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1998 DIGILAW 1232 (MAD)

Coronation Printing Ink Manufacturing Company and Others v. Elgi Finance Limited

1998-09-11

M.KARPAGAVINAYAGAM

body1998
Judgment :- M. KARPAGAVINAYAGAM, J. The first petitioner, the company and petitioners Nos. 2 to 4, the partners have filed this application under section 482 of the Criminal Procedure Code, 1973, seeking to quash the proceedings initiated in the private complaint at the instance of the respondent/complainant in C.C. No. 251 of 1997 on the file of the learned Judicial Magistrate, No. 6, Coimbatore, for the offence under section 138 of the Negotiable Instruments Act. The short facts are. - The first accused is a partnership finance company and the others are its partners. The company is carrying on financing business. The accused approached the complainant-company and requested it to extend revolving purchase bill discounting facility. Accordingly, the complainant extended revolving purchase bill discounting facility to the accused vide Hundi Nos. 18, 19, 20, 21 and 22 amounting to Rs. 20, 00, 000. The maturity date for repayment of the above amount was November 19, 1996. In the event of failure to make payment within the stipulated time, the accused have to pay the amount along with 42 per cent. penal interest. As on April 22, 1997, the accused were liable to pay Rs. 23, 03, 781 inclusive of additional factoring charges. Hence, on behalf of the first petitioner, the company, the second petitioner had issued a cheque dated April 22, 1997, drawn in favour of the complainant-company on Tamil Nadu Mercantile Bank Limited, Anna Salai, Chennai, for the said sum. The said cheque was presented in the bank on April 22, 1997. The same was returned to the complainant on April 28, 1997, with an endorsement "funds insufficient". So the complainant issued legal notice on April 30, 1997, and the same was served on the first petitioner on May 2, 1997, and on others on May 3, 1997. There was neither reply nor payment. Hence, the complainant filed the abovesaid complaint for the offences under sections 138 and 141 of the Negotiable Instruments Act. On receipt of the summons in the above complaint in C.C. No. 251 of 1997 on the file of learned Judicial Magistrate, No. 6, Coimbatore, the petitioners appeared before the court and received the copies. Challenging the above proceedings before the commencement of the examination of the witnesses, the petitioners have presented this application to quash the same before this court.Mr. Challenging the above proceedings before the commencement of the examination of the witnesses, the petitioners have presented this application to quash the same before this court.Mr. Thangaraj, counsel appearing for the petitioners, would press into service the following contentions : (i) The cheque amount was only a sum of Rs. 23, 03, 781. But the statutory notice was sent calling upon the petitioners to pay a sum of Rs. 23, 03, 781 together with the incidental charges of Rs. 5, 770 spent on the said cheque on its presentation to the bank within 15 days from the receipt of the notice. As per section 138(b) of the Act, the complainant is entitled to send the legal notice only for the said cheque amount and not more than that. Since the notice in the instant case was sent demanding more amount, the notice has become invalid and as such, the proceedings are vitiated. (ii) The cheque was issued by the company, the first petitioner, signed by the second petitioner. The other two petitioners are mere partners. As per section 141 of the Negotiable Instruments Act, the complaint could be filed against the company as well as against the partners who are in charge of and responsible for, the day-to-day affairs of the company. Both in the complaint and the sworn statement there are no averments that petitioners Nos. 3 and 4 are in charge of and responsible for the conduct and affairs of the company. Though the first petitioner being the company and the second petitioner being the partner who had signed the cheque, may be liable to be tried for the said offence, petitioners Nos. 3 and 4 cannot be made liable. Mr. 3 and 4 are in charge of and responsible for the conduct and affairs of the company. Though the first petitioner being the company and the second petitioner being the partner who had signed the cheque, may be liable to be tried for the said offence, petitioners Nos. 3 and 4 cannot be made liable. Mr. Rupert Barnabas, counsel appearing for the respondent, would contend that the notice demanding the cheque amount together with the incidental charges would not make the notice invalid, since there is no bar, that all the petitioners received the notice, but they have not chosen to reply to the same and that therefore, the trial court has to find out whether all the petitioners are in charge and responsible only during the course of trial and as such, the petition for quashing is liable to be dismissed.Regarding the first point, I must, at the very outset, say that the statutory notice demanding the cheque amount as well as the incidental charges, is perfectly valid in law, inasmuch as the complainant has got both the remedies by approaching the criminal court as well as the civil court. For punishing the accused for the offences committed, the complainant can resort to penal action by approaching the criminal court under section 138 of the Negotiable Instruments Act. Similarly, in order to get the relief of recovery of the cheque amount, incidental charges and interest, the complainant is at liberty to approach the civil court under Order 7, rule 1 or Order 37, rule 1 of the Civil Procedure Code. Under such circumstances, the notice issued in the instant case by the complainant is perfectly valid, as the complainant can avail of both the remedies in both the jurisdictions, as he has got a legal right to proceed against the petitioners before the criminal court as well as the civil court. No law contemplates that there should be separate notices one to be used before the criminal court and other before the civil court. All that section 138(b) of the Act requires is that the drawee of the cheque should make a demand for the payment of the cheque amount by giving notice within 15 days from the receipt of intimation from the bank. It may be the cheque amount or inclusive of the cheque amount. All that section 138(b) of the Act requires is that the drawee of the cheque should make a demand for the payment of the cheque amount by giving notice within 15 days from the receipt of intimation from the bank. It may be the cheque amount or inclusive of the cheque amount. In the present case, the respondent/complainant had notified to the petitioners about the bouncing of the cheque and demand for payment of the cheque amount as well as incidental charges occurred on the presentation of the said cheque within time. Therefore, demand for the payment of the amount relating to the cheque though it is more than the cheque amount, is legally permissible, as it would certainly satisfy the requirements of the statutory notice as contemplated under section 138(b) of the Act.The above view of mine has been fortified by this court in the decision in Kiran v. Ghansyamdas 1992 2 ILR 1060. The relevant observation by Hon'ble Justice Pratap Singh (as he then was) is this : "Regarding the third submission, I have to only say that because some more amount is claimed in the notice apart from the amount which the cheque bears, that would be a superfluous one but it will not invalidate the notice. If the amount mentioned in the cheque has been demanded in the notice, that would suffice and satisfy the requirement of clause (b) of the proviso to section 138 of the Act." Therefore, the first point is answered against the petitioners. Regarding the second point, counsel for the petitioners would state that the proceedings as against petitioners Nos. 3 and 4, at any rate, have got to be quashed, inasmuch as there are no averments that they are in charge of and responsible for the conduct and day-to-day affairs of the company. This contention, in my view, has got some force. Admittedly, petitioners Nos. 3 and 4 have not signed the cheque. There is no material as on date through the complaint, sworn statement and other documents filed before the court that petitioners Nos. 3 and 4 were in charge and responsible. To be made liable, the complainant must first show that the petitioners were in charge of and responsible to the company at the time when the offence was committed. There is no material as on date through the complaint, sworn statement and other documents filed before the court that petitioners Nos. 3 and 4 were in charge and responsible. To be made liable, the complainant must first show that the petitioners were in charge of and responsible to the company at the time when the offence was committed. Whatever be the liability of the petitioners to pay the amount under the cheque, in the absence of any averment in the complaint that the petitioners were in charge of and responsible to the company, the complaint cannot be legally sustained as against those petitioners. On a similar situation, the apex court in the decision in Municipal Corporation of Delhi v. Ram Kishan Rohtagi, while confirming the order of the High Court quashing the proceedings as against the directors, would observe as follows (page 70) : "So far as the directors are concerned, there is not even a whisper nor a shred of evidence nor anything to show, apart from the presumption drawn by the complainant that there is any act committed by the directors from which a reasonable inference can be drawn that they could also be vicariously liable. In these circumstances, therefore, we find ourselves in complete agreement with the argument of the High Court that no case against the directors (accused Nos. 4 to 7) has been made out ex facie on the allegations made in the complaint and the proceedings against them were rightly quashed." In the light of the above observation, it is clear that unless there is a basic foundation through the relevant averments as against the partners, as indicated above, it cannot be said that all the partners shall be proceeded against, though they have not signed the cheque and have not participated in the day-to-day affairs of the company. It is brought to my notice that this court in N. Doraisamy v. Archana Enterprises 1995 Crl. LJ 2306; held that those averments are not necessary. However, this judgment has been considered in Col. It is brought to my notice that this court in N. Doraisamy v. Archana Enterprises 1995 Crl. LJ 2306; held that those averments are not necessary. However, this judgment has been considered in Col. R. S. Agarwal v. Ashok Leyland Ltd. 1998 1 LW (Crl.) 24, on the strength of the decisions in Municipal Corporation of Delhi v. Ram Kishan Rohtagi, and Sham Sunder v. State of Haryana, and it has been held that the proceedings are liable to be quashed against the partners unless it is mentioned in the complaint or any material shown before the court at the time of taking the complaint on file. I am in entire agreement with the reasonings given in Col. R. S. Agarwal v. Ashok Leyland Ltd. 1998 1 LW (Crl.) 24. I may add some reasonings to arrive at the said conclusion.Section 141 of the Negotiable Instruments Act deals with the offences by companies which includes the firm or other association of the individuals, which reads as follows : "141. Offences by companies. - (1) If the person committing an offence under section 138 is a company every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be the guilty of the offence and shall be liable to be proceeded against and punished accordingly : Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence." Though there is a deeming provision with reference to the guilt of the offence, it shall be the duty of the complainant to first make a mention about the role of each of the accused with reference to the offence. It must be pointed out that in criminal cases, the court is concerned with the criminal liability on the basis of the part played by each of the partners or directors of the company, as it is not a civil liability and there is no vicarious liability in criminal law. Therefore, section 141 does not make all the partners liable for the offence whether they do business or not. Therefore, section 141 does not make all the partners liable for the offence whether they do business or not. The apex court, while dealing with such a situation, would give an emphatic note of caution stating that there may be partners, better known as sleeping partners who are not required to take part in the business of the firm and that there may be ladies and minors who were admitted to the benefits of partnership and that they may not know anything about the business of the firm.Therefore, it would be a travesty of justice to prosecute all the partners including the ladies and minors and ask them to prove under the proviso to sub-section (1) of section 141 that the offence was committed without their knowledge. In other words, it is for the accused to establish under the proviso that the offence took place without his knowledge, only when the complainant establishes the said condition mentioned in sub-section (1), namely, the active role of the partners is established. So on these reasons, I am of the view that the proceedings as against petitioners Nos. 3 and 4 are liable to be quashed and accordingly quashed. As far as petitioners Nos. 1 and 2 are concerned, since the second petitioner issued the cheque on behalf of the first petitioner, they are liable to face the trial. So, the trial court is directed to go on with the trial in so far as petitioners Nos. 1 and 2 are concerned and dispose of the same in accordance with law. With the above observations, the criminal original petition is partly allowed. Consequently, Crl. M.P. No. 4641 of 1997 stands dismissed. After the pronouncement of the order, Mr. S. N. Thangaraj, learned counsel for the petitioners has filed an affidavit sworn by the first and second petitioners, stating that the second petitioner is a person, who is in charge of the business transactions of the first petitioner and hence, he would undertake to settle the cheque amount of Rs. 23, 03, 781 by way of making payment of Rs. 1, 00, 000 (rupees one lakh only) on every English calendar month commencing from December 15, 1998, onwards. The second petitioner is present before this court. Mr. Rupert Barnabas appearing for the respondent, who is also present before the court would agree for this settlement. 23, 03, 781 by way of making payment of Rs. 1, 00, 000 (rupees one lakh only) on every English calendar month commencing from December 15, 1998, onwards. The second petitioner is present before this court. Mr. Rupert Barnabas appearing for the respondent, who is also present before the court would agree for this settlement. Therefore, the trial court is directed to verify the compliance with this undertaking and then proceed with the case, in accordance with law. In the event of failure of this undertaking, the trial court is directed to go on with the trial. Any non-compliance with the undertaking given by the second petitioner would certainly give liberty to the respondent to file the necessary petition to bring to the notice of this court for necessary action.