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Karnataka High Court · body

2009 DIGILAW 769 (KAR)

Bharathy v. Benigopal Jhawar

2009-10-08

SUBHASH B.ADI

body2009
ORDER Subhash B. Adi, J: Petitioner is accused No.3 in private complaint No.55/2008 (C.C. No.920/2008) pending on the file of JMFC-II, Raichur. 2. Respondent filed a private complaint under Section 200 of Cr.P.C. alleging that accused No.1 - the company, accused No.2 - the Managing Director, accused No.3 (petitioner) - the Finance Manager have committed an offence punishable under Section 138 of Negotiable Instruments Act. 3. The case of the complainant is that, in connection with purchase of 101 bales of full pressed cotton towards part payment, the accused had issued four cheques and two cheque;:; were presented for encashment. Both the cheques returned by the banker of the accused with an endorsement "PAYMENT STOPPED BY DRAWER". In this regard complainant issued: a legal notice calling upon the accused to pay the said amount. However, the accused failed to pay the same. As such, complainant filed the complaint. 4. Learned Magistrate considering the averments in the complaint, sworn statement of the complainant and the material produced along with the complaint, found that there is a prima facie case to proceed against the accused and accordingly ordered for registration of case and issued summons to accused. At this stage, this petition has been filed. 5. Heard the learned Counsel Sri. Gourish S. Khashampur, for the petitioner and Sri. Shivakumar Kalloor, learned Counsel for the respondent. 6. The contention of the learned Counsel for the petitioner is that, petitioner is arrayed as accused No.3. He was a Finance Manager of the accused No.1 - Company. Petitioner was neither the Director nor he is incharge of the affairs of the company. He was only an employee working in accused No. 1- Company and since he has retired, is no more related to the company. 7. Second contention is that, accused No.1 is a company and accused. No.2 is a Managing Director and the petitioner has not been issued with legal or otherwise any notice in terms of Section 138 of Negotiable Instruments Act and without there being any demand as contemplated under Section 138, the complaint insofar as this petitioner is concerned is not maintainable. In this regard, he relied on a decision of the Apex Court reported in 2009 AIR sew 3836 in the matter of Ramaraj Singh Vs. In this regard, he relied on a decision of the Apex Court reported in 2009 AIR sew 3836 in the matter of Ramaraj Singh Vs. State of M.P. and another and submitted that, there must be a specific averment as regards to the role played by the petitioner and complaint must contain the averment as regard to the person incharge and responsible for the conduct of business of the company and without such specific averment, only on the ground that the petitioner was an employee, petitioner cannot be held liable for the offence punishable under Section 138 of N.I. Act 8. Learned Counsel further relied on the judgment of the Apex Court and submitted that, Apex Court in identical circumstances in Ramaraj Singh case, where notice was not issued to the Director against whom the complaint was filed, has held that, the complaint is not maintainable for want of notice. He submitted that, an employee cannot be termed either as person incharge or responsible for the conduct of business of the company, if at all he had played any role, it would be on behalf of the company and at the direction Of the Directors of the Company and he cannot be alleged that he is responsible and incharge for the conduct of the business• of the company. 9. On the contrary, learned Counsel appearing for the respondent complainant submitted that, complaint discloses that the petitioner was a Finance Manager. Complaint also discloses that he was incharge and responsible for the conduct of business of the company. He relied on the provisions of Section 138 and Section 141 of N.I. Act and submitted that, Section 138 requires the notice to be given to the drawer of the cheque and the drawer of the cheque has been defined under Section 7 of the N.I. Act and submitted that "drawer" or "drawee" means maker of a bill of exchange or cheque is called the "drawer"; the person thereby directed to pay is called the "drawee", and drawer in this case being the company, notice is issued to the company, hence no notice is required to be issued to any other person other than the drawer. 10. 10. He further submitted that, under Section 141 of N. I. Act a person who at the time of commission of the offence was responsible and incharge of the conduct of business of the company would also be guilty of an offence along with the company. If the company is the drawer and the notice is issued to the company, no further notice is contemplated under Section 138 of N.I. Act. 11. In this regard, be relied on a judgment of the Calcutta High Court reported in (1992) 1 (Judgments on. dishonor of cheque. reported). 857 in the matter of Dilip Kumar J aiswal Vs. Debapriya, Banerjee and submitted that, the Calcutta High Court on interpretation, of Section 138 and 141 which has held that no notice is required to be given to the Directors as Section 138 does not contemplate notice to be given to the person other than the drawer. He also relied on the judgment of the Apex Court reported in AIR 2008 SC 3273 in the matter of Malwa Cotton and Spinning Mills Ltd. Vs. Virsa Singh Sidhu and Others and submitted that, Apex Court on interpretation of Section 141 relying on the earlier judgment reported in (2006) (4) SCC 173 in the matter of S. V. Muzumdar Vs. Gujarat State Fertilizer Co. Ltd and Another, has held that, whether the Director is responsible and incharge of the business of the company is a matter of evidence and it has to be proved by the accused at the trial. Such matter cannot be gone into at the threshold. In this regard, he relied on Para-9 of the judgment and submitted that, a person who claims that he is not incharge of the business, it is for him to prove the same by leading evidence at the trial, and cannot be gone into at this stage of issue of process. 12. In the light of the rival contention, the points arise for my consideration in this petition are: i) as to whether the employee of the company can be prosecuted for an offence punishable under Section 138 read with Section 141 of N.I. Act? 12. In the light of the rival contention, the points arise for my consideration in this petition are: i) as to whether the employee of the company can be prosecuted for an offence punishable under Section 138 read with Section 141 of N.I. Act? ii) whether a notice is necessary to all the accused who are Directors or the employees who alleged to be responsible for the affairs of the company or notice to company alone is sufficient under Section 138 read with Section 141 of N.I. Act? 13. It is useful to consider the provisions of Section 138 of No!. Act Section 138 of N.I. Act requires that a 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 the account by an agreement made with that bank, such person shall be deemed to have committed an offence. 14. In order to constitute an offence proviso to Section 138 of N.I. Act, requires that the cheque must be presented to the Bank within a period of 6 months from the date of the cheque and it must be dishonoured for the reason mentioned under Section 138 of N.I. Act and the payee or the holder in due course of the cheque as the case may be, makes a demand for payment of the said amount by giving notice in writing to the drawer of cheque within 30 days of the receipt of the information from the Bank regarding the return of the cheque as unpaid and the drawer of the said cheque fails to make the payment of the said amount to the payee or to the holder in due course of the cheque within 15 days from the date of receipt of the notice it constitute an offence punishable under Section 138 of N.I. Act. These ingredients are necessary to constitute an offence punishable under Section 138 of N.I. Act. 15. These ingredients are necessary to constitute an offence punishable under Section 138 of N.I. Act. 15. In this case, the cheque is presented within 6 months and it is returned dishonoured and thereafter a notice has been issued by the complainant to the company and accused No.2. It is not in dispute that petitioner - accused No.3 has not been issued with any notice. It is also not in dispute that first accused is the company, and incase of an offence committed by the company, under Section 141 not only the company but also every person in charge and responsible to the company for conduct of business are also guilty of the offence along with the company. 160 Whether a notice to company alone is sufficient to meet the requirement of Section 138 and 141 of N.I. Act? No doubt, the Calcutta High Court in Dilip Kumar Jaiswal's case, has observed that, since the drawer being the company no notice is required to be issued to the Directors It is in this context, it is necessary to consider the proviso to Section 138 of N.I. Act To constitute an offence under Section 138 of N.I. Act the accused is required to be issued by a legal notice, making, a demand for payment of amount involved in the cheque. To meet this requirement the accured is required to be informed with notice of demand given an opportunity to make payment even before the complaint is filed. Reading of Section 138 of N.I. Act makes it clear that, no offence could be constituted till the accused is issued with notice and the accused has failed to make the payment within 15 days of receipt of notice. 17. If only the Managing Director is issued with notice, and other directors are made as accused without issuing notice, then even though other director may be willing to pay the cheque amount, however they will be denied of this opportunity and they will be held guilty of the offence with any demand as contemplated under proviso to Section 138 of the N.I. Act. Then, very purpose of making the demand before filing the complaint is to give one chance to the accused. Then, very purpose of making the demand before filing the complaint is to give one chance to the accused. The offence under Section 138 of N.I Act is based on non-payment of amount under cheque which is dishonored Offence relates to financial transaction and more of quasi civil in nature and has to be understood and appreciated in the said background. 18. In this ease, 1st accused is a company, then necessarily in order to constitute an offence punishable under Section 141 of N.I. Act, not only the company is guilty, but all other persons' who were incharge and responsible for the conduct of business of the company are also guilty of the offence. Offence can be said to have been committed only in case the amount as demanded by a legal notice in terms of Section 138 clause (b) is issued and same is not paid in terms of clause (c) of proviso to Section 138 of N.I. Act. Mere issue of cheque, mere dishonour of cheque does not by themselves constitute an offence. The offence said to have been committed only after the failure of the accused to make the payment within 15 days of receipt of notice of demand, if the notice is issued to the company only and notice is not issued to the other accused, who may be willing to pay and in the absence of such notice neither they could pay nor they will have an opportunity to avail the benefit under Section 138(c) of the N.I. Act. Even if the company is accused, company alone cannot be prosecuted. The requirement of Section 141 is company as well as the person incharge and responsible, necessarily means the drawer and the other person who are also responsible. Hence, in case of company is drawer under Section 138 of the N.I. Act, for the purpose of issue of notice is the person who is responsible and incharge of day-to-day business of the company at the time of commission of the offence. No doubt the company may be drawer of the cheque, however in case of offence against the company, the company alone cannot be prosecuted or punished with imprisonment. Necessarily the person incharge and responsible for the business of company is also necessary as per Section 141 of N.I. Act. 19. No doubt the company may be drawer of the cheque, however in case of offence against the company, the company alone cannot be prosecuted or punished with imprisonment. Necessarily the person incharge and responsible for the business of company is also necessary as per Section 141 of N.I. Act. 19. In this context, drawer for the purpose of company means company and the persons responsible and incharge of the conduct of the business of the company. Section 138 (1) cannot be read in isolation, it has to be read along with Section 141 of N.I. Act in case of offence against company. 20. In this case the petitioner was an employee not been issued with the notice, he had no opportunity to reply. There is a possibility; in case of a reply, the complainant might not have proceeded against petitioner. If the provisions of Sections 138 and 141 of N.I. Act are read harmoniously, I think to constitute-an offence under Section 138 of N.I. Act all the accused against whom offence punishable under Section 138 of the N.I. Act is alleged are required to be issued with notice under Section 138(b) of the N.I. Act. 21. The complaint is required to state that the person incharge and responsible along with the company necessarily means that the complainant is required to comply with the ingredients of provisions of Section-138 of N.I. Act Calcutta High Court though has referred to the word "drawer" under Section 138, Section 138 does not refer to the company and a person inchargeand responsible to the conduct of the business, of the company. Section 138 and Section 141 required to be considered harmoniously. If the offence is committed by company; person incharge and responsible for the conduct of business of the Company is also guilty of an offence along with the company, the company alone cannot be prosecuted along with company, the person responsible have to be prosecuted. Hence notice is necessary to all the accused. 22. In this case, the complainant admittedly has not issued notice to the petitioner calling upon him to make payment within 15 days it cannot be held that he had committed an offence punishable under Section 138, as there is no compliance with the requirement of proviso to Section 138 of N.I. Act. 23. 22. In this case, the complainant admittedly has not issued notice to the petitioner calling upon him to make payment within 15 days it cannot be held that he had committed an offence punishable under Section 138, as there is no compliance with the requirement of proviso to Section 138 of N.I. Act. 23. In view of the above, when the basic requirement of Section 138 of N.I. Act is not complied, there is no reason for this accused to face trial when the complaint does not disclose the ingredient of Section 138 of N.I. Act, the complaint does not make out prima facie case against this accused. In the circumstances, petition required to be allowed. Accordingly, criminal petition is allowed, proceedings in P.C.No.55/ 2008 (C.C.No. 920/2008) on the file of JMFC, Raichur is quashed in so far as the petitioner is concerned.