who is sought to be held vicariously liable was "in charge of" and "responsible to the Company" for the conduct of the business of the Company at the time when the offence under Section 138 was committed. In circumstances where such persons are indeed found vicariously liable, those persons as well as the Company shall be deemed to be guilty of the offence under Section....
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..... It was also contended by the petitioner therein that the provisions of Section 141 of the NI Act would have no applicability to a case involving a proprietorship concern as the same is not owned by a collection of individuals but a single person. 64. The High Court while rejecting the contention of the petitioner therein, adverted to the object of Section 138 of the NI Act to hold that the authorized signatory could be said to be the drawer of the cheque as he was "maintaining" the account held in the name of the proprietorix concern and thus could be held liable under Section 138 of the NI Act. 65. We find it difficult to subscribe to the view taken by the High Court in the aforesaid decision. The High Court referred to an extract from the 11th Edition of the commentary on the NI Act by Bhashyam and Adiga wherein the liability of the principal for the acts of the agents has been discussed and erroneously relied upon it to attribute liability to the petitioner therein, who was the agent acting on behalf of the proprietorix concern. 66. The position of law as has been settled by this Court and reiterated in a legion of decisions is that it is only the drawer of the cheque....
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....sued on an account maintained by the hospital, the requirement of Section 138 of the Act cannot be said to have been complied with. 70. It would have been altogether a different situation if the accused was prosecuted in his capacity as a Director of the Shilabati Hospital. In such a scenario, the cheque drawn by him on an account maintained by the Company would have satisfied the requirement of Section 138 of the Act but as the accused has been proceeded against for an offence under Section 138 of the Act in his individual capacity and inasmuch as the cheque dishonoured for insufficiency of funds was drawn on the account maintained by the Company, namely, Shilabati Hospital Pvt. Ltd., and not by the accused herein, no offence could be said to have been committed under Section 138 of the Act. The High Court rightly held that in the absence of the principal offender having been arraigned as an accused, prosecution for the commission of an offence under Section 138 of the NI Act could not have proceeded against the accused. 71. As is evident from the discussion in the preceding parts of this judgment, the requirement of Section 138 of the NI Act is that for fastening criminal l....