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2008 DIGILAW 1016 (DEL)

M. Abdul Haque v. Birla Yamaha Limited

2008-11-03

KAILASH GAMBHIR

body2008
KAILASH GAMBHIR, J. By way of this common order bearing Crl. M.C. Nos. 2235/07 and 1399/08 filed by the petitioners under Section 482 Cr.P.C. seeking quashing of complaint case No. 705/4/2004 and complaint case No. 708/4/2004 in Crl.M.C. No. 2235/07 and CC No. 6224/1/04 in Crl. M.C. No. 1399/08 filed by the respondent under Section 138 of the Negotiable Instruments Act are being disposed of. The fundamental question raised by the petitioners in the present case is as to whether the petitioners, who are not the signatories of the dishonoured cheques, can be made to face criminal prosecution under Section 138 of the Negotiable Instruments Act simply on account of the fact that once the petitioner No. 2 was partner in M/s Universal Engineering Co. on whose behalf one of their partner had issued the cheques in his individual and personal capacity and from his own saving bank account. Before deciding the said question it would be appropriate to give brief facts of the case as under:- The petitioner No.2 viz. Mrs. Zulnar Haque and one Mr. P. Mohankrishnan started M/s Universal Engineering Co. in the year of 1994 as their unregistered partnership concern, which was engaged in business of canvassing and booking orders on behalf of respondent/complainant and stocking the Birla Yamaha Portable Generators which are manufactured by the respondent/complainant Company. The petitioner No. 1 viz. M. Abdul Haque is the husband of petitioner No.2 and he has nothing to do with the business and affairs of the M/s Universal Engineering. Therefore, the Petitioner No.1 is nowhere connected with the activities of M/s Universal Engineering and he is not at all connected for the trading and business of M/s Universal Engineering. During the course of business certain dispute arose between the complainant and the Petitioner No.2 as well one Mr. P. Mohankishnan with regard to the conduct of the business and also concerning some dues. The detailed business meetings were held on 12.02.1998 and 13.02.1998 between representatives of the Respondent/complainant (Birla Yamaha Ltd.) with the partners of M/s Universal Engineering. In these meetings, the Respondent/complainant (Birla Yamaha Ltd.) herein was represented by Sh. Sandeep Kapoor “ DGM (MKTG), Sh. Rakesh Sharma -- Senior Manager Accounts, Sh. G. Swaminathan “ Sr. Manager Marketing, Sh. K. Balamurugan “ Area Sales Manager and Sh. K. Ramachandran, Sr. Asst. Engr. In these meetings, the Respondent/complainant (Birla Yamaha Ltd.) herein was represented by Sh. Sandeep Kapoor “ DGM (MKTG), Sh. Rakesh Sharma -- Senior Manager Accounts, Sh. G. Swaminathan “ Sr. Manager Marketing, Sh. K. Balamurugan “ Area Sales Manager and Sh. K. Ramachandran, Sr. Asst. Engr. On the other hand M/s Universal Engineering was represented by its both the partners Mr. P. Mohankrishnan and the 2nd Petitioner viz. Mrs. Zulnar Haque. In these business meetings, the parties arrived at the conclusion that Mr. P. Mohankrishnan agreed to liquidate the outstanding of Rs. 9,82,765/-and ready to make the payment in the form of cheques bearing Nos. 332611 to 332620, Dhanalakshmi Bank, Coimbatore, Tamil Nadu and in case of any default, the complainant reserved their rights in taking immediate legal action for the recovery of the above from Mr. P. Mohanakrishnan. True copy of the minutes of these meetings held on 12th and 13th February 1998 was accepted and signed on 13.02.1998 by Sh Sandeep Kapoor “ DGM (MKTG), Sh. Rakesh -- Sr. Manager Marketing, Sh. K. Balamurugan - Area Sales Manager and Sh. K. Ramachanderan, Sr. Asst. Engr. on behalf of respondent/complainant. As per the minutes of the meeting dated 13.02.1998 and in order to discharge his own monetary obligation, Mr. P. Mohanakrishnan, the partner of M/s Universal Engineering in his individual capacity and liability issued cheque bearing No. 332617 dated 25.06.2001 of Rs.4,00,00.00/- (Rupees Four Lacs Only), cheque No. 332618 dated 27.06.2001 of Rs.5,00,000.00/- (Rupees Five Lacs only), cheque No. 332619 dated 19.06.2001 of Rs.2,50,000.00/- (Rupees Two Lacs Fifty Thousand only) and cheques No. 332620 dated 30.06.2001 of Rs.2,78,134.00/-(Rupees Two Lacs Seventy Eight Thousand One Hundred Thirty Four only) from his personal account maintained by him i.e. in Dhanalakshami Bank Ltd. Gandhipuram, Coimbatore “ 641012 in favour of respondent/complainant herein. The Respondent/Complainant herein filed two Complaint Cases i.e., CC No. 705/1/07 and C.C. 708/1/07 against the M/s Universal Engineering Co., Mr. P. Mohanakrishnan and against both the petitioners herein in the Patiala House Court, New Delhi as the above mentioned cheques issued by Mr. P. Mohankrishnan in favour of Respondent/Complainant from his personal account maintained by him in Dhanalakshami Bank Ltd. Gandhipuram, Coimbatore “ 641012 in order to discharge his liability were dishonoued for the reason of “Account Closed”. Mr. P. Mohanakrishnan and against both the petitioners herein in the Patiala House Court, New Delhi as the above mentioned cheques issued by Mr. P. Mohankrishnan in favour of Respondent/Complainant from his personal account maintained by him in Dhanalakshami Bank Ltd. Gandhipuram, Coimbatore “ 641012 in order to discharge his liability were dishonoued for the reason of “Account Closed”. Mr. S. Nanda Kumar, counsel appearing for the petitioner vehemently contended that vide minutes of meeting dated 13.2.1998, which were duly agreed and accepted by the parties, Mr. P. Mohankrishnan drawer of the cheques in question had agreed to pay the outstanding liability of the partnership firm to the extent of Rs. 9,82,765/-. Counsel further submitted that pursuant to the said agreement between the parties the cheques in question were issued by the said Mr. P. Mohankrishnan in his own individual capacity from his own saving bank account and it was made clear that in case of any default on the part of Mr. P.Mohankrishnan then the legal action will be taken by the respondent against Mr. P.Mohankrishnan alone and not against the other partners of the firm. Placing reliance on Section 138 of the Negotiable Instruments Act the counsel submitted that since the cheques were issued by Mr. P. Mohankrishnan in his individual capacity and, therefore, the complaint as filed by respondent No. 2 as against the petitioners, who are neither the signatories to the said cheques nor drawer of the said cheques can be made liable to face prosecution under Section 138 of the Negotiable Instruments Act. Opposing the said submission, counsel appearing for the respondent submitted that the petitioners being the partners of M/s Universal Engineering Co. cannot escape from their liability. Counsel for the respondent further submitted that in para 2 of the complaint case it has been clearly stated that M/s Universal Engineering Co. is a partnership concern and the present petitioners along with Mr. P. Mohankrishnan are its partners and incharge of and responsible to the said company for the conduct of its day to day business. In para 5 of the complaint it has also been stated that the said accused No.2 Mr. is a partnership concern and the present petitioners along with Mr. P. Mohankrishnan are its partners and incharge of and responsible to the said company for the conduct of its day to day business. In para 5 of the complaint it has also been stated that the said accused No.2 Mr. P. Mohanakrishnan had issued cheques in question being the partner of the said firm towards the legally enforceable dues of the said firm and therefore, as per the contention of the counsel for the respondent all the partners are jointly and severally liable to pay the amount of debt against which the said cheques in question were issued by one of the partners. Counsel thus sought to urge that the issuance of the cheques by Mr. P.Mohankrishnan were not in his individual capacity, but in the capacity of partner of the firm and respondent No. 2 had accepted the said cheques only recognizing the said Mr. P.Mohankrishnan in his capacity as partner and not any individual unconnected with the said outstanding liability of their firm. Counsel for the respondent further submitted that the present petition has been filed by the petitioners with dishonest intentions as after seeking stay of their arrest, they have been delaying the service of the notice upon the respondent. Highlighting the conduct of the petitioners further, counsel submitted that even before the Trial Court the petitioners never disclosed the fact of filing of the present petition so as to prevent the respondent to appear before this Court in the present petition. Counsel also submitted that even petitioner No. 2 has not signed the present petition nor any affidavit in support of the petition has been filed by her and therefore, also the present petition cannot be held to be maintainable. Counsel for the respondent also urged that the remedy under Section 482 Cr.P.C. cannot be exercised in a routine manner as the same is exercisable only under exceptional circumstances so as to meet the ends of justice. The contention of the counsel for the respondent is that the issues raised by the petitioner can only be decided during the course of the trial and, therefore, in the face of involvement of serious disputed question of facts the jurisdiction under Section 482 Cr.P.C. cannot be exercised. I have heard learned counsel for the parties at considerable length and have gone through the records. I have heard learned counsel for the parties at considerable length and have gone through the records. Before dealing with the issue it would be worthwhile to reproduce Section 141 of N.I. Act, which is as under: “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 guilty of the offence and shall be liable to be proceeded against and 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. Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government 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 attribute to, any neglect on the part of, any director, Manager, secretary, or other office 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 purpose of this section. - (a) ``Company` means any body corporate and includes a firm or other association of individuals; and (b) ``Director`, in relating to a firm, means a partner in the firm.” The explanation to section 141 clearly shows that the definition of a company encompasse a partnership firm and even a association of individuals also. A Partnership firm is nothing but a compendious expression to refer to the partners who transact business in partnership in that name. A Partnership firm is nothing but a compendious expression to refer to the partners who transact business in partnership in that name. In view of section 141 the partners who are responsible to the firm for the conduct of the business of the firm as well as the firm are to be deemed to be guilty of the offence under section 138 of the Negotiable Instruments Act if the cheque issued by the firm is dishonoured due to any of the grounds mentioned in section 138 of the Act. A person would be vicariously liable for commission of an offence on the part of a partnership only in the event the conditions precedent laid down therefor in Section 141 of the Act stand satisfied. For the aforementioned purpose, a strict construction would be necessary. In S.V. Muzumdar and Ors. v. Gujarat State Fertilizer Co. Ltd. and Anr., this Court explicitly laid down the following categories of persons who are covered under Section 141 of the act: (1) The company who committed the offence. (2) Everyone who was in charge of and was responsible for the business of the company. (3) Any other person who is a director or a manager or a secretary or officer of the company with whose connivance or due to whose neglect the company has committed the offence. Section 141 does not make all partners liable for the offence. Every partner of the firm cannot automatically be roped in. The criminal liability can be fastened on those who, at the time of the commission of the offence, were in charge of and were responsible to the firm for the conduct of the business of the firm. To launch a prosecution against the partners there must be a specific allegation in the complaint as to the part played by them in the transaction. In order to fasten vicarious liability against the partners of the Firm, there must be clear, specific and unambiguous averment made in the complaint. There should be clear and unambiguous averment as to how the partners are incharge and responsible for the conduct of the business or the partnership firm. The complainant can proceed only against such persons who at the time the offence was committed by the firm, were in-charge of and were responsible to the firm for the conduct of its business. There should be clear and unambiguous averment as to how the partners are incharge and responsible for the conduct of the business or the partnership firm. The complainant can proceed only against such persons who at the time the offence was committed by the firm, were in-charge of and were responsible to the firm for the conduct of its business. Such persons must be in over all control of the day-to-day business of the firm. A complaint based on a vague statement that one of the partners signed the cheque on behalf of all the partners and the cheque was issued towards the amount due and payable by all the partners are not sufficient enough to fulfil the requirement of Section 141 N.I.Act. The accusation against each partner must be specific and unambiguous. The role played by each of the accused must be clearly stated in the complaint. No complainant can be permitted to launch prosecution against all the partners of a firm without there being a proper foundation in the complaint itself about the actual role played by them at the material point of time when the offence is committed by the firm. No prosecution would lie against a partner on the simple accusation in the complaint that such person was the partner of the firm. At this juncture it would be worthwhile to reproduce section 138 of N.I. Act, which is as under: “138. No prosecution would lie against a partner on the simple accusation in the complaint that such person was the partner of the firm. At this juncture it would be worthwhile to reproduce section 138 of N.I. Act, which is as under: “138. Dishonour of cheque for insufficiency, etc., of funds in the accounts 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 exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall without prejudice to any other provisions of this Act, be punished with imprisonment for ``a term which may extend to two year`, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless- (a) The cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier. (b) The payee or the holder induce course of the cheque, as the case may be, 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 thirty days`] of the receipt of information by him from the bank regarding the return of the cheques as unpaid, and (c) The drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation: For the purpose of this section, ``debt or other liability` means a legally enforceable debt or other liability.” Therefore, a complaint petition may be maintainable at the instance of the person in whose favour the cheque was drawn only when: (i) The cheque was drawn by `a person; and (ii) the cheque was drawn 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 the drawer is insufficient to honour the cheque or that it exceeds the amount to be paid from that account; and (iii) In that event `such a person shall be deemed to have committed an offence. The mandate of the section clearly indicates that the firm is liable for prosecution when a cheque is issued on its behalf and bounced on presentation of such cheque. The intendment of the section is not to give scope to individuals to escape by issuing cheques in the name of the firm. Therefore, when cheques are issued in the name of the company, the company is invariably liable for prosecution for the offence under Section 138 of the Act. Thus, when the drawer of the cheque who falls within the ambit of Section 138 of the Act is a human being or a body corporate or even firm, prosecution proceedings can be initiated against such drawer. It is settled law that drawer of the cheque can be prosecuted under Section 138 of the Negotiable Instruments Act on the cheque getting dishonoured. In the instant case, the situation is little different. In the case at hand, the cheque has been issued from the personal account and in the personal capacity by one of the partners of the partnership firm, Mr. P. Mohanakrishanan. Where the Cheques in question are issued by a person in his individual capacity and not as partner of any firm, the firm is not an accused in this case anymore, and the remaining partners other than the said person cannot be summoned to stand trial as persons responsible to the firm for conduct of its business. P. Mohanakrishanan. Where the Cheques in question are issued by a person in his individual capacity and not as partner of any firm, the firm is not an accused in this case anymore, and the remaining partners other than the said person cannot be summoned to stand trial as persons responsible to the firm for conduct of its business. Unlike in the case of a cheque drawn by a person in his individual capacity, in the case of cheque drawn by a person in charge of and responsible to the firm, criminal liability is fastened not only as the de facto drawer of the cheque but also on the firm as well as any partner, manager secretary or other officer of the firm, provided that such person is guilty of act or omission referred to in Section 141(2) of the Act. What then emerges is that in a case where the offence is committed by a firm, the criminal liability is not confined to the signatory of the cheque alone but also to non-signatories also provided the other conditions in the regard are satisfied. In other words, in a case of this nature it may not be permissible to draw a distinction between signatories and non-signatories qua the cheque in question. A similar issue came up before this court in Srikant Somani and Ors. Vs. Sharad Gupta and Anr.- 119(2005)DLT616, wherein it was observed as under: “7. The respondents say that the cheques were issued on behalf of the accused. This certainly has no relevance for an offence under Section 138 of the Negotiable Instrument Act. The offence is committed by the person who issues the cheques and not the person on whose behalf the cheque is issued unless, however, the person on whose behalf the cheque is issued is a company or a partnership firm. Even if it is presumed that the account from which the cheque was issued was held jointly by petitioner No.1 and any other petitioner, no petitioner other than petitioner No.1 can become liable for the offence. Section 138 makes it very clear that only the person who draws the cheque is liable for the offence. Vicarious liability is available only in respect of those offences committed by a company as provided in Section 141 of the Negotiable Instrument Act. Section 138 makes it very clear that only the person who draws the cheque is liable for the offence. Vicarious liability is available only in respect of those offences committed by a company as provided in Section 141 of the Negotiable Instrument Act. The petitioners other than petitioner No.1 are neither the persons who drew the cheques nor the persons who can become liable by virtue of Section 141 of the Negotiable Instrument Act. Thus only the petitioner No.1 becomes liable for the offence and he alone can be summoned. The petitioners, other than petitioner No.1, could not have been summoned by the trial court.” On the basis of the above discussion, I feel that the present petitioners have been wrongly arraigned as a party, therefore, the petition is allowed and the complaint case bearing nos. 705/4/2004 and 708/4/2004 in Crl. M.C. No. 2235/2007 and complaint case No. 6224/1/04 in Crl. M.C. No. 1399/2008 filed by the respondent under S. 138 N.I. Act and proceedings arising therefrom are hereby quashed qua the petitioners. It is, however, made clear that this order shall have no affect as far as pendency of the said complaint cases are concerned as against the other respondents. With the above directions both the petitions are disposed of.