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2004 DIGILAW 522 (PAT)

Kishan Mehrotra v. State Of Bihar

2004-05-10

MRIDULA MISHRA

body2004
Judgment Mridula Mishra, J. 1. The petitioner has filed this application for quashing the order dated 28.4.2003 passed by the Judicial Magistrate, 1st Class, Patna, in Complaint Case No. 2457(c) of 2002 by which cognizance has been taken against the petitioner under sec. 420 of the Indian Penal Code and also u/s. 138 of the Negotiable Instruments Act, 1881 . 2. The Bihar State Credit and Investment Corporation Ltd. (BICICO) filed complaint Case No. 2457(c) of 2002 on 29.11.2002 against M/s. Sunil Polyplast Ltd. and its Managing Director and Executive Director, namely, S.K Mehrotra and Kishan Mehrotra. It is stated in the complaint petition that accused No. 1 Sunil Polyplast Ltd. is a Public Limited Company and accused Nos. 2 and 3 are Managing Director, and Executive Director of the company. The accused persons approached the complainant for a term loan and the complainant sanctioned Rs. 90 lacs in favour of the company in the year 1989. Since then accused persons wilfully neglected and failed to pay the amount and the interest thereon, amounting to Rs. 2,95,39,112 as on 30.9.2002. Complainant took legal action under the State Financial Corporation Act, 1951 and also under the Public Demand Recovery Act for realisation of its dues. Subsequent to the initiation of the said recovery proceedings the company submitted a cheque of Rs. 1,28,42,000.00 to the complainant followed by five cheques of Rs. 1 lac each towards the aforesaid dues. Out of these cheques, three cheques were presented for payment before the Bank which were dishonoured. The details of the cheques presented for payment arc as under: --------------------------------------------------------------------- Sl. Cheque Date Amount (Rs.) Drawn on No. No. --------------------------------------------------------------------- 1. 508600 20/09/02 1,28,42,000/- Indian Overseas Bank 2. 508517 18/09/02 1,00,000/- -Do- 3. 508516 29/08/02 1,00,000/- -Do- --------------------------------------------------------------------- 3 The complainant thereafter sent a legal notice to the accused No. 1 under Sec. 138 of the Negotiable Instruments Act, but in spile of receipt of notice the accused person did not pay the loan in question. It is stated in the complaint petition that accused Nos. 2 and 3 are the Director and Promoter of the company and the entire activities of the company are carried out and controlled by them for their gain. It is stated in the complaint petition that accused Nos. 2 and 3 are the Director and Promoter of the company and the entire activities of the company are carried out and controlled by them for their gain. It is alleged that the accused persons acting in conspiracy have cheated the complainant and committed breach of trust and misappropriation of public money and, as such, guilty of offence under Sections 120-B. 420, 406 and 425 of the Indian Penal Code and sec. 138 of the Negotiable Instruments Act. 4. After legal inquiry cognizance was taken u/s. 420 of the Indian Penal Code and sec. 138 of the Negotiable Instruments Act. It is pertinent to state here that one of the accused S.K. Mehrotra, Managing Director of the company preferred Cr. Misc. No. 17009 of 2002 for quashing the entire criminal proceeding as well as the order taking cognizance. This Criminal Misc. application has been decided by order dated 5.4.2004 by a Bench of this Court in which the order of cognizance and the proceeding u/s. 420 of the Indian Penal Code have been quashed so far the proceeding u/s. 138 of the Negotiable Instruments Act is concerned. The application has been dismissed and it will proceed. 5. Mr. K.D. Chatterjee, learned Counsel for the petitioner, has submitted that since the proceeding u/s. 420 of the Indian Penal Code has been quashed in Cr. Misc. No. 17009 of 2003 and the case of the petitioner being similar to the case of S.K. Mehrotra, cognizance taken u/s. 420 of the Indian Penal Code against the petitioner should also be quashed. So far the criminal proceeding in respect of sec. 138 of the Negotiable Instruments Act is concerned, it is stated that the cognizance should be quashed because there is no material for the purpose of fastening the petitioner with any liability under Sec. 138 of the Negotiable Instruments Act. There is no allegation that the cheque was drawn by the petitioner on an account maintained by him with the Bank nor it is alleged that the petitioner is borrower or guarantor, liable for repayment of loan to the complainant. There is no allegation that the cheque was drawn by the petitioner on an account maintained by him with the Bank nor it is alleged that the petitioner is borrower or guarantor, liable for repayment of loan to the complainant. It has also been submitted that merely because the petitioner is alleged to be the Director of the company it is not enough in the eye of law to make him liable for offence u/s. 138 of the Negotiable Instruments Act, in absence of any allegation that at the relevant time when the offence was committed he was either in-charge of or was responsible for the conduct of the business of the company. The complaint does not contain any allegation that the petitioner is in-charge of or responsible for the conduct of the business of the company. The omission amounts to a clear non-compliance of the requirements u/s. 141 of the Negotiable Instruments Act. The complainant in his statement on S.A. did not state anything to the effect that the petitioner approached the complainant-corporation for sanction of loan in question or he was the signatory to the loan agreement. It has clearly been admitted by the complainant that the petitioner had not played any role in the loan transaction and this is sufficient proof of the fact that the petitioner was not at all concerned with the present matter and conduct of the company. Since the material on record fails to disclose any fact that constitutes the ingredients of the offence, continuation of such proceeding against him amounts to an abuse of the process of the Court. Regarding the dishonoured cheques, it has also been slated that the cheques were issued conditionally upon the acceptance of the terms of the compromise offered and not in discharge of any debt. As such, the dishonoured cheques did not contain charge under the provision of sec. 138 of the Negotiable Instruments Act, 6. In reply Mr. Rana Pratap Singh, learned Senior Counsel for the opposite party BICICO submitted that it has not been disputed by the petitioner that the company and its Director owe certain amount to the corporation as loan which was not paid and as a consequence the proceeding of recovery of the same was instituted by the Corporation. In reply Mr. Rana Pratap Singh, learned Senior Counsel for the opposite party BICICO submitted that it has not been disputed by the petitioner that the company and its Director owe certain amount to the corporation as loan which was not paid and as a consequence the proceeding of recovery of the same was instituted by the Corporation. The outstanding debt and the liability are not in dispute and admittedly different post dated cheques were issued in favour of the Corporation in satisfaction of such debt. It has also been admitted that such cheques were presented and dishonoured and despite notice u/s. 138 of the Negotiable Instruments Act, no payment was made. Learned Counsel for the opposite party No. 2 also stated that in para-3 of the complaint petition it has specifically been stated that accused Nos. 2 and 3 are the Director/Promoter of the company and entire activities of the company arc carried out and controlled by these Directors, It has also been stated that the Director/Promoter has also given personal guarantee towards the payment of loan. He has placed reliance on Raj Lakshmi Mills. V/s. Shakti Bhakoo, 2002(8)SCC 236. It was also a case under Sec. 138 of the Negotiable Instruments Act and the point for consideration was whether the provision u/s. 141 of the Negotiable Instruments Act is applicable against the partner who was not in-charge of or responsible for the conduct of the business of the company. It has been held by the Supreme Court that at the stage of summoning when evidence was yet to be led by the parties the High Court could not in assumption of facts come to a finding that the respondent was not responsible for the conduct of the business. 7. The Counsel for the petitioner has placed reliance on State of Haryana V/s. Brij Lal Mitral and Ors., AIR 1998 SC 2327 ; Company Municipal Corporation of Delhi V/s. Ram Kishan Rohtagi and Ors., AIR 1983 SC 67 ; K. P. G. Nair V/s. Jindal Menthol India Ltd., IV (2000) CCR 100=I (2000) BC 243= 2001(10) SCC 218 and Katta Sujatha (Smt.) V/s. Fertilisers and Chemicals Travancore Ltd. and Anr., II (2004) CCR 94 (SC)= 2002(7) SCC 655 . In these decisions it has been held that if except for a bald statement that the accused persons were Directors of the company, there was no other allegations to indicate, even prima facie, that they were in charge of the company and also responsible to the company for conduct of its business. The prosecution against them was to be quashed. After going through these decisions, I find that facts of those cases arc not applicable in the present case. 8. The fact is that admittedly the petitioner is the Executive Director of the company. It is also admitted that a loan was sanctioned in favour of the company which remained unpaid and for which legal proceeding under the State Financial Corporation Act, as well as Public Demand Recovery Act was initiated against the company. In the complaint petition in specific terms it has been stated that the accused Nos. 2 and 3 are Directors/ Promoters of the company and also responsible for looking after the whole business of the company and are beneficiaries of the company. In such a circumstances, in view of sec. 141 of the Negotiable Instruments Act, a person other than the company can be proceeded against, when there is specific averment in the complaint that the accused was responsible to the company for the conduct of its business. It is not essential that the words of sec. 141 be incorporated in a complaint as magic words but substance of the allegation as a whole should answer and fulfil the requirement of the ingredients of the said provision for being proceeded against the accused. In the present case that requirement has clearly been fulfilled and there is no illegality if cognizance u/s. 138 of the Negotiable Instruments Act has been taken against the petitioner. 9. I do not feel inclined to interfere with the impugned order so far it relates to sec. 138 of the Negotiable Instruments Act. Proceeding u/s. 420 of the Indian Penal Code has already been quashed against another accused whose case is similar to that of this petitioner. The proceeding u/s. 420 of the Indian Penal Code is hereby quashed. Prosecution of the petitioner under Sec. 138 of Negotiable Instruments Act will proceed. This application is thus; disposed of.