Compilation of Important Judgments of Supreme Court and High Courts regarding Section 138 of the Negotiable Instruments Act, 1881

INDEX

1. Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel, 2022 SCC OnLine SC 1376.
2. Dilip Hariramani v. Bank of Baroda, 2022 SCC OnLine SC 579
3. Gajanand Burange v. Laxmi Chand Goyal, 2022 SCC OnLine SC 1711
4. Expeditious Trial of Cases Under Section 138 of NI Act 1881, In re, 2022 SCC OnLine SC 649
5. Expeditious Trial of Cases Under Section 138 of NI Act 1881, In re, 2022 SCC OnLine SC 1041
6. Oriental Bank of Commerce v. Prabodh Kumar Tewari, 2022 SCC OnLine SC 1089
7. Pawan Kumar Goel v. State of U.P., 2022 SCC OnLine SC 1598.
8. Rathish Babu Unnikrishnan v. State (NCT of Delhi), 2022 SCC OnLine SC 513.
9. S.P Mani & Mohan Dairy v. Snehalatha Elangovan, 2022 SCC OnLine SC 1238.
10. J. Vedhasingh v. R.M. Govindan, 2022 SCC OnLine SC 1010.
11. Sanjiv Kumar v. Haryana Financial Corpn., 2022 SCC OnLine P&H 311.
12. Jagmal v. State of Haryana, 2022 SCC OnLine P&H 246.
13. Jarnail Singh Bajwa v. State of Punjab, 2022 SCC OnLine P&H 1690.
14. Rajesh Kumar v. State of Haryana, 2022 SCC OnLine P&H 3316.
15. Satpal Garg v. State of Punjab, 2022 SCC OnLine P&H 2230.
16. Prakash Chand v. State, 2022 SCC OnLine Del 4497.
17. Roots Production (P) Ltd. v. Aarti Malhotra, 2022 SCC OnLine Del 3173.
18. Safety Energy Solutions (P) Ltd. v. Gopi Ram, 2022 SCC OnLine Del 4352.
19. Subhash Chandra Agarwal v. Planet Media Services Ltd., 2022 SCC OnLine Del 4349.
20. Vishal Arora v. Yes Bank Ltd., 2022 SCC OnLine Del 3964.
21. Satvinder Jeet Singh Sodhi v. State of Maharashtra, 2022 SCC OnLine Bom 2298.
22. Avneet Bedi v. State of W.B., 2022 SCC OnLine Cal 3985.
23. Subrata Bose v. Mithu Ghosh, 2022 SCC OnLine Cal 3538.
24. Environ Energy – Tech Service Ltd. v. State of W.B., 2022 SCC OnLine Cal 3693.
25. Vivek Bhaskaran v. State of W.B., 2022 SCC OnLine Cal 299.

Supreme Court

1. Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel¹

   (i) Factual Matrix

   • The appeal arises before Supreme Court from a judgment dated 12-1-2022 of the High Court of Gujarat², where the High Court dismissed an appeal against the judgment of the Additional Chief Judicial Magistrate dated 30-8-2016 by which the first respondent was acquitted of the offence under Section 138 of the Negotiable Instruments Act, 1881.
   • The issue before the Supreme Court is whether the offence under Section 138 of the Act would deem to be committed if the cheque that is dishonoured does not represent the enforceable debt at the time of encashment.
   • On 10-4-2014, the appellant issued a statutory notice under Section 138 of the Act to the first respondent-accused. It was alleged that the first respondent borrowed a sum of rupees twenty lakhs from the appellant on 16-1-2012 and to discharge the liability, issued a cheque dated 17-3-2014 bearing Cheque No. 877828 for the said sum. It was further alleged that the cheque when presented on 2-4-2014 was dishonoured due to insufficient funds. The appellant issued the notice calling the first respondent to pay the legally enforceable debt of Rs 20,00,000.
   • On 12-5-2014, the appellant filed a criminal complaint against the first respondent for the offence under Section 138 of the Act.
   • On 19-5-2014, the first respondent issued another reply to the legal notice. By the said reply, the earlier reply to the legal notice was sought to be amended by replacing the acknowledgment of having received a loan of rupees forty lakhs to rupees twenty lakhs.

   (ii) Trial court proceedings

   • By a judgment dated 30-8-2016, the trial court acquitted the first respondent of the offence under Section 138 on the ground that the first respondent paid the appellant a sum of rupees 4,09,3015 between 8-4-2012 and 30-12-2013 partly discharging his liability in respect of the debt of rupees twenty lakhs. The split up of the payments is set out below : Date amount 18-4-2012 Rs 49,315 5-10-2012 Rs 1,20,000 15-1-2013 Rs 60,000 10-7-2013 Rs 1,20,000 30-12-2013 Rs 60,000 total Rs 4,09,315.
   • The trial court observed that the appellant has failed to prove that he was owed a legally enforceable debt of rupees twenty lakhs:6. Therefore, the plaintiff’s complaint proved that the accused has paid Rs 4,09,315 out of the amount due as per fact. So that on the day the plaintiff deposited in the bank to recover a legal amount of Rs 20,00,000. The court believes that the prosecution has failed to prove that fact³.

   (iii) Appeal before the High Court

   • The appellant filed an appeal against the judgment of the trial court before the High Court of Gujarat.
   • On 10-10-2019, the first respondent moved an application before the High Court of Gujarat seeking to place on record the amended reply dated 19-5-2014. By an order dated 11-10-2018, the High Court allowed the application for placing the additional evidence on record.
   • The High Court by its judgment dated 12-1-2022⁴ dismissed the appeal, thereby upholding the judgment of the trial court acquitting the first respondent.
   • High Court while dismissing the appeal against acquittal held that the notice issued by the appellant is an omnibus notice since it does not represent a legally enforceable debt. Relying on the judgment of this Court in Rahul Builders v. Arihant Fertilizers & Chemicals⁵, it was held that the legal notice was not issued in accordance with proviso (b) to Section 138 since it did not represent the “correct amount”. The appellant has contended that the requirement under Section 138 is to send a notice demanding the “cheque amount”. It was contended that the offence under Section 138 was made out since the appellant in the statutory notice demanded the payment of rupees twenty lakhs which was the “cheque amount”.
   • The High Court affirmed the finding of fact by the trial court that a part of the debt owed by the first respondent to the appellant was discharged and thus the notice of demand issued under Section 138 of the Act is not valid. In the course of the analysis, the following findings were entered:The appellant has in the course of his cross-examination accepted that the first respondent had deposited rupees 4,09,315 in his account. There is a statutory presumption that the sum drawn in the cheque is a debt or liability that is owed by the drawer of the cheque to the drawee. The part-payment made by the first respondent ought to have been reflected in the statutory notice issued by the appellant. The sum in the cheque is higher than the amount that was due to the appellant. Thus, the statutory notice issued under Section 138 is not valid. It is an omnibus notice since it did not recognise the part-payment that was made.The cheque was a security for the money lent by the appellant. The undated cheque was presented to the bank without recognising the part-payment that was already made.

   (iv) Submissions before the Supreme Court

   • Counsel appearing on behalf of the appellant submitted that there is nothing on record to show that the payment of rupees 4,09,315 was made towards the discharge of the debt of rupees twenty lakhs and the payment of rupees 4,09,315 was before the issuance of the cheque and the first respondent did not make any payment of the sum that was due since the statutory notice that was served upon him on 15-4-2014.
   • Counsel appearing on behalf of the first respondent submitted that the term “debt or other liability” used in Section 138 of the Act has been defined in the explanation clause to mean a “legally enforceable debt or other liability”. Thus, the demand made in the statutory notice must be for a sum that is legally enforceable; if the debtor has paid a part of the debt, a statutory notice seeking the payment of the entire sum in the cheque without any endorsement under Section 56 of the part-payment made would not be legally sustainable; and since the first respondent has paid off a part of the debt, the appellant cannot initiate action if the cheque which represented the principal amount without deducting or endorsing a part payment has been dishonoured.

   (v) Supreme Court observations

   • Whether Section 138 of the Act would still be attracted when the drawer of the cheque makes a part-payment towards the debt or liability after the cheque is drawn but before the cheque is encashed, for the dishonour of the cheque which represents the full sum.
   • When a part-payment of the debt is made after the cheque was drawn but before the cheque is encashed, such payment must be endorsed on the cheque under Section 56 of the Act. The cheque cannot be presented for encashment without recording the part payment. If the unendorsed cheque is dishonoured on presentation, the offence under Section 138 would not be attracted since the cheque does not represent a legally enforceable debt at the time of encashment.
   • For the commission of an offence under Section 138, the cheque that is dishonoured must represent a legally enforceable debt on the date of maturity or presentation.
   • If the drawer of the cheque pays a part or whole of the sum between the period when the cheque is drawn and when it is encashed upon maturity, then the legally enforceable debt on the date of maturity would not be the sum represented on the cheque.
   • When a part or whole of the sum represented on the cheque is paid by the drawer of the cheque, it must be endorsed on the cheque as prescribed in Section 56 of the Act. The cheque endorsed with the payment made may be used to negotiate the balance, if any. If the cheque that is endorsed is dishonoured when it is sought to be encashed upon maturity, then the offence under Section 138 will stand attracted.
   • The first respondent has made part-payments after the debt was incurred and before the cheque was encashed upon maturity. The sum of rupees twenty lakhs represented on the cheque was not the “legally enforceable debt” on the date of maturity. Thus, the first respondent cannot be deemed to have committed an offence under Section 138 of the Act when the cheque was dishonoured for insufficient funds.
   • The notice demanding the payment of the “said amount of money has been interpreted by judgments of this Court to mean the cheque amount. The conditions stipulated in the provisos to Section 138 need to be fulfilled in addition to the ingredients in the substantive part of Section 138. Since in this case, the first respondent has not committed an offence under Section 138, the validity of the form of the notice need not be decided.

   (vi) Conclusion

   • The appeal against the judgment of the High Court of Gujarat dated 12-1-2022 is dismissed.
2. Dilip Hariramani v. Bank of Baroda⁶

   (i) Factual matrix

   • That the respondent Bank of Baroda had granted term loans and cash credit facility to a partnership firm M/s Global Packaging on 4-10-2012 for Rs 6,73,80,000. It is alleged that in part repayment of the loan, the firm, through its authorised signatory, Simaiya Hariramani, had issued three cheques of Rs 25,00,000 each on 17-10-2015, 27-10-2015 and 31-10-2015.
   • The cheques were dishonoured on presentation due to insufficient funds. On 4-11-2015, the Bank, through its Branch Manager, issued a demand notice to Simaiya Hariramani under Section 138 of the NI Act.
   • On 7-11-2015, the respondent Bank, through its Branch Manager, filed a complaint under Section 138 of the NI Act before the Court of Judicial Magistrate, Baloda Bazar, Chhattisgarh, against Simaiya Hariramani and the appellant. The firm was not made an accused.
   • That in complaint Simaiya Hariramani and the appellant, as per the cause title, were shown as partners of the firm. Para 8 of the complaint, which relates to the vicarious culpability, states that both Accused 1 and 2 are partners of the indebted firm. Accused 1, as a partner of the debtor firm, issued a under the obligation of the debtor firm. Thus, under Section 20 of the Partnership Act, 1932, Accused 2 is equally responsible for the underlying authority and liability of the deemed partners. Other than the paragraph mentioned above, no other assertion or statement is made to establish the vicarious liability of the appellant.
   • That as per the respondent Bank had produced as witness – Prashant Kumar Gartia (PW 1), who was posted as the Branch Manager of the respondent and had deposed that the firm was a partnership firm with Simaiya Hariramani as its partner. The firm had availed term loans and cash credit and gave three cheques of Rs 25,00,000 each, which were dishonoured due to “insufficient funds”.
   • In his cross-examination, PW 1 admitted that the demand notice had not been issued to the firm and that no loan had been obtained by Dilip Hariramani and Simaiya Hariramani in their individual capacity.

   (ii) Trial court proceedings

   • On 19-2-2019, the appellant and Simaiya Hariramani were convicted by the Judicial Magistrate First Class, Baloda Bazar, Chhattisgarh, under Section 138 of the NI Act and sentenced to imprisonment for six months. They were also asked to pay Rs 97,50,000 as compensation under Section 357(3) of the Criminal Procedure Code, 1973 and, in default, suffer additional imprisonment for one month.
   • An appeal preferred by the appellant and Simaiya Hariramani challenging their conviction was dismissed by the Sessions Judge, Baloda Bazar, Chhattisgarh, vide judgment dated 21-11-2019, albeit the appellate court modified the sentence awarded to imprisonment till the rising of the court and at the same time, enhanced the compensation amount under Section 357(3) from Rs 97,50,000 to Rs 1,20,00,000 with the stipulation that the appellant and Simaiya Hariramani shall suffer additional imprisonment for three months in case of failure to pay.

   (iii) Appeal before High Court

   • The appellant and Simaiya Hariramani challenged the judgment before the High Court of Chhattisgarh, which has been dismissed by the impugned judgment dated 12-10-2020.
   • The impugned judgment primarily relies upon the decision of Supreme Court in MonabenKetanbhai Shah v. State of Gujarat⁷ and observes that the liability under the NI Act is only upon the partners who are responsible for the firm for conduct of its business. In the present case, both the appellant and Simaiya Hariramani had furnished guarantees of the amount borrowed by the firm from the bank. The exact reasoning given by the High Court reads as under:The only question raised in this revision petition is that the prosecution of the applicants in personal capacity, was not maintainable, appears to be out of place in view of the discussions, which has been made hereinabove. It is liability of a person as a partner of a firm, that has to be given emphasis. Lapse to make a proper mention in the cause title of the complaint would not by itself disentitle, the complainant, who has a claim to make and who has entitlement to file a complaint against the partners of the firm. The cause title of the complaint of course does not mention other description of the applicant, but the body of the plaint clearly mentions that the applicants are the partners of M/s Global Packaging.Section 141 of the Act of 1881 provides as to who shall be deemed as guilty and it mentions the person concerned not a company or the firm. Therefore, the complaint filed against the applicants was not against the provisions of law or against the provision under Section 141 of the Act of 1881.

   (iv) Supreme Court observations

   • The issues raised in this appeal by the appellant, Dilip Hariramani, challenging his conviction under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881, are covered by the decisions of this Court on the aspects of (i) vicarious criminal liability of a partner; and (ii) whether a partner can be convicted and held to be vicariously liable when the partnership firm is not an accused tried for the primary/substantive offence.
   • Section 141 of the NI Act: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 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.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 attributable to, any neglect on the part of, any director, manager, secretary or other officer 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 purposes of this section,— (a) “company” means any body corporate and includes a firm or other association of individuals; and (b) “director”, in relation to a firm, means a partner in the firm.
   • That as per the Supreme Court observation the expression “every person” is wide and comprehensive enough to include a director, partner or other officers or persons. At the same time, it follows that a person who does not bear out the requirements of “in charge of and responsible to the company for the conduct of its business” is not vicariously liable under Section 141 of the NI Act. The burden is on the prosecution to show that the person prosecuted was in charge of and responsible to the company for conduct of its business. The proviso, which is in the nature of an exception, states that a person liable under sub-section (1) shall not be punished 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. The onus to satisfy the requirements and take benefit of the proviso is on the accused. Still, it does not displace or extricate the initial onus and burden on the prosecution to first establish the requirements of sub-section (1) to Section 141 of the NI Act. The proviso gives immunity to a person who is otherwise vicariously liable under sub-section (1) to Section 141 of the NI Act.
   • Sub-section (2) to Section 141 of the NI Act does not state that the persons enumerated, which can include an officer of the company, can be prosecuted and punished merely because of their status or position as a director, manager, secretary or any other officer, unless the offence in question was committed with their consent or connivance or is attributable to any neglect on their part. The onus under sub-section (2) to Section 141 of the NI Act is on the prosecution and not on the person being prosecuted.
   • That as per the Supreme Court observation the primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every director knows about the transaction.
   • Section 141 does not make all the directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.
   • Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.
   • Vicarious liability on the part of a person must be pleaded and proved and not inferred.

   (v) Conclusion

   • The appellant cannot be convicted merely because he was a partner of the firm which had taken the loan or that he stood as a guarantor for such a loan. The Partnership Act, 1932 creates civil liability. Further, the guarantor’s liability under the Contract Act, 1872 is a civil liability. The appellant may have civil liability and may also be liable under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. However, vicarious liability in the criminal law in terms of Section 141 of the NI Act cannot be fastened because of the civil liability. Vicarious liability under sub-section (1) to Section 141 of the NI Act can be pinned when the person is in overall control of the day-to-day business of the company or firm. Vicarious liability under sub-section (2) to Section 141 of the NI Act can arise because of the director, manager, secretary, or other officer’s personal conduct, functional or transactional role, notwithstanding that the person was not in overall control of the day-to-day business of the company when the offence was committed. Vicarious liability under sub-section (2) is attracted when the offence is committed with the consent, connivance, or is attributable to the neglect on the part of a director, manager, secretary, or other officer of the company.
   • The provisions of Section 141 impose vicarious liability by deeming fiction which presupposes and requires the commission of the offence by the company or firm. Therefore, unless the company or firm has committed the offence as a principal accused, the persons mentioned in sub-section (1) or (2) would not be liable and convicted as vicariously liable. Section 141 of the NI Act extends vicarious criminal liability to officers associated with the company or firm when one of the twin requirements of Section 141 has been satisfied, which person(s) then, by deeming fiction, is made vicariously liable and punished. However, such vicarious liability arises only when the company or firm commits the offence as the primary offender. This view has been subsequently followed in Sharad Kumar Sanghi v. Sangita Rane⁸, Himanshu v. B. Shivamurthy⁹, and Hindustan Unilever Ltd. v. State of M.P.¹⁰ The exception carved out in Aneeta Hada v. Godfather Travels and Tours (P) Ltd.¹¹, which applies when there is a legal bar for prosecuting a company or a firm, is not felicitous for the present case. No such plea or assertion is made by the respondent.
   • Thus, in the present case, the firm has not been made an accused or even summoned to be tried for the offence.
3. Gajanand Burange v. Laxmi Chand Goyal¹²

   (i) Facts of the case

   • The appeal arises from a judgment dated 28-11-2018 of a Single Judge of the High Court of Chhattisgarh reversing the acquittal of the appellant for an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 .
   • On 7-11-2005, a notice was addressed by the respondent to the appellant alleging that the appellant had taken a cash loan of Rs 2.5 lakhs and had furnished a cheque dated 28-10-2005 towards repayment. The notice alleged that the cheque was returned by the bank to the respondent due to insufficiency of funds in the account of the appellant. The notice dated 7-11-2005 was received by the appellant on 8-11-2005. The respondent instituted a complaint against the appellant under 1-2-2011, the trial court acquitted the appellant. The order of acquittal was questioned before the High Court in appeal. By a judgment dated 28-11-2018, the High Court has allowed the appeal and convicted the appellant for an offence punishable under Section 138 of the NI Act awarding a sentence of a fine in the amount of Rs 3 lakhs. Section 138 of the NI Act on 22-11-2005.
   • Two issues were formulated:

     (a) Can cognizance of an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 be taken on the basis of a complaint filed before the expiry of the period of 15 days stipulated in the notice required to be served upon the drawer of the cheque in terms of Section 138(c) of the Act aforementioned?

     (b) Can the complainant be permitted to present the complaint again notwithstanding the fact that the period of one month stipulated under Section 142(b) for the filing of such a complaint has expired?

   (ii) Supreme Court observation

   • A bare reading of the provision contained in clause (c) of the proviso makes it clear that no complaint can be filed for an offence under Section 138 of the NI Act unless the period of 15 days has elapsed. Any complaint filed before the expiry of 15 days from the date on which the notice has been served on the drawer/accused is no complaint at all in the eye of the law. It is not the question of prematurity of the complaint where it is filed before the expiry of 15 days from the date on which notice has been served on him, it is no complaint at all under law. As a matter of fact, Section 142 of the NI Act, inter alia, creates a legal bar on the court from taking cognizance of an offence under Section 138 except upon a written complaint.
   • Complaint filed under Section 138 of the NI Act before the expiry of 15 days from the date on which the notice has been served on the drawer/accused is no complaint in the eye of the law, obviously, no cognizance of an offence can be taken on the basis of such complaint. Merely because at the time of taking cognizance by the court, the period of 15 days has expired from the date on which notice has been served on the drawer/accused, the court is not clothed with the jurisdiction to take cognizance of an offence under Section 138 on a complaint filed before the expiry of 15 days from the date of receipt of notice by the drawer of the cheque.
   • That as per the Supreme Court observation in the abovementioned case the notice was received by the appellant on 8-11-2005, the complaint was filed before the period of fifteen days was complete. The complaint could have been filed only after 23-11-2005, but was filed on 22-11-2005. In view of the legal bar which is created by Section 142 of the NI Act, as explained in the three-Judge Bench decision of this Court, taking of cognizance by the court was contrary to the law and the complaint was not maintainable before the expiry of the period of fifteen days from the date of its receipt by the appellant.

   (iii) Conclusion

   • That the payee or the holder in due course of the cheque may file a fresh complaint within one month from the date of decision in the criminal case and, in that event, delay in filing the complaint will be treated as having been condoned under the proviso to clause (b) of Section 142 of the NI Act. This direction shall be deemed to be applicable to all such pending cases where the complaint does not proceed further in view of our answer to question (i). As we have already held that a complaint filed before the expiry of 15 days from the date of receipt of notice issued under clause (c) of the proviso to Section 138 is not maintainable, the complainant cannot be permitted to present the very same complaint at any later stage. His remedy is only to file a fresh complaint; and if the same could not be filed within the time prescribed under Section 142(b), his recourse is to seek the benefit of the proviso, satisfying the court of sufficient cause. Question (ii) is answered accordingly.
   • The impugned judgment and order of the Single Judge of the High Court of Chhattisgarh dated 28-11-2018 shall stand set aside.
   • The respondent would be at liberty to institute a fresh complaint and since the earlier complaint could not be presented within the time prescribed by Section 142(b) of the NI Act, the respondent would be at liberty to seek the benefit of the proviso by satisfying the trial court of sufficient cause for the delay in instituting the complaint.
4. Expeditious Trial of Cases Under Section 138 of NI Act, 1881, In re¹³

   (i) Order dated 27-4-2022

   • On 10-3-2021, a committee was appointed to submit a report specifying steps that should be taken to facilitate early disposal of cases under the Negotiable Instruments Act, 1881 (for short “the NI Act”). A report has been submitted by the Committee, to which the amicus curiae has filed a note making suggestions to some of the observations and recommendations recorded in the report of the Committee.
   • As constitution of Special Courts is concerned, the learned amicus curiae has, for the purposes of constitution of Special Courts under the NI Act, identified the States of Maharashtra, Delhi, Gujarat, Uttar Pradesh and Rajasthan on the ground that the number of cases pending in these States are higher than the other States. The suggestion made by the learned amicus curiae is that five districts in each of the above States, where cases under the NI Act are high, can be selected and one court in each such district be established. The High Courts of Maharashtra, Delhi, Gujarat, Uttar Pradesh and Rajasthan can respond to the said suggestion made by the learned Amicus Curiae, within a period of two weeks.
5. Expeditious Trial of Cases Under Section 138 of NI Act, 1881, In re¹⁴

   (i) Facts

   • A judgment of the Constitution Bench of this Court in Expeditious Trial of Cases Under Section 138 of NI Act, 188, In re¹⁵, various directions were issued with respect to the conduct of trials of complaints under Section 138 of the Negotiable Instruments Act.
   • Supreme Court as per vide order dated 31-3-2021 had required High Courts to file status reports indicating compliance with the directions contained in the judgment and as to whether rules were framed appropriately in line with the judgment. Similarly, the necessary amendments to the Police Manuals, etc. had to be carried out. As on date, all High Courts except the Patna High Court have complied with the directions and proposed the amended Rules.
   • On 16-4-2021 by the said judgment of the larger Bench an Expert Committee was constituted to consider various suggestions with respect to streamlining the procedure of arresting the judicial docket, in regard to complaints and trials for offences under the Negotiable Instruments Act.
   • The Expert Committee, by its report has suggested the creation of de novo Special NI Courts by the Central Government vide its powers under Article 247 to tackle the problem of docket explosion. The Expert Committee proposed a scheme with two grades of Judges at the trial court level and two at the appellate/revision stage. According to the Expert Committee’s calculations, the establishment of these Special NI Courts would require recruitment of 1826 special judicial officers and a total cost of Rs 126.59 crores.
   • Expert Committee disclosed that as on 8-11-2021, 26,07,166 complaints were pending at various stages before the courts seized of trial of offences under the NI Act. As on 13-4-2022, this pendency has increased to 33,44,290. This is an increase in pendency of 7,37,124 cases in a period of just over 5 months. As per the data available on 8-11-2021, NI Act cases contribute to 8.81% of the total criminal cases pending in the courts. Further, 11.82% of the total criminal cases that are stagnating due to appearance/service related issues are NI Act cases.
   • That as per the reports of amici curiae pilot study of the test of the scheme employing retired judicial officers and retired court staff to operationalise the Special Courts under the NI Act. It was suggested that this scheme could be tested on a pilot basis in 5 judicial districts with the highest pendency in the 5 States with the highest pendency (namely, Maharashtra, Rajasthan, Gujarat, Delhi and Uttar Pradesh) and the viability of utilising services of retired judicial officers can be examined based on the results of the pilot study.
   • This High Court has by its order dated 27-4-2022 directed the High Courts in the States of Maharashtra, Rajasthan, Gujarat, Delhi and Uttar Pradesh to respond to the suggestions of the amici curiae. Their responses are as under:
   • High Court of Bombay : The High Court has identified Nagpur, Nashik, Thane, Pune and CMM, Mumbai as the 5 districts with highest pendency.
   • High Court of Rajasthan : The High Court has identified Jaipur Metro-I, Jaipur Metro-II, Jodhpur Metro, Udaipur and Ajmer as the 5 districts with highest pendency.
   • High Court Allahabad : The High Court has identified Lucknow, Agra, Kanpur, Gautam Buddh Nagar and Ghaziabad as the 5 districts with the highest pendency.
   • High Court of Gujarat : The High Court has given concurrence for establishing one additional court to try cases under Section 138 of the NI Act as per the pilot project.
   • High Court of Delhi : Delhi already has 72 Special Courts for cases under the NI Act. 9. This Court had on 12-5-2022 indicated that the amici curiae may place a detailed proposal for the pilot study, which has since been filed.
   • Having considered the suggestions made by the amici the court hereby directs that the pilot study shall be conducted in the manner hereafter indicated. The guidelines covering the pilot study shall be as under:

     (a) Duration of study : The pilot study shall be conducted for a duration of 1 year from 1-9-2022 to 31-8-2023.

     (b) Number of courts : The pilot study shall be conducted in 25 Special Courts in total. One Special Court shall be established in each of the 5 judicial districts which have been identified as having the highest pendency by each of the five High Courts of the States (mentioned above) with the highest pendency of NI Act cases.

     (c) Presiding Officers and staff : For operationalising the Special Courts under this pilot study, retired judicial officers and retired court staff, preferably those who have retired within the past 5 years, may be employed. The High Court concerned shall ensure that no vacancy arises, during this period.

     (d) Timeline for identification of requirement : The infrastructural requirements, including information technology support for video conferencing facilities, should be identified and secured by July 2022. Similarly, the Presiding Officers, support staff and human resources required for operationalising these Special Courts and their contractual terms should be finalised by the end of July 2022.

     (e) Training : The identified judicial officers, who are to preside over the Special Courts, be imparted specialised training. A four-week training programme by the State Judicial Academies on topics of substantive, procedure and evidence law related to the offences under the NI Act shall be conducted for them. Further, a detailed ready reckoner with governing case law and practice directions may be prepared and circulated to assist them in the adjudicatory exercise.

     (f) Pay and service duration : The High Court concerned should ensure that the Presiding Officers and court staff for operationalising the Special Courts can be hired on contractual basis for one year for the duration of the pilot study. It is further proposed that they be paid a fixed honorarium in accordance with their standing prior to retirement.

     (g) Type of cases : The Special Courts shall adjudicate upon only those cases in which summons have been duly served and the accused has entered appearance through a lawyer or in person. The oldest pending cases in which service of summons is complete must be identified in a chronological manner (oldest first). It must be ensured that no case where service of summons is incomplete is sent to the Special Courts.

     (h) Timeline for identification of cases : All such cases should be identified by July and a comprehensive list of these cases should be posted before the regular Magistrates expeditiously so that cases which can be settled are referred to mediation immediately and are hence, not part of the cases to be sent to the Special Courts. The final comprehensive list of cases, where service is complete and the matters are not referred to mediation, must be identified by the end of July.

     (i) Advance list and weekly list : An advance list of all matters to be taken up by the Special Courts should be circulated by the end of July to give adequate notice to all counsel that such matters shall be taken up on priority basis by the respective Special Courts. Further, weekly lists shall also be published notifying all the matters listed for final disposal.

     (j) Functioning of courts : The working days and working hours of the Special Courts should be notified by the end of July along with the circulation of the advance list.

     (k) Procedure : The Special Courts set up for the pilot study shall follow the same procedure with respect to trial as mandated by the Criminal Procedure Code, 1973. In order to ensure speedy disposal of cases, adjournments should not be routinely given, especially on the ground of lack of notice. Further examination of outstation witnesses may be conducted online by following appropriate protocol so that the delay in trial due to commute of the witnesses is avoided.

     (l) Mediation : A list or panel of mediators must be identified by the end of July and circulated to all the Presiding Officers of the Special Court. In the event that the accused indicates willingness to settle at stage of trial before the Special Court, the Presiding Officer must refer the case to time-bound, online mediation before one of the identified mediators to prevent further delays.

     (m) Data collection : A weekly statement of disposal shall be sent to the Registrar General of the High Courts concerned who shall actively monitor the progress of the pilot study. Quarterly statements of disposal must be sent to the Supreme Court. A facilitation officer may be appointed for the Special Courts to assist in collection of the data, in curating the cause lists and in conducting weekly review meetings with Presiding Officers to identify any additional bottlenecks or issues which need to be assessed for future planning purposes.

6. Oriental Bank of Commerce v. Prabodh Kumar Tewari¹⁶

   (i) Facts of the case

   • Appeal arises from a judgment dated 24-7-2019 of a Single Judge of the High Court of Delhi.
   • The appellant is the complainant in proceedings under Section 138 of the Negotiable Instruments Act, 1881. He seeks to question the order of a Single Judge by which the respondents were permitted to engage a handwriting expert to seek an opinion on whether “the authorship on the questioned writings” (the disputed cheque) can be attributed to the respondents.
   • The appellant is a body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980. According to the appellant, a consortium of five companies, namely, (i) Century Communications Ltd.; (ii) Pixion Media Pvt. Ltd; (iii) Pearl Studios Pvt. Ltd.; (iv) Pixion Vision Pvt. Ltd.; and (v) Pearl Vision Pvt. Ltd. availed of credit facilities from the appellant. The total outstanding dues of the consortium are alleged to be in excess of Rs 1200 crores as on the date of the institution of these proceedings. It has been alleged that the first respondent (A-2 before the trial court) handed over a cheque bearing number 387172 dated 26-12-2011 from the account of Century Communications Ltd. in the amount of Rs 5.57 crores drawn on Indian Overseas Bank, Defense Colony Branch, New Delhi – towards the dues of the above five companies. According to the appellant, this was accompanied by a letter of the same date, bearing reference number CCL/OBC/036/2011, with a request to present the cheque at the end of the second week of January. The cheque was presented for encashment, but was returned on 25-5-2012 with the remarks “insufficient funds”.
   • That after issuing a legal notice on 5-6-2012, the appellant instituted a criminal complaint, being CC No. 3065 of 2012, before the Court of the Additional Chief Metropolitan Magistrate, Dwarka Courts, New Delhi for an offence punishable under Section 138 of the NI Act. Notices were framed against the first and second respondent under Section 251 of the Code of Criminal Procedure, 1973 .

   (ii) Proceedings before trial court

   • That during the course of the trial, on 12-2-2018, the Metropolitan Magistrate recorded the statements of the first and second respondents under Section 313 CrPC. The first respondent has stated that he is a director in all the five companies; he was an authorised signatory; and a blank signed cheque was given by him towards security. Therefore, there is no dispute that the cheque bears the signature of the first respondent.
   • The first and second respondents filed an application before the trial Judge seeking to have the cheque in question, the specimen signature and handwriting of the first respondent examined by a government handwriting expert. The application was dismissed by the trial Judge on 21-2-2019.

   (iii) Appeal before High Court

   • The first and second respondents appealed to the High Court. The High Court by the impugned order dated 24-7-2019 held that there was no occasion to allow the examination of a government handwriting expert. However, the Single Judge nonetheless allowed the petition filed by the respondents to the extent that they have been permitted to engage a handwriting expert for the purpose of examining the disputed “writings”.

   (iv) Submission before Supreme Court

   • That the submission which has been urged on behalf of the appellant is that even assuming, as the first respondent submits, that the details in the cheque were not filled in by the drawer, this would not make any difference to the liability of the drawer.Section 139 of the NI Act states : 139. Presumption in favour of holder.— It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability. In Bir Singh v. Mukesh Kumar¹⁷, after discussing the settled line of precedent of this Court on this issue, a two-Judge Bench held:33. A meaningful reading of the provisions of the Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted. 34. If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence.

   (v) Supreme Court observation

   • In Anss Rajashekar v. Augustus Jeba Ananth¹⁸, a two-Judge Bench of this Court reiterated the decision of the three-Judge Bench of this Court in Rangappa v. Sri Mohan¹⁹ on the presumption under Section 139 of the NI Act. The Court held : Section 139 of the Act mandates that it shall be presumed, unless the contrary is proved, that the holder of a cheque received it, in discharge, in whole or in part, of a debt, or liability. The expression “unless the contrary is proved” indicates that the presumption under Section 139 of the Act is rebuttable. Terming this as an example of a “reverse onus clause” the three-Judge Bench of this Court in Rangappa²⁰ held that in determining whether the presumption has been rebutted, the test of proportionality must guide the determination. The standard of proof for rebuttal of the presumption under Section 139 of the Act is guided by a preponderance of probabilities. This Court held thus In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of “preponderance of probabilities”. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.”
   • Supreme Court held that the impugned order of the Single Judge of the Delhi High Court dated 24-7-2019 is set aside. The report which has been received in pursuance of the impugned order dated 24-7-2019 shall not be taken into consideration during the course of trial.
7. Pawan Kumar Goel v. State of U.P.²¹

   (i) Facts of the case

   • The present appeals are directed against the final judgment and order dated 19-11-2019 passed by the High Court of Judicature at Allahabad (hereinafter referred to as “High Court”) in four criminal miscellaneous writ petitions filed by the respondents seeking quashing of the summoning order dated 18-3-2013 passed by the Additional Chief Judicial Magistrate-II, Muzaffarnagar (hereinafter referred to as “Magistrate”) and order dated 2-12-2013 passed by the Additional Sessions Judge, Muzaffarnagar (hereinafter referred to as “Sessions Court”). The High Court allowed the writ petition and quashed the entire proceedings including the summoning order dated 18-3-2013 as well as order dated 2-12-2013.
   • The appellant is engaged in the business of sales of machinery and spare parts under the name and style of M/s Pawan Hardware Store. Respondent 2 herein is one of the Director of Ravi Organics Limited, a private limited company, engaged in the manufacturing and sales of various types of chemicals. Both of them were having business dealings and Ravi Organics Limited was having a running account with the appellant. Respondent 2 is alleged to have issued an account payee cheque for a sum of Rs 10 lakhs payable at Union Bank of India, Muzaffarnagar, in favour of the appellant towards discharge of its liability for supply of materials made by the appellant. When the appellant presented the cheque before the banker, it was dishonoured on 24-12.-2012. The appellant, thereafter, sent a legal notice dated 1-1-2013 to Respondent No. 2 through registered post, which, though, was served, however, there was no response from Respondent No.2.
   • That despite service of notice, when neither there was any response from the accused nor payment was made, appellant filed four criminal complaints against Respondent 2 for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as “NI Act”) on the allegations that the account payee cheque bearing No. 802276 of Union Bank of India, Muzaffarnagar, for a sum of Rs 10 lakhs dated 20-11-2012 issued by Respondent 2 towards the outstanding bills when presented for clearance was dishonoured on the ground that the cheque amount exceeds arrangement.

   (ii) Trial before Magistrate

   • The Magistrate took cognizance of the said complaint and required the appellant to get his statement recorded under Section 200 of the Code of Criminal Procedure (hereinafter referred to as “CrPC”). However, on 7-2-2013, the appellant filed an affidavit to this effect seeking that it be read as a statement under Section 200 CrPC. The Magistrate passed an order dated 18-3-2013 summoning Respondent 2 for trial in Criminal Case No. 162 of 2013.

   (iii) Trial before Session Court

   • Being aggrieved by the summoning order dated 18-3-2013, Respondent 2 filed Criminal Revision No. 212 of 2013 before the Sessions Court. Vide order dated 2-12-2013, the Sessions Court dismissed the criminal revision petition and held that the cheque was issued against outstanding payments arising out of commercial transactions between Respondent 2 and appellant.

   (iv) Appeal before High Court

   • Respondent 2 aggrieved by the dismissal of the criminal revision approached the High Court by way of Criminal Miscellaneous Writ Petition No. 24632 of 2013 seeking quashing of the summoning order dated 18-2-2013 passed by the Magistrate and also the order dated 2-12-2013 passed by the Sessions Court. The High Court vide impugned judgment and order dated 19-11-2019 allowed the writ petition and quashed the entire proceedings including the summoning order dated 18-3-2013 passed by the Magistrate placing reliance on the pronouncement of this Court in Aneeta Hada v. Godfather Travels & Tours (P) Ltd.²² and SMS Pharmaceuticals Ltd. v. Neeta Bhalla²³.

   (v) Submission before Supreme Court

   • Counsel for the appellant submitted that the cheque issued by Respondent 2 towards payment of outstanding dues of supply of material due to the appellant was dishonoured and hence the respondent is guilty of committing offence under the Negotiable Instruments Act and was righly summoned by the trial court to face the trial. He further submitted that the criminal revision petition challenging the summoning order was also rightly dismissed but the High Court committed a manifest error of law in causing interference and quashing the summoning order as well as the proceedings.
   • It was further submitted that the High Court erred in not appreciating that Respondent 2 was arrayed by name describing him as a director of the Ravi Organics Limited and on account of a typographical error, the company could not be arrayed as Accused 2 in the complaint by name, though the details thereof is mentioned in the description of Accused 1.
   • Further submitted that the complaint contained all necessary factual allegations constituting each of the ingredients of offence under Section 138 of the NI Act and there is no provision either under the NI Act or under the Criminal Procedure Code, which prohibits the amendment of a complaint or the impleadment of an additional accused subsequent to the filing of the complaint.
   • Counsel for Respondent2 submitted that the summoning order is erroneous as the proceedings itself is not maintainable without the company having not been arrayed as an accused in the complaint.
   • It was also submitted that it is well settled by a catena of decisions that if a complaint under Section 138 of the NI Act is filed in respect of dishonour of cheque issued from the account of the company, it is incumbent on the part of the complainant to make necessary averments in the complaint that at the time when the offence was committed, the person accused was in charge of and responsible for the conduct and business of the company. This averment is an essential requirement of Section 141 of the NI Act. He further submitted that the infirmity in the complaint under Section 138 of the NI Act for not impleading the company or not making specific averments in respect of the commission of offence by the company as required under the Act, cannot be said to be curable.

   (vi) Supreme Court observations

   • Two main issues which falls for our consideration in this appeal are (1) whether a director of a company would be liable for prosecution under Section 138 of the NI Act without the company being arraigned as an accused. (2) Whether a complaint under Section 138 of the NI Act would be liable to be proceeded against the director of the company without their being any averments in the complaint that the director arrayed as an accused was in charge of and responsible for the conduct and business of the company.
   • The scope of Section 141 of the NI Act was again exhaustively considered by this Court in SMS Pharamaceuticals²⁴:10. What is required is that the persons who are sought to be made criminally liable under Section 141 should be at the time the offence was committed, in charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a director of a company who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable under the provision. The liability arises from being in charge of and responsible for conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Conversely, a person not holding any office or designation in a company may be liable if he satisfies the main requirement of being in charge of and responsible for conduct of business of a company at the relevant time. Liability depends on the role one plays in the affairs of a company and not on designation or status. If being a director or manager or secretary was enough to cast criminal liability, the section would have said so. Instead of “every person” the section would have said “every director, manager or secretary in a company is liable”…, etc. The legislature is aware that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action.
   • Supreme Court held that it is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.
   • Further added merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases.
   • That the Managing Director or Joint Managing Director would be admittedly in charge of the company and responsible to the company for conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office, they hold as Managing Director or Joint Managing Director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141.
8. Rathish Babu Unnikrishnan v. State (NCT of Delhi)²⁵

   (i) Fact of the case

   • The challenge in these appeals is to the judgment and order dated 2-8-2019 in Rathish Babu Unnikrishnan v. State (NCT of Delhi)²⁶ whereby the Delhi High Court dismissed the application under Section 482 of the Criminal Procedure Code, 1973 (hereinafter referred to as “CrPC”) for quashing of the summoning order dated 1-6-2018 and the order framing notice dated 3-11-2018, issued against the appellant under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the “NI Act”).
   • On the criminal complaint instituted by one Satish Gupta (Respondent 2), the order under Section 251 CrPC was issued against the appellant by the Magistrate’s court. The High Court on considering the rival contention opined that the grounds agitated by the appellant are “factual defences” which should not be considered within the parameters of limited enquiry permissible in a petition under Section 482 CrPC Accordingly, the petition was dismissed but the accused liberty to raise his defence in the competent court was safeguarded in the impugned order.

   (ii) Submission before Supreme Court

   • As per the counsel appearing for the appellant, the essential ingredients for the offence under Section 138 of the NI Act to the effect that the dishonoured cheque received by the complainant is against “legally enforceable debt or liability”, the criminal process could not have been issued. Relying on few judgments, it is next argued that the ingredients necessary to constitute the offence under Section 138 of the NI Act is missing in the instant case and therefore the appellant cannot be prosecuted for the offence under the said provision.
   • According to the appellant, the post-dated cheques drawn concerned by him in favour of the complainant were, contingent/security cheques for buyback of shares of AAT Academy (appellant’s Company), held by the complainant, and therefore the cheques could not have been prematurely presented to the bank and should have been presented for encashment only after transfer of the complainant’s shareholding in the appellant’s Company. In other words, as the complainant was still holding the shares of the appellant’s Company when the cheques were presented, the complainant is not entitled to receive any payment at that stage, through encashment of the cheques, made available to him.

   (iii) Conclusion

   • The Supreme Court in the abovementioned case mentioned that the impugned judgment is rendered by applying the correct legal principles and the High Court rightly declined relief to the accused, in the quashing proceeding. Having said this, to rebut the legal presumption against him, the appellant must also get a fair opportunity to adduce his evidence in an open trial by an impartial Judge who can dispassionately weigh the material to reach the truth of the matter. At this point, one might benefit by recalling the words of Harry Brown, the American author and investment advisor who so aptly said, “A fair trial is one in which the rules of evidence are honoured, the accused has competent counsel, and the Judge enforce the proper court room procedure – a trial in which every assumption can be challenged.” We expect no less and no more for the appellant.
   • The proposition of law as set out above makes it abundantly clear that the court should be slow to grant the relief of quashing a complaint at a pre-trial stage, when the factual controversy is in the realm of possibility particularly because of the legal presumption, as in this matter. What is also of note is that the factual defence without having to adduce any evidence need to be of an unimpeachable quality, so as to altogether disprove the allegations made in the complaint.
   • The consequences of scuttling the criminal process at a pre-trial stage can be grave and irreparable. Quashing proceedings at preliminary stages will result in finality without the parties having had an opportunity to adduce evidence and the consequence then is that the proper forum i.e. the trial court is ousted from weighing the material evidence. If this is allowed, the accused may be given an unmerited advantage in the criminal process. Also because of the legal presumption, when the cheque and the signature are not disputed by the appellant, the balance of convenience at this stage is in favour of the complainant/prosecution, as the accused will have due opportunity to adduce defence evidence during the trial, to rebut the presumption.
9. S.P Mani and Mohan Dairy v. Snehalatha Elangovan²⁷

   (i) Facts of the case

   • The appellant herein (original complainant) is engaged in the business of milk and milk products. The respondent herein is one of the partners of a partnership firm running in the name of Sira Marketing Services. The firm used to purchase milk and milk products from the appellant/complainant on credit basis.
   • The appellant has to recover an amount of Rs 10,71,434.60 (Rs ten lakh seventy-one thousand four hundred thirty-four and sixty paise) from the partnership firm. The firm issued a cheque duly signed by the original Accused 2 (partner/authorised signatory) in favour of the appellant for the amount of Rs 10,00,000 (Rs ten lakh only) dated 5-5-2017.
   • The cheque came to be dishonoured as there was no sufficient balance in the account maintained by the firm. No sooner, the bank intimated the appellant herein that the cheque could not be cleared due to insufficient funds than the appellant herein issued a statutory notice dated 14-8-2017 to the firm and the two partners of the firm. Despite service of notice to the firm as well as the two partners (accused persons) the amount was not paid to the appellant and therefore, the appellant was left with no other option but to file the complaint in the Judicial Magistrate Fast Track Court No. II, Erode for the offence punishable under Section 138 r/w Section 141 of the NI Act which came to registered as the STC No. 583 of 2017.

   (ii) Appeal before High Court

   • The respondent herein (original Accused 3/partner) preferred an application under Section 482 of the Code in the High Court and prayed that the criminal proceedings instituted against her may be quashed as she has no liability under the law. The principal argument of the respondent herein before the High Court was that much before the cheque came to be issued, the firm had been dissolved. The accounts of the firm were also settled on 13-2-2017 following the dissolution. The High Court quashed the proceedings against the respondent herein mainly on the ground that there was nothing to indicate as to how and in what manner the respondent at the relevant point of time was in-charge and responsible for the conduct of the business of the firm. The High Court took the view that the complaint can be prosecuted as against the respondent herein only if the allegations made in the complaint fulfils the requirements of Section 141 of the NI Act. The High Court took the view that merely by reciting the words used under Section 141 of the NI Act in the complaint no vicarious liability can be fastened on the partner of the firm.
   • The High Court as aforesaid would indicate that the proceedings came to be quashed essentially on the ground that there was nothing to indicate that in what manner the respondent herein was in-charge and responsible for the day-to-day affairs of the firm so as to make her vicariously liable for the alleged offence with the aid of Section 141 of the NI Act. To put it in other words, the High Court proceeded on the footing that mere averments in the complaint as regards the role of the respondent as a partner in the firm is not sufficient.
   • The High Court allowed the application filed by respondent herein and terminated the proceedings.

   (iii) Submission before Supreme Court

   (a) Submission on behalf of appellant

   That the High Court committed a serious error in passing the impugned order quashing the proceedings against the respondent herein. Learned counsel submit that the entire premise on which the High Court proceeded could be termed as erroneous in law. The learned counsel would submit that in the statutory notice issued to the respondent as well as in the body of the complaint, there are specific averments that Accused 2 and 3 respectively, being the partners of the partnership firms, are in-charge and responsible for the day-to-day affairs of the firm. Learned counsel pointed out there are specific averments made in the complaint that the partners which include the respondent herein are regularly looking after and actively taking part in the day-to-day business of the firm.

   (b) Learned Counsel further pointed out that there is a specific averment that in order to discharge the liability, the original Accused 2 had issued the cheque within the knowledge and consent of the respondent herein. It is argued that if the substance of the allegation made in the complaint fulfil the requirements of Section 141 of the NI Act, the complaint is to proceed and is required to be tried with. The learned counsel vociferously argued that while construing a complaint the court should not adopt a hypertechnical approach and quash the same.

   (c) The learned counsel further submitted that once the necessary averments are made in the complaint, the onus thereafter would shift on the accused to establish by producing some unimpeachable and incontrovertible evidence which may clearly indicate that the respondent herein as one of the partners of the firm, could not have been concerned with the issuance of the cheque in question.

   (d) The learned counsel further pointed out that three individual notices were issued under Section 138 of the NI Act before the filing of the complaint. He would submit that the statutory notice was duly served upon the respondent herein. However, the respondent thought fit not to give any reply to the notice. It is argued that if the respondent had anything to say as regards her role in the firm, she could have given an appropriate reply that she is a sleeping partner and not involved into the day-to-day affairs of the firm.

   Submission on behalf of respondent

   (a) The learned counsel appearing for the respondent (accused) on the other hand has vehemently opposed the present appeal submitting that no error, not to speak of any error of law, could be said to have been committed by the High Court in passing the impugned order. She would submit that mere bald averments in the complaint are not sufficient to fasten the vicarious liability on the partner of the firm as envisaged under Section 141 of the NI Act.

   (b) The learned counsel would submit that the case on hand is squarely covered by the decision of this Court in SMS Pharmaceuticals Ltd. v. Neeta Bhalla²⁸. Relying on the said decision of this Court, the learned counsel would submit that the deeming fiction creating criminal liability and vicarious liability are a departure from the usual principles of criminal law and that a clear case should be spelt out and the accused person should be made aware of the case alleged against him or her. The learned counsel would submit that this would therefore necessarily require averments in addition to the statement that the accused is in charge of and responsible for the affairs of the company/firm.

   (c) The learned counsel appearing for the respondent in support of her aforesaid submissions has placed strong reliance on the following decisions:

   Gunmala Sales (P) Ltd. v. Anu Mehta²⁹;

   National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal³⁰;

   Sunita Palita v. Panchami Stone Quarry³¹.

   (iv) Supreme Court observations

   • The primary responsibility of the complainant is to make specific averments in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no legal requirement for the complainant to show that the accused partner of the firm was aware about each and every transaction. On the other hand, the first proviso to sub-section (1) of Section 141 of the Act clearly lays down that if the accused is able to prove to the satisfaction of the court that the offence was committed without his/her knowledge or he/she had exercised due diligence to prevent the commission of such offence, he/she will not be liable of punishment.
   • The complainant is supposed to know only generally as to who were in charge of the affairs of the company or firm, as the case may be. The other administrative matters would be within the special knowledge of the company or the firm and those who are in charge of it. In such circumstances, the complainant is expected to allege that the persons named in the complaint are in charge of the affairs of the company/firm. It is only the directors of the company or the partners of the firm, as the case may be, who have the special knowledge about the role they had played in the company or the partners in a firm to show before the court that at the relevant point of time they were not in charge of the affairs of the company. Advertence to Sections 138 and 141 respectively of the NI Act shows that on the other elements of an offence under Section 138 being satisfied, the burden is on the Board of Directors or the officers in charge of the affairs of the company/partners of a firm to show that they were not liable to be convicted. The existence of any special circumstance that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial to show that at the relevant time they were not in charge of the affairs of the company or the firm.
   • Criminal liability is attracted only on those, who at the time of commission of the offence, were in charge of and were responsible for the conduct of the business of the firm. But vicarious criminal liability can be inferred against the partners of a firm when it is specifically averred in the complaint about the status of the partners “qua” the firm. This would make them liable to face the prosecution but it does not lead to automatic conviction. Hence, they are not adversely prejudiced if they are eventually found to be not guilty, as a necessary consequence thereof would be acquittal.
   • If any director wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he/she is really not concerned with the issuance of the cheque, he/she must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his/her contention. He/she must make out a case that making him/her stand the trial would be an abuse of process of court.
   • In Rallis India Ltd. v. Poduru Vidya Bhushan³², as to how the High Court should exercise its power to quash the criminal proceeding when such proceeding is related to offences committed by the companies. “The world of commercial transactions contains numerous unique intricacies, many of which are yet to be statutorily regulated. More particularly, the principle laid down in Section 141 of the NI Act (which is pari materia with identical sections in other Acts like the Food Safety and Standards Act, 2006; the erstwhile Prevention of Food Adulteration Act, 1954, etc.) is susceptible to abuse by unscrupulous companies to the detriment of unsuspecting third parties.”
   • The impugned order passed by the High Court was set aside.
10. J. Vedhasingh v. R.M. Govindan³³

    (i) Facts of the case

    • That appeal has been filed assailing the final order dated 6-12-2018 passed by the High Court of Madras in R.M. Govindan v. J. Vedhasingh³⁴, whereby the High Court allowed the criminal petition filed by Respondents 1 to 4 under Section 482 of the Criminal Procedure Code, 1973 (for short “CrPC”) and quashed proceedings under Sections 120-B, 406, 420 and 34 of the Penal Code, 1860 (for short “IPC”) being CC No. 33 of 2017 pending before Judicial Magistrate Court III, Coimbatore.
    • That the appellant herein was working as a Civil Engineer in Saudi Arabia. On his return back to India in the year 2011, he purchased a site from Respondent 2 who is the father of Respondent 1 in Coimbatore. Apart from this, the respondents owned 7 other house sites in total in V.C.K. Layout, Trichy Road, Coimbatore City, which all were mortgaged to Tamil Nadu Industrial Investment Corporation, way back from 12-10-2006.
    • Appellant contended that the respondents approached and asked him to invest money for the development of the land of the said 7 sites and assured that profit shall be divided amongst the appellant and respondents. Pursuant to it a profit-sharing agreement was executed between the parties. The appellant made the investment of a sum of Rs 62,32,754, but neither profit was shared nor any piece of land was given to the appellant. Consequently, the appellant asked to repay the amount. Under guise of assurance of repayment by Respondent 1, the appellant did not lodge any criminal prosecution as per his request.
    • That Respondent 1 handed over a cheque dated 9-9-2015 for an amount of Rs 87,00,000 in lieu of repayment of principal sum and interest.
    • Appellant while presenting the said cheque to the bank it was dishonoured on account of insufficient funds on 9-9-2015. Being aggrieved, a demand notice was issued on 30-10-2015 and complaint under Section 138 of the Negotiable Instruments Act, 1881 (for short “NI Act”) being STC No. 792 of 2015 renumbered as CC No. 199 of 2016 on the file of Fast Track Magistrate 1 of Coimbatore (for short “138 Proceedings”) was lodged by the appellant on 7-12-2015. Prior to initiating 138 proceedings, the appellant lodged a complaint under Section 156(3) CrPC being CMP No. 5083 of 2015 before Judicial Magistrate No. III Coimbatore on 30-10-2015.

    (ii) Brief of trial proceedings

    • The Magistrate directed Respondent 5 to register the FIR but by filing a report dated 29-1-2016, it was said that no offence is made out against the respondents.
    • The appellant challenged the same by filing Crl. OP No. 6766 of 2016 before the High Court of Madras and also prayed for direction against Respondent 5 to conduct fresh investigation. The High Court disposed of the same with an observation that the appellant may raise objection on closure report by way of protest petition.
    • In pursuance thereof, the appellant filed a protest petition being Crl. MP No. 3891 of 2016, which was allowed by the Magistrate vide order dated 24-9-2016 directing Respondent 5 to register the case against Respondents 1 to 4 and to complete the investigation. Thereafter only, Respondent 5 registered the case against Respondents 1 to 4 at Crime No. 49 of 2016 for the offences under Sections 120-B, 406, 420 and 34 IPC on 1-10-2016, and after investigation, challan was filed before the competent Magistrate on which cognizance was taken by him.
    • The respondents, being aggrieved by the same, filed Crl. OP No. 6750 of 2017 before the High Court of Madras for quashment of the aforesaid proceedings. The High Court by the impugned order allowed the said petition and quashed the proceedings taking into consideration that proceedings under Section 138 of the NI Act pertaining to the same cause of action and on the same facts and grounds are pending, prior to the registration of the present proceedings.
    • It was observed that, looking to the allegations made in the FIR, only offence under Section 138 of the NI Act can be made out and continuance of the present proceedings for offences under Sections 406, 420, 120B and 34 IPC would amount to abuse of process of the court. The said order passed by the High Court is assailed by the appellant in the instant appeal.

    (iii) Submission before Supreme Court

    A. Submission on behalf of appellant

    • That in the facts of the present case the plea of double jeopardy or bar of Section 300(1) CrPC would attract only when the earlier offence and the later offence is same or have same ingredients. The identity of the allegations on fact is not relevant, in fact, the identity of the ingredients of the offence is relevant. The plea taken by Respondents 1 to 4 that a person who is previously acquitted cannot be tried for the same offence subsequently, shall apply only when it is shown that acquittal for the previous charge would lead to acquittal in the subsequent charge.
    • That in an offence under Section 138 of the NI Act, requirement to prove mens rea is not necessary although for an offence under Section 420, fraudulent and dishonest intention i.e. mens rea is relevant to prove. In support of the said contention, reliance has been placed on the judgment of Sangeetaben Mahendrabhai Patel v. State of Gujarat³⁵. The said judgment has also been relied in V.S. Reddy & Sons v. Muthyala Ramalinga Reddy³⁶. Therefore, urged the quashment of the proceedings for an offence under Sections 420, 406, 120-B and 34 IPC as directed by the High Court is wholly unjustified.

    B. Submission on behalf of respondent

    • That as per the judgment of Kolla Veera Raghav Rao v. Gorantla Venkateswara Rao³⁷, this Court has held that if the offences are different and the facts are the same, the prosecution under Section 420 IPC is barred by virtue of Section 300(1) CrPC. Further reliance has been placed on a judgment of this Court in G. Sagar Suri v. State of U.P.³⁸, wherein also the offences under Section 138 of the NI Act as well as the offence under Sections 406 and 420 IPC were allegedly committed by the accused of that case. After lodging the complaint under Section 138 of the NI Act, a petition under Section 482 before the High Court was filed for quashment of the complaint which was dismissed. On filing the special leave petition before this Court, it was allowed and the court directed that the prosecution under Sections 420 and 406 is not tenable and quashed.

    (iv) Supreme Court observation

    • On a judgment of Sangeetaben Mahendrabhai Patel³⁹ the Supreme Court has considered various judgments. The relevant portion of the judgment of Sangeetaben Mahendrabhai Patel⁴⁰ is reproduced as thus:35. The learned counsel for the appellant has further placed reliance on the judgment in G. Sagar Suri v. State of U.P.⁴¹ wherein during the pendency of the proceedings under Section 138 of the NI Act, prosecution under Sections 406/420 IPC had been launched. This Court quashed the criminal proceedings under Sections 406/420 IPC, observing that it would amount to the abuse of process of law. In fact, the issue as to whether the ingredients of both the offences were same, had neither been raised nor decided. Therefore, the ratio of that judgment does not have application on the facts of this case. 36. Same remained the position so far as the judgment in Kolla Veera Raghav Rao v. Gorantla Venkateswara Rao⁴² is concerned. It has been held therein that once the conviction under Section 138 of the NI Act has been recorded, the question of trying the same person under Section 420 IPC or any other provisions of IPC or any other statute is not permissible being hit by Article 20(2) of the Constitution and Section 300(1) CrPC.37. Admittedly, the appellant had been tried earlier for the offences punishable under the provisions of Section 138 of the NI Act and the case is sub judice before the High Court. In the instant case, he is involved under Sections 406/420 read with Section 114 IPC. In the prosecution under Section 138 of the NI Act, the mens rea i.e. fraudulent or dishonest intention at the time of issuance of cheque is not required to be proved. However, in the case under IPC involved herein, the issue of mens rea may be relevant. The offence punishable under Section 420 IPC is a serious one as the sentence of 7 years can be imposed.38. In the case under the NI Act, there is a legal presumption that the cheque had been issued for discharging the antecedent liability and that presumption can be rebutted only by the person who draws the cheque. Such a requirement is not there in the offences under IPC. In the case under the NI Act, if a fine is imposed, it is to be adjusted to meet the legally enforceable liability. There cannot be such a requirement in the offences under IPC. The case under the NI Act can only be initiated by filing a complaint. However, in a case under IPC such a condition is not necessary.39. There may be some overlapping of facts in both the cases but the ingredients of the offences are entirely different. Thus, the subsequent case is not barred by any of the aforesaid statutory provisions.
    • On perusal of the judgment of Sangeetaben Mahendrabhai Patel⁴³ relied V.S. Reddy & Sons⁴⁴ by the appellant and the judgments relied upon by the respondents in G. Sagar Suri⁴⁵ and Kolla Veera Raghav Rao⁴⁶ as aforequoted, the facts and the allegations were similar and that too the prosecution for the offences under Section 138 of the NI Act and, under Sections 406 and 420 IPC were also similar. In Sangeetaben Mahendrabhai Patel⁴⁷ it was held that the requirement to prove an offence under the NI Act and an offence under the IPC is different, and it was observed that there may be some overlapping of facts but the ingredients of the offences are entirely different, therefore, the subsequent cases are not barred by any statutory provisions. While in G. Sagar Suri⁴⁸ and Kolla Veera Raghav Rao⁴⁹, the court concluded that as per Section 300(1) CrPC no one can be tried and convicted for the same offence or even for a different offence on the same facts, therefore, the prosecution under Section 420 IPC is barred by Section 300(1) CrPC and accordingly liable to be quashed. It is to observe that in Sangeetaben Mahendrabhai Patel⁵⁰ the judgments of G. Sagar Suri⁵¹ and Kolla Veera Raghav Rao⁵² have been referred but distinguished on the ground that it was not raised and decided that ingredients of both offences were not same, and the bar of Section 300(1) CrPC would not attract.

    (v) Conclusion

    • The judgments relied by learned counsel for both the parties are in conflict with each other on the legal issue. Therefore, the above questions of law have been formulated for answer by a larger Bench for decision. In such circumstances, we request the Registry to place the file before the Chief Justice of India for orders.
11. Sanjiv Kumar v. Haryana Financial Corpn.⁵³

    (i) Facts of the case

    • That petition, challenge is to judgment dated 14-9-2009 passed by the Sessions Judge, Kaithal, whereby an appeal against judgment of conviction dated 2-8-2006 and order of sentence dated 4-8-2006 passed by the trial court, has been dismissed.
    • That complainant/Respondent 1 Haryana Financial Corporation (for short, “Corporation”) advanced some credit to M/s Anmol Agro India Pvt. Ltd. The petitioners were directors of the said firm. The firm, through petitioner Sanjiv Kumar, issued two account payee post dated cheques bearing Nos. 641549 and 641550 dated 25-12-1997 and 15-1-1998 in the sum of Rs 7,50,000 each, drawn on State Bank of India, Kaithal, in favour of complainant Corporation, qua payment of amount due towards the petitioners.
    • On presentation of cheques before Oriental Bank of Commerce, Kaithal, the same were dishonoured vide memo dated 16-1-1998. Legal notice dated 19-1-1998 was served upon the petitioners but they failed to indemnify the complainant. Consequently, complainant filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 (for short, “NI Act”), wherein the petitioners were summoned, after preliminary evidence, to face trial under Section 138 of the NI Act vide order dated 13-10-1998.
    • Petitioners herein along with Mr N.M. Chandrana (Accused 4 in complaint case) put in appearance and made statement that they are representing Accused 1 M/s Anmol Agro India Pvt. Ltd. as its directors. Accused 4 Mr N.M. Chandrana, however, died during pendency of the proceedings and accordingly proceedings against Accused 4 were dropped vide order dated 25-10-2005 by the trial court. Notice of accusation was served upon the petitioners to which they pleaded not guilty and claimed trial. After evidence of complainant, petitioners were examined under Section 313 CrPC wherein Petitioner 1 though admitted the issuance of cheques but pleaded that the cheques were misused by the complainant without giving the details of the account.

    (ii) Proceeding before trial court

    • The trial court vide judgment dated 2-8-2006 held the petitioners guilty for commission of offence punishable under Section 138 of the NI Act and vide order dated 4-8-2006, sentenced them simple imprisonment for a period of two years, payment of compensation to the tune of Rs 15 lakh each to the complainant within one month and payment of fine to the tune of Rs 10,000 each. In default of payment of fine, the petitioners were ordered to undergo simple imprisonment for three months each.

    (iii) Proceedings before the Session Court

    • The aforesaid judgment of conviction and order of sentenced were challenged in appeal before the Sessions Court which was also dismissed vide impugned judgment dated 14-9-2009.

    (iv) Submission before High Court

    • Counsel for the petitioners has vehemently contended that the courts below have grossly erred in reading the facts and law. The courts below have overlooked the material evidence on record to the effect that Rs 10 lakh had been deposited by the petitioners after dishonour of the cheque and all assets of the petitioners were sold by the respondent Corporation in realisation of gross amount of Rs 80.10 lakh. Learned counsel further contended that it was the duty of complainant to show that cheques were issued by the petitioners in discharge of their liability and that to prove this fact, statement of account and other relevant documents pertaining to loan advanced to the petitioners were not placed on record by the complainant. Learned counsel contended that notice dated 19-1-1998 was served upon the petitioners by the Branch Manager of respondent Corporation whereas the complaint was preferred through an Assistant of the Corporation. Once the complaint had been filed by a person different from the person who served notice, the complaint was liable to be dismissed.

    (v) High Court observation

    • Taking into consideration the peculiar facts and circumstances of the case coupled with the fact that an amount of Rs 10 lakh had already been paid by the petitioner after dishonour of cheque(s) and an amount of Rs 10 lakh was deposited in the treasury account with State Bank of India, Treasury Branch, Mini Secretariat, Kaithal, vide order dated 25-9-2009 passed by this Court, receipt of which is annexed with the file as Annexure P-4; as also all assets of petitioner were sold by the respondent Corporation resulting in realisation of gross amount of Rs 80.10 lakh, taking a lenient view, period of sentence qua imprisonment of petitioner is reduced to the period already undergone by him, while maintaining the conviction. The petitioner be set at liberty forthwith, if not required in any other case. So far as Rs 10 lakh deposited in the treasury, referred to above, is concerned, respondent Corporation is held entitled to get the amount released by moving an appropriate application. As regards compensation, liberty is granted to the complainant to avail appropriate remedy available under law for recovery of compensation, if so advised.
12. Jagmal v. State of Haryana⁵⁴

    (i) Facts of the case

    • Revision petition is relating to conviction and sentence of the petitioner in a criminal case relating to dishonour of cheque worth Rs 1,67,550 by Judicial Magistrate I Class, Yamuna Nagar at Jagadhri which was upheld by the Court of Additional Sessions Judge, Yamuna Nagar at Jagadhri.
    • On 18-11-2019 the Coordinate Bench of this Court pass the following order : 3. The office file shows that the petitioner was released on interim bail on his promise to pay up the entire bank dues as well as the compounding charges as per the judgment of the Supreme Court in Damodar S. Prabhu v. Sayed Babalal H.⁵⁵. However, there is nothing on record to show that the petitioner has either paid up the bank dues or has deposited the compounding charges anywhere. Adjournment is prayed for. Adjourned to 25-2-2020. Interim order to continue till the next date of hearing only. However, it is clarified that if “no-dues certificate” qua the bank amounts, is not placed on record by the petitioner three days in advance, before the next date of hearing, then the interim order in his favour shall stand automatically vacated; without any further orders from the court.

    (ii) Submission before the High Court

    • Counsel for the petitioner submits that in compliance of the aforesaid order dated 18-11-2019, the entire bank dues relating to cheque in question and compounding charges have been paid to Respondent 2 Bank vide two cheques bearing No. 132895 of Rs 1,40,000 and Cheque No. 132863 of Rs 50,000 whose copies are already placed on the file.
    • Counsel for Respondent 2 Bank has admitted the fact regarding deposit of aforesaid amount by the petitioner and he further submitted that he has no objection if the offence punishable under Section 138 of the Negotiable Instruments Act (for short “NI Act”) is compounded and the petitioner is acquitted by accepting the present criminal revision petition.

    (iii) High Court observation

    • That parties have effected compromise and the petitioner has paid the entire cheque amount in question and also paid compounding fee to Respondent 2 Bank. Accordingly, offence under Section 138 of the NI Act is hereby compounded, the present revision petition is accepted and the impugned judgments/orders dated 19-8-2015 and 19-1-2018 passed by Judicial Magistrate I Class, Yamuna Nagar at Jagadhri and Additional Sessions Judge, Yamuna Nagar at Jagadhri are set aside and the petitioner is acquitted of the offence punishable under Section 138 of the NI Act.
13. Jarnail Singh Bajwa v. State of Punjab⁵⁶

    (i) Facts of the case

    • That the petition, filed under Section 482 CrPC, the petitioner seeks quashing of FIR No. 65 dated 24-2-2021 registered at Police Station City Kharar, SAS Nagar, Mohali (Annexure P-1), constituting therein an offence, under Sections 174-A IPC, and also of all the consequential proceedings arising therefrom.
    • That as per Order dated 22-3-2021 from Shilpi Gupta, PCS Addl. Civil Judge (Sr. Divn.) cum SDJM, Kharar to the SHO Police Station City Kharar, direction for issuance FIR under Section 174-A IPC against 1. Bajwa Developers Ltd. Through its M.D. Jarnail Singh Bajwa Sunny Enclave Desu Majra Tehsil Kharar District Mohali in complaint case titled as Dayal Singh v. Bajwa Developers under Section 138 of the NI Act NACT 247/2018 Memo in reference to the subject cited above, it is stated that above said accused Jarnail Singh Bajwa has been declared proclaimed offender vide order dated 30-11-2019 of the undersigned in the above noted case. Therefore, FIR under Section 174-A IPC be registered against him immediately by making reader of this Court, namely, Sh. Manish Jain as complainant. It is further directed that one copy of this FIR be sent to the court of undersigned so that, it can be annexed with the said file. Sd/Shilpi Gupta. PCS, Addl. Civil Judge (Sr. Divn) cum SDJM Kharar.

    (ii) High Court observation

    • The High Court mentioned that the validity of the aforemade order, is imperatively required to be tested by this Court, before this Court proceeding to in consequence thereof, especially depending upon its becoming annulled or upheld, to either accept the petition or dismiss it. However, a perusal of Annexure P-3 reveals, that the order declaring the petitioner herein as a proclaimed offender, became recalled in pursuance of a compromise, becoming entered into inter se the petitioner, and, the respondent complainant. Therefore, the efficacy of the above factum probandum, which rather led the learned Magistrate concerned, to order the SHO concerned, to register the FIR against the accused, for an offence under Section 174-A IPC, obviously becomes scuttled. Moreover, when the order declaring the petitioner as a proclaimed offender, has also been recalled, and, set aside, by the learned Judicial Magistrate concerned, thereupon, the FIR, as carried in Annexure P-1, and, constituting therein an offence under Section 174-A IPC, is also amenable to be quashed, and, set aside.
14. Rajesh Kumar v. State of Haryana⁵⁷

    (i) Facts of the case

    • The petitioner is convicted under Section 138 of the Negotiable Instruments Act, has come up before this Court challenging the deposit of 20% of the compensation awarded by the appellate court.
    • Challenging the conviction whereby the petitioner was sentenced to undergo simple imprisonment for six months and was directed to pay compensation of Rs 90 lakhs which was double to the cheque amount, the convict had filed an appeal before the Session Judge, Kurukshetra.
    • As per the vide impugned order dated 26-9-2019), learned Additional Sessions Judge directed the convict to deposit 20% of the compensation awarded by the trial court within 60 days.
    • Challenging the said order the petitioner came up before this Court under Section 482 CrPC.

    (ii) Submission before the High Court

    • As per Section 148 of the Negotiable Instruments Act, it is within the power of the appellate court to order payment pending the appeal against conviction and also to order deposit of such sum and deposit a sum which is minimum of 20% of the fine of the compensation awarded by the trial court.
    • In Surinder Singh Deswal v. Virender Gandhi⁵⁸, in paras 7 and 8, the Supreme Court of India held as follows:“7. It is the case on behalf of the appellants that as the criminal complaints against the appellants under Section 138 of the NI Act were lodged/filed before Amendment Act 20 of 2018 by which Section 148 of the NI Act came to be amended and therefore amended Section 148 of the NI Act shall not be made applicable. However, it is required to be noted that at the time when the appeals against the conviction of the appellants for the offence under Section 138 of the NI Act were preferred, Amendment Act 20 of 2018 amending Section 148 of the NI Act came into force w.e.f. 1-9-2018. Even, at the time when the appellants submitted application(s) under Section 389 CrPC to suspend the sentence pending appeals challenging the conviction and sentence, amended Section 148 of the NI Act came into force and was brought on statute w.e.f. 1-9-2018. Therefore, considering the object and purpose of the amendment in Section 148 of the NI Act and while suspending the sentence in exercise of powers under Section 389 CrPC, when the first appellate court directed the appellants to deposit 25% of the amount of fine/compensation as imposed by the learned trial court, the same can be said to be absolutely in consonance with the Statement of Objects and Reasons of amendment in Section 148 of the NI Act.8. Now so far as the submission on behalf of the appellants that even considering the language used in Section 148 of the NI Act as amended, the appellate court “may” order the appellant to deposit such sum which shall be a minimum of 20% of the fine or compensation awarded by the trial court and the word used is not “shall” and therefore the discretion is vested with the first appellate court to direct the appellant-accused to deposit such sum and the appellate court has construed it as mandatory, which according to the learned Senior Advocate for the appellants would be contrary to the provisions of Section 148 of the NI Act as amended is concerned, considering the amended Section 148 of the NI Act as a whole to be read with the Statement of Objects and Reasons of the amending Section 148 of the NI Act, though it is true that in the amended Section 148 of the NI Act, the word used is “may”, it is generally to be construed as a “rule” or “shall” and not to direct to deposit by the appellate court is an exception for which special reasons are to be assigned. Therefore amended Section 148 of the NI Act confers power upon the appellate court to pass an order pending appeal to direct the appellant-accused to deposit the sum which shall not be less than 20% of the fine or compensation either on an application filed by the original complainant or even on the application filed by the appellant-accused under Section 389 CrPC to suspend the sentence. The aforesaid is required to be construed considering the fact that as per the amended Section 148 of the NI Act, a minimum of 20% of the fine or compensation awarded by the trial court is directed to be deposited and that such amount is to be deposited within a period of 60 days from the date of the order, or within such further period not exceeding 30 days as may be directed by the appellate court for sufficient cause shown by the appellant. Therefore, if amended Section 148 of the NI Act is purposively interpreted in such a manner it would serve the Objects and Reasons of not only amendment in Section 148 of the NI Act, but also Section 138 of the NI Act. The Negotiable Instruments Act has been amended from time to time so as to provide, inter alia, speedy disposal of cases relating to the offence of the dishonour of cheques. So as to see that due to delay tactics by the unscrupulous drawers of the dishonoured cheques due to easy filing of the appeals and obtaining stay in the proceedings, an injustice was caused to the payee of a dishonoured cheque who has to spend considerable time and resources in the court proceedings to realise the value of the cheque and having observed that such delay has compromised the sanctity of the cheque transactions, Parliament has thought it fit to amend Section 148 of the NI Act. Therefore, such a purposive interpretation would be in furtherance of the Objects and Reasons of the amendment in Section 148 of the NI Act and also Section 138 of the NI Act.”

    (iii) High Court observation

    • The impugned order under the provisions of Section 148 of the Negotiable Instruments Act and also in the light of the pronouncement of Supreme Court of India in Surinder Singh Deswal case⁵⁹.
    • High Court could not find any illegality in the impugned order, as such the petition stands dismissed and all interim orders are vacated. It is clarified that dismissal of this petition shall not come in the way in case the accused/convict avails legal remedies as may be available to him in accordance with law. Pending applications, if any, stand disposed of.
15. Satpal Garg v. State of Punjab⁶⁰

    (i) Facts of the case

    • Complaint under Section 138 of the Negotiable Instruments Act, 1881 (for short NI Act), the Judicial Magistrate, 1 Class, Barnala, vide judgment of conviction and order of sentence dated 6-11-2017, found the petitioner guilty for the offence punishable under Section 138 of the NI Act, and sentenced him to undergo rigorous imprisonment for a period of two years and to pay a compensation to the tune of Rs 67,500 i.e. one-and-half the cheque amount.
    • Aggrieved there against, the petitioner preferred an appeal before the learned Sessions Judge, Barnala, which was dismissed vide impugned judgment dated 5-12-2019.
    • Petitioner now filed a revision petition.

    (ii) Submission before the High Court

    • Learned counsel for the petitioner submits that a compromise dated 1-3-2022 has been effected between the parties whereby the petitioner has agreed to pay the compensation amount to the tune of Rs 67,500 and Respondent 2/complainant, namely, Sanjiv Kumar, has acceded to the same and he has no objection if the offence is compounded.
    • Learned counsel for Respondent 2 does not dispute the factum of the compromise effected between the parties.
    • Both the counsels of the parties submit that as the matter stands compromised, the necessary permission may be granted to the parties to compound the offence under Section 138 of the NI Act in view of the law laid down by the Supreme Court in Damodar S. Prabhu v. Sayed Babalal H.⁶¹; the impugned judgments and order passed by the learned trial court and the learned appellate court may be set aside and the petitioner can be acquitted of the notice of accusation served upon him.

    (iii) High Court observation

    (a) In view of the law laid down in Damodar S. Prabhu case⁶², compounding of the present offence can be allowed provided the petitioner-accused pays 15% of the cheque amount by way of costs. On calculation, 15% of the cheque amount comes to be Rs 6750. As noticed above, the parties have settled the dispute by way of compromise dated 1-3-2022. Thus, this Court grants permission to compound the offence punishable under Section 138 of the NI Act.

16. Prakash Chand v. State⁶³

17. (i) Facts of the case

    • The petition is filed under Section 482 of the Criminal Procedure Code, 1973, the petitioner seeks quashing of the summoning order dated 28-11-2018 passed by then Metropolitan Magistrate 4, Patiala House Courts, Delhi and the Criminal Complaint No. 16201 of 2017 titled as “PEC Ltd. v. K.S. Oil Ltd.” and all its consequent proceeding pending in the Court of MM- 4 (NI Act), or any successor court at Patiala House Courts, New Delhi.
    • That seven agreements (high seas sales contracts) were executed between the complainant and Accused 1 Company i.e. K.S. Oils Ltd. for importing crude oil through complainant Company, on the respective dates : (i) two agreements on 24-8-2012; (ii) two agreements on 28-8-2012; (iii) one agreement on 3-9-2012; (iv) one agreement on 4-12-2012; and (v) one agreement on 8-1-2013.
    • The total amount of all the consignments arising from the contracts was a sum of Rs 1,06,77,37,316.50 (rupees one hundred and six crore, seventy-seven lakhs, thirty-seven thousand, three hundred sixteen and fifty paise only).
    • That on 11-11-2016, 16 cheques were issued in favour of the drawer company against the aforesaid seven agreements. On 7-2-2017, the cheques were drawn on account of Central Bank of India, Morena, M.P. maintained by the drawer company, and the same were returned dishonoured with remarks showing “funds insufficient”.
    • Thereafter on 7-3-2017, statutory demand notice and another addendum notice dated 9-3-2017 was sent to the accused demanding payment of the said amount. However, upon not receiving any response from the side of the accused, a complaint was filed under Sections 138/141 of the Negotiable Instruments Act, 1881 (NI Act) bearing Complaint No. 16201 of 2017 before CMM at Patiala House Courts, New Delhi on 27-4-2017.
    • The complaint was filed against the company and 12 persons, who were directors between 2012 and 2017 (including past, non-executive and nominee directors).
    • As per the vide order dated 28-11-2018, the petitioner as well as all other accused persons were summoned to appear by the learned trial court.

    (ii) Submission before the High Court

    (a) Submission on behalf of petitioner

    • That the petitioner is the independent/non-executive director in the accused Company at the time of commission of offence, the fact which is authenticated by the records of Registrar of Companies, and had no role in the transactions or business of the company or in any day-to-day affairs of the company.
    • That petitioner is neither a signatory to any of cheques in dispute, nor were the cheques issued under his knowledge.
    • That the allegations against the petitioner are general and vague and that Respondent 2 in its complaint has not made any specific allegations against the petitioner to show as to how the petitioner had knowledge or was involved in the transaction alleged in the complaint.
    • That mere statement that the petitioner being a director was in-charge and responsible for the day-to-day affairs of the company cannot make her liable to face the trial. Reliance in this regard is placed on the following judgments : (i) Har Sarup Bhasin v. OrigoCommodities India (P) Ltd.⁶⁴; (ii) Anoop Jhalani v. State⁶⁵; (iii) MCD v. Ram Kishan Rohtagi⁶⁶; (iv) Gunmala Sales (P) Ltd. v. Anu Mehta⁶⁷; (v) National Small Industries Corpn. Ltd. v. Harmeet Singh Painwal⁶⁸; (vi) Sunita Palita v. Panchami Stone Quarry⁶⁹; and (vii) Sudeep Jain v. ECE Industries Ltd.⁷⁰
    • That Respondent 2 did not even serve the petitioner with statutory legal notice, hence it was within the knowledge of the complainant/Respondent 2 that petitioner was neither in-charge nor responsible for the day-to-day affairs of the accused Company.

    (b) Submission on behalf of respondent

    • That cheques in question were dishonoured in February 2017 whereas the petitioner had resigned from company only in September 2017. It is further stated that the even as per the records, the petitioner was a director of the accused Company and he is liable to face the trial. It is also averred that the petitioner’s arguments cannot be considered at this stage and can be dealt with only during the trial.
    • That learned Additional Public Prosecutor for the State and counsel for respondent clearly mention the fact that the amount in question is more than Rs 106 crores and trial is pending as of now, in view of which, the relief prayed for in the present petition may not be granted.

    (iii) High Court observation

    • The High Court made a specific reference in SMS Pharmaceuticals Ltd. v. Neeta Bhalla⁷¹ , the Supreme Court of India discussed the meaning and purpose of Section 141 as well as the averments required to be made in the complaint under Section 138 r/w Section 141 of the Negotiable Instruments Act, 1881 to fasten the vicarious liability on the persons associated with a company. The Supreme Court held as under:10. While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. The keywords which occur in the section are “every person”. These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words:“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, etc.”What is required is that the persons who are sought to be made criminally liable under Section 141 should be, at the time the offence was committed, in charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for the conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a director of a company who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable under the provision. The liability arises from being in charge of and responsible for the conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Conversely, a person not holding any office or designation in a company may be liable if he satisfies the main requirement of being in charge of and responsible for the conduct of business of a company at the relevant time. Liability depends on the role one plays in the affairs of a company and not on designation or status. If being a director or manager or secretary was enough to cast criminal liability, the section would have said so. Instead of “every person” the section would have said “every director, manager or secretary in a company is liable”…, etc. The legislature is aware that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action.16. (a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.(b) … Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases…”
    • High Court in reiterating the same view, the Supreme Court in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal⁷² further held as under:22. Therefore, this Court has distinguished the case of persons who are in charge of and responsible for the conduct of the business of the company at the time of the offence and the persons who are merely holding the post in a company and are not in charge of and responsible for the conduct of the business of the company. Further, in order to fasten the vicarious liability in accordance with Section 141, the averment as to the role of the directors concerned should be specific. The description should be clear and there should be some unambiguous allegations as to how the directors concerned were alleged to be in charge of and were responsible for the conduct and affairs of the company.*           *           *38. But if the accused is not one of the persons who falls under the category of “persons who are responsible to the company for the conduct of the business of the company” then merely by stating that “he was in charge of the business of the company” or by stating that “he was in charge of the day-to-day management of the company” or by stating that “he was in charge of, and was responsible to the company for the conduct of the business of the company”, he cannot be made vicariously liable under Section 141(1) of the Act. To put it clear that for making a person liable under Section 141(2), the mechanical repetition of the requirements under Section 141(1) will be of no assistance, but there should be necessary averments in the complaint as to how and in what manner the accused was guilty of consent and connivance or negligence and therefore, responsible under sub-section (2) of Section 141 of the Act.39. From the above discussion, the following principles emerge:

      (i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every director knows about the transaction.

      (ii) Section 141 does not make all the directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.

      (iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.

      (iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.

      (vi) If the accused is a director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint.

      (vii) The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases…”

    (iv) Conclusion

    • It is clear from the aforesaid portion of the complaint that general allegations have been made against all the directors of the accused Company. Such mere allegation or bald assertion may be sufficient to implicate the Managing Directors as well as those who are signatories to cheque, but not the other directors or persons, especially independent or non-executive directors, as held in catena of judgments.
    • In absence of any specific averments or allegations carving out a specific role attributable to petitioner in relation to conduct of business of accused Company, merely making bald statements that all the accused persons/directors were in-charge and responsible for the day-to-day affairs of the company, does not suffice to make the petitioner herein vicariously liable for dishonouring of the cheques not signed by him and there being material-on-record to show that he was an independent director in the company.
    • Thereof, the impugned order dated 28-11-2018 passed by the learned MM-04, Patiala House Courts, New Delhi in CC No. 16201 of 2017 is thus, quashed to the extent of issuing of summons to the present petitioner for alleged commission of the offence punishable under Section 138 of the Negotiable Instruments Act, 1881.
18. Roots Production (P) Ltd. v. Aarti Malhotra⁷³

    (i) Facts of the case

    • The revision being Crl. Rev. P. No. 590 of 2022 under Section 397 read with Section 401 of the Criminal Procedure Code, 1973 (CrPC) is directed against the order dated 4-8-2022 passed by the Additional Sessions Judge 8, West District, Tis Hazari Courts, Delhi, whereby, the appeal being Crl. A. No. 36 of 2021 preferred by the petitioner for enhancement of sentence has been dismissed. Another revision being Crl. Rev. No. 591 of 2022 in Criminal Appeal No. 36 of 2021 whereby the appeal preferred by the respondent against the conviction under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) and order on sentence has been allowed.
    • That the petitioner complainant is a private limited company which claims to be providing to its customers a strong foundation of seamless and flawless backend operations to ensure a definite success in every event and activation services.
    • That according to the petitioner complainant, the respondent placed an order for stall fabrication work at Ludhiana. The total amount for work was agreed for Rs 8,40,000, out of which, a sum of Rs 3,43,000 stated to have been paid by Cheque No. 512396 dated 8-10-2014 drawn on State Bank of India, Anand Vihar, Delhi. On 10-10-2014, the petitioner was informed by his bank that the cheque in question is not encashed and dishonoured with the reason “payment stopped”. The cheque returning memo is dated 10-10-2014.
    • In response to which petitioner/complainant Company issued legal notice dated 8-11-2014. Since no payment was made by the respondent and reply dated 9-12-2014 was sent denying the liability, therefore, the petitioner Company filed complaint case against the respondent under Section 138 of the NI Act.
    • The learned Metropolitan Magistrate after recording pre-summoning evidence, took cognizance and directed for issuance of summons against the respondent. The respondent after entering her appearance was served with notice under Section 251 CrPC and she pleaded not guilty and claimed trial.
    • The respondent took a defence in her application under Section 145(2) of the NI Act took defence that a formal agreement was to be entered between her and the petitioner complainant but the petitioner complainant did not turn up and did not do any work owing to which the payment qua the cheque in question was stopped. According to her, no order was ever placed with the petitioner complainant and there was no certificate of work completion.
    • After recording the evidence of the petitioner complainant and the respondent-accused, the learned Magistrate vide judgment dated 21-8-2020 convicted the respondent for the offence punishable under Section 138 of the NI Act. By separate order dated 6-1-2021, the respondent was sentenced to undergo simple imprisonment till rising of the court and she was also directed to pay compensation of Rs 3,43,000 to the petitioner complainant within 30 days from the date of the order.
    • Both the orders were challenged by the respondent before the Additional Sessions Judge in appeal. The appeal preferred by the respondent was registered as Criminal Appeal No. 80 of 2021. The petitioner complainant also preferred appeal praying for enhancement of sentence which was registered as Crl. Appeal No. 36 of 2021. The appeal preferred by the respondent has been allowed and the judgment on conviction and order on sentence has been set aside, whereas, the appeal preferred by the petitioner complainant has been dismissed, therefore, the petitioner complainant has preferred two revision petitions before this Court.

    (ii) Submission before the High Court

    (a) Submission on behalf of petitioner

    • The impugned order is illegal and improper and the same has been passed in ignorance of the settled legal position. According to him, the respondent kept on changing her defence. He also stated that during recording of the statement under Section 313 CrPC, the respondent alleged that an order was placed with the revisionist but at the stage of filing of an application under Section 145(2) of the NI Act and during cross-examination, her defence was that no order was placed with the revisionist. According to him, since no documents were produced with respect to placement of the order, on this ground, the order of conviction and sentence would not have been set aside.
    • That the offence under Section 138 of the NI Act is primarily a civil wrong and the burden of proof is on accused in view of presumption under Section 139 of the NI Act.

    (iii) High Court observation

    • As according to the facts of the case the cheque in question was issued on 8-10-2014 and it was dishonoured on the third day i.e. on 10-10-2014. It is a matter of record that there is no agreement between the parties for execution of any work. No bill is produced by the petitioner qua incurring any expenditure in execution of the contract. The respondent has successfully discharged the onus to prove that there was no admitted liability against her. There is no evidence on record to establish that there was any legal debt or liability against the respondent-accused. The learned appellate court has found that the agreement for providing services was terminated immediately and, therefore, the demand was made for return of the cheque to the petitioner/revisionist.
    • Having considered the entire material available on record, the appellate court has rightly found that the judgment on conviction and sentence was unsustainable and, therefore, the same has rightly been set-aside.
19. Safety Energy Solutions (P) Ltd. v. Gopi Ram⁷⁴

    (i) Facts of the case

    • The petitioners is assailing orders dated 7-12-2021 and 11-5-2022 (“impugned orders” in short) passed by the learned ASJ 4, (South-West District), in Criminal Appeal No. 445 of 2019 under Section 148 of the Negotiable Instruments Act, 1881 (“NI Act” in short) and is seeking the following reliefs:

      (a) Quash the impugned orders dated 7-12-2021 and 11-5-2022 passed by the learned ASJ 4, (South West District), Dwarka Courts, New Delhi in Criminal Appeal No. 44 of 2019 titled as Safety Energy Solutions (P) Ltd. v. Shri Gopi Ram; and

      (b) Direct that the land in question which is in possession of the respondent may be treated as sufficient security in place of deposit of an amount of Rs 1,90,00,000 in the form of FDR; and

      (c) Pass any other further orders which this Court deems fit and proper in the circumstances of the case, in favour of the petitioner.

    • The respondent/complainant had filed a complaint bearing CC No. 4990027/16 under Section 138 of the NI Act against the petitioners herein and Ms IOCL Officer’s Welfare Society (“IOCL” in short) and Bijoy Kumar Sharma, Secretary and Authorised Signatory of Ms IOCL.
    • As per the complaint, the petitioners/accused persons had purchased agricultural land in Revenue Estate of village Hassanpur, Tehsil Kapashera, New Delhi from the complainant for a total sum of Rs 24,33,72,800 vide registered sale deed dated 7-11-2014.
    • That the consideration amount was paid by the accused-petitioners by way of cheques of Rs 22 lakhs (two cheques of Rs 11 lakh each) and three cheques bearing nos. 000906, 000905 and 000904, all dated 7-11-2014 for Rs 4,38,00,000, Rs 7,00,00,000, and Rs 10,50,00,000 respectively.
    • Except two cheques of Rs 11 lakh each, other cheques were dishonoured and were returned by the bank with remarks “Funds insufficient” and “drawers signature differ” vide return memos dated 2-1-2015, 3-1-2015 and 6-1-2015. As the said amount remained unpaid despite notice, the respondent had filed the aforesaid complaint.

    (ii) Proceedings before trial courts

    • Petitioner 1 herein (Accused 2) i.e. M/s Safety Energy Solutions Private Limited (“M/s Safety Energy” in short) being the drawer of the cheques and Petitioner 2 herein i.e. U.P. Singh, director of Petitioner 1 (Accused 4) being the signatory of the cheques in question, were convicted by learned MM (NI Act 07), South-West, Dwarka, Delhi vide judgment dated 17-7-2019. Vide order dated 5-8-2019, the learned MM sentenced the petitioners, as under:“Convict 1 Safety Energy is a company which is represented by Sh. U.P. Singh (Convict 2). It is pertinent to mention that the Convict 2 has settled the matter before the court on 10-5-2016 for a sum of Rs 17 crores 50 lakhs. The convicts did not comply with the terms and conditions of the settlement.Considering the totality of circumstances, Convict 2 (Sh. U.P. Singh) is sentenced to simple imprisonment for six months and is further ordered to pay compensation to son/LR of the complainant for an amount of Rs 10.0 crores (Rs ten crores only) under Section 357 CrPC Convict 1 (M/s Safety Energy) is directed to pay the compensation of Rs 10.0 crores to son/LR of the complainant. In default of payment of compensation, Convict 2 (Sh. U.P. Singh) shall undergo further simple imprisonment for a period of 6 months.It is hereby clarified that the compensation is granted after taking into account the payment of Rs 4 crores 38 lakhs already made to the complainant by the convicts.”
    • Aggrieved by the aforesaid judgment and order on sentence, the petitioners herein preferred an appeal before the learned ASJ vide Criminal Appeal No. 445 of 2019 and also prayed for suspension of sentence.Vide order dated 25-10-2019, the learned appellate court/learned ASJ-02 (South-West), Dwarka Courts, suspended the sentence awarded to the petitioner observing as under:In view of the above and having regard to the facts and circumstances of the present case and in view of the provisions of Section 389 CrPC, the sentence awarded by the learned trial court is suspended and the appellant is granted bail during the pendency of this appeal on his furnishing a personal bond in the sum of Rs 5,00,000 with one surety in the like amount. Bail bond furnished and accepted.Appellant is directed to deposit an FDR in the sum of Rs 2 crores before this Court on the NDOH.
    • Subsequently an application dated 19-2-2021 was filed by the petitioners seeking waiver of the condition of deposit of Rs 2 crores imposed vide order dated 25-10-2019 pleading that instead of FDR for Rs 2 crores, the petitioners be allowed to deposit a security in the form of the undivided half share in the land in question which is valued at much more than Rs 2 crores. Said application was dismissed by learned ASJ vide order dated 7-12-2021 observing as under:“The court has considered the record of the present appeal. It is seen that after effecting token compliance of the order dated 25-10-2019 through deposit of Rs 10 lakhs by FDR on 13-12-2019, the appellant kept seeking time to deposit the remainder amount of rupees one crore ninety lakhs, only to completely withdraw even from the said commitment. Instead, the present application was moved for deposit of a security instead of the FDR.The court finds that the appellant has want only abused the grace offered to him by the court in the form of extension of time for compliance of order dated 25-10-2019. The application is thus liable to be dismissed. The deposit of the FDR being a condition for the suspension of the sentence and grant of bail, the prayer of the appellant is also a plea for review of the order dated 25-10-2019 passed by the learned predecessor of this Court. This Court does not possess the power to review either.The application is dismissed. In the interest of fairness, the appellant is granted a final opportunity for compliance of order dated 25-10-2019 by the next date of hearing. List on 8-1-2022.”
    • As the aforesaid order was not complied with, on 11-5-2022, learned ASJ passed the following order:“11-5-2022Present : Mr Yogondra Adari, learned APP for the State.Sh. B.K. Singh, learned counsel for appellant. Ms Namita Roy, learned counsel for respondent.Exemption application filed on behalf of Appellant 2 on the ground that he is appearing before Tiz Hazari Court. The application contains no details of the case in which appellant is appearing before Tiz Hazari Courts, Delhi. Further, perusal for file shows that appellant is not appearing in the court for the last many dates. Vide order dated 25-10-2019 sentence passed by the learned trial court was suspended and bail was granted to the appellant on the ground that he will deposit the 20% of the compensation amount. As per the Section 148 of the NI Act, 20% of the compensation amount is to be deposited by the appellant within 60 days and such period can only be extended to 30 days i.e. total 90 days, if sufficient cause is shown by the appellant. More than two-and-half years have gone by but till date appellant has not deposited the compensation amount as directed by this Court and further no sufficient reason has been shown by him for not depositing the compensation amount under Section 148 of the NI Act.Considering the abovementioned facts and the conduct of the accused and that no reason has been stated in the application, therefore, application is hereby dismissed. The bail granted to the accused vide order dated 25-10-2019 is hereby cancelled. NBWs issued against the appellant with notice to his/her surety. Put up for further proceedings on 4-6-2022.”(viii) It is the above orders dated 7-12-2021 and 11-5-2022 of learned ASJ, which are under challenge in the present petition.

    (iii) Submission before High Court

    Submission on behalf of petitioner

    • That there was no privity of contract between the petitioners and the respondent; Petitioner 1 was only an agent who assisted/facilitated in identification of the land owners and purchase of the land for M/s IOCL, in consideration of which, the petitioner was to keep only 1% consultancy fee of the total value of the land. Acting on behalf of the IOCL, the petitioners had entered into an oral agreement for purchase of agricultural land. Merely because, Petitioner 2 signed the impugned cheques in absence of any debt, much less legally recoverable debt from the petitioners, the petitioners could not have been fastened with any liability under Section 138 of the NI Act.
    • That this Court has power to reduce the amount of deposit. She also argued that one cheque bearing No. 000906 of Rs 4.38 crore has already been encashed by the respondent and the same can be taken into account while considering reduction of deposit as contemplated under Section 148(1) of the NI Act. In support, she placed reliance upon the judgments of Punjab and Haryana High Court in Surinder Kumar v. Jaswinder Kumar⁷⁵ and Vivek Sahni v. Kotak Mahindra Bank Ltd.⁷⁶

      Submission on behalf of respondent

    • That the dismissal of this petition with heavy cost submitting that it is an abuse of process of law. Learned counsel submitted that the direction for deposit of Rs 2 crores by the learned trial court is in terms of the statutory mandate under Section 148 of the NI Act, which requires the appellate court to order the convict to make minimum deposit of 20 per cent of the fine or compensation awarded by the trial court, before the appeal is entertained.
    • That respondent also submitted that it were the petitioners who made the payment by way of cheques in question towards purchase of the respondent’s land. Therefore, they cannot now turn around and plead that they were simply agents.
    • Further argued that the respondent has already executed the sale deed in favour of IOCL and therefore, the petitioners’ prayer that half of sold land be taken as security, is misplaced.

    (iv) High Court observation

    • Petitioners have challenged the impugned orders pleading that vide order dated 7-12-2021 bail was granted to Petitioner 2 without imposing any condition. Condition of pre-deposit of Rs 2 crores in the form of FDR was imposed for the entertainment of the petitioner’s appeal under Section 148 of the NI Act. Therefore, learned ASJ could not have cancelled Petitioner 2’s bail on account of non-deposit of Rs 2 crores. Learned counsel also argued that by imposing an unreasonable precondition of deposit of Rs 2 crores for entertainment of appeal, in effect, learned ASJ has scuttled the petitioners’ right to appeal. Therefore, the order dated 7-12-2021 imposing the aforesaid condition of deposit of Rs 2 crores and order dated 11-5-2022 cancelling Petitioner 2’s bail are illegal, arbitrary and not sustainable.
    • That from bare perusal of Section 148 of the NI Act, it is evident that while entertaining an appeal, the appellate court may order the appellant to deposit an amount, which shall not be less than 20% of the compensation awarded by the trial court.
    • That the petitioners were convicted under Section 138 of the NI Act by the learned Magistrate vide judgment dated 17-7-2019 and were sentenced vide order dated 5-8-2019 directing them inter alia, to pay compensation of Rs 10 crores each to the son/LR of the complainant/respondent herein and in default, Petitioner 2 herein to undergo simple imprisonment for a period of six months. The said judgment and order on sentence was challenged by the petitioners by way of appeal. The appellate court, while suspending the sentence and granting bail to Petitioner 2 herein, vide order dated 25-10-2019 directed the appellant/s to deposit in court, a sum of Rs 2 crores by way of FDR by the next date of hearing, adjourning the matter to 13-12-2019. Petitioner 2 did not challenge the said order and rather, deposited a part amount of Rs 10 lakhs by way of FDR on 13-12-2019 and sought time to deposit the remaining amount of Rs 1,90,00,000. Even subsequently, the petitioners kept seeking time for depositing the balance amount. Thus, it does not lie in the mouth of the appellants to now contend that the learned ASJ imposed an unreasonable condition, thus effectively scuttling the appellant’s right to appeal.
    • That after repeatedly seeking time for depositing the remaining amount of Rs 1,90,00,000, instead of depositing the said amount, subsequently after a lapse of more than one year, an application on behalf of the petitioners was filed; vide said application it was prayed that Petitioner 2 instead be allowed to deposit a security in the form of the undivided half share in the land in question pleading that the same is worth more than two crores. Even thereafter, learned ASJ, while dismissing the said application vide order dated 7-12-2021, still granted to the petitioners, one more/final opportunity in the interest of justice, to deposit the said amount and listed the matter on 8-1-2022. Admittedly, the remaining amount of Rs 1,90,00,000 was not deposited either by 8-1-2022 or thereafter till 11-5-2022.
    • That on 11-5-2022 Petitioner 2, who was on bail, was not even present before the learned ASJ. The learned ASJ observing that Petitioner 2 had not been appearing for last many dates; and his non-appearance even on that date i.e. 11-5-2022 was not satisfactorily explained; and also taking into account the conduct of the petitioners i.e. non-compliance of directions of deposit of part of compensation amount despite lapse of more than 2½ years, revoked suspension of sentence/cancelled bail granted to Petitioner 2 vide the impugned order dated 11-5-2022. In view of these facts, judgment of Punjab & Haryana High Court in Amit Kumar v. State of Haryana⁷⁷, is of no assistance to the petitioners.

    (v) Conclusion

    • In view the above facts and circumstances, the petitioners have failed to demonstrate any illegality or irregularity in the impugned orders dated 7-12-2021 and 11-5-2022, passed by the learned ASJ.
20. Subhash Chandra Agarwal v. Planet Media Services Ltd.⁷⁸

    (i) Facts of the case

    • The present petition is filed under Section 482 of the Criminal Procedure Code, 1973 (hereinafter referred to as “the Code”) for quashing the summoning orders dated 1-4-2017 and 23-2-2017 (hereinafter referred to as the “impugned orders”) passed in criminal complaints titled as Planetcast Media Services Ltd. v. Beret Media Services bearing CC Nos. 5229 of 2017 and 3047 of 2019 by the court of Shri Lovleen, Metropolitan Magistrate, Patiala House Courts, New Delhi (hereinafter referred to as the “trial court”.
    • Respondent 1/complainant (hereinafter referred to as “Respondent 1”) has filed two complaints under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the “NI Act”) titled as Planetcast Media Services Ltd. v. Beret Media Services bearing CC No. 5229 of 2017 subject-matter of Crl. M.C. No. 1745 of 2019 and CC No. 3047 of 2017 subject-matter of Crl. M.C. No. 1155 of 2019 respectively on the allegations that Respondent 1 is engaged in the business of providing playout, satellite bandwidth & teleport (uplinking) services under the licence of the Ministry of Information & Broadcasting (MIB), Government of India. Respondent 2, namely, Beret Media Pvt. Ltd./Accused 1 (hereinafter referred to as “Respondent 2”) is stated to be a company registered under the Companies Act, 1956.
    • Petitioner/Accused 2, Respondent 3/Accused 3 and Respondent 4/Accused 4 are stated to be directors of Respondent 2, and are in-charge and responsible for the conduct, management and day-to-day affairs of Respondent 2. Respondents 2 and 3 are jointly, severely liable for acts of Respondent 2. Accused 5 i.e. Bhola Baba Developers Ltd. is stated to be company registered under the Companies Act, 1956 and is running a TV channel “India Crime”. Accused 6, namely, Virender Kumar Agarwal (hereinafter referred to as “Accused 6”), Accused 7, namely, Hari Shankar Agarwal (hereinafter referred to as the “Accused 7”), Accused 8, namely, Jitendra Agarwal (hereinafter referred to as “Accused 8”) are the directors of Accused 5. Accused 6 to 8 are responsible for day-to-day affairs of Accused 5.
    • Accused 5 through Accused 6 to 8 approached Respondent 1 for availing the uplinking and bandwith services for their TV Channel “India Crime” by using Respondent 1 Teleport and Satellite resources along with teleport/hub. Accused 5 through Accused 6 to 8 as per mutually agreed understanding had entered into uplinking service agreement and space segment service contract dated 17-1-2013 with Respondent 1. Accused 5 also gave a written confirmation dated 28-10-2015 to Respondent 1 wherein it is stated that all the payments towards the invoices raised after 28-10-2018 for uplinking and bandwith charges to Accused 5 shall be done by Respondent 2. Respondent 2 also gave a written confirmation dated 30-10-2015 to Respondent 1 by stating that all the payments towards the invoices raised after 28-10-2015 for uplinking and bandwith charges to Bhola Baba Real Estate Developers Pvt. Ltd. i.e. Accused 5 shall be borne by Respondent 2, after all clearances and given frequency of channel from the date, Respondent 2 shall be liable to give payment to Essel Shayam (now known as Respondent 1) for uplinking charges. Respondent 1 has fulfilled all its obligations and started providing uplinking and bandwith services for the TV channel, namely, “India Crime” w.e.f. 23-11-2015 and accordingly, Accused 1 to 8 have availed the facilities and services provided by Respondent 1 under the agreements.
    • Respondent 1 in lieu of services rendered by it, issued various invoices from time to time to Accused 5 on account of Respondent 2. In terms of the invoices raised by Respondent 1, still a principal balance of Rs 53,81,557 is outstanding and payable by the petitioner, Respondents 2 to 4 and Accused 5 to 8 as on 31-1-2017 and they are also liable to pay interest amounting to Rs 9,75,946 in terms of the agreement. Respondent 2 in terms of the letter/written communication dated 30-10-2015, admitted its liability and accordingly, in discharge of its liability, Respondent 2 through petitioner, Respondents 3 and 4, issued cheque bearing No. 190325 dated 3-2-2017 amounting to Rs 39,58,988 subject-matter of complaint bearing CC No. 5229 of 2017 and Crl. M.C. No. 1745 of 2019 and cheques bearing No. 214270 dated 30-9-2016, 214281 dated 20-10-2016 and 214280 dated 30-10-2016 each amounting to Rs 6,00,000, drawn on Axis Bank, Meerut, Uttar Pradesh- 250 001 subject-matter of complaint bearing CC No. 3047 of 2017 and Crl. M.C. No. 1155 of 2019, respectively.
    • However, when the said cheques were presented for encashment, returned back from the bankers of Respondents 1 with remarks “fund insufficient” vide return memo dated 6-2-2017 and 27-12-2016 respectively issued by the Canara Bank, Branch Janpath i.e. the banker of Respondent 1. Respondent 2 through the petitioner and Respondents 3 and 4, did not make the payment of the cheque amount despite the notice dated 15-2-2017. Hence, the present complaints.

    (ii) Proceedings before trial court

    • The trial court vide impugned orders dated 23-2-2017 passed in Complaint No. 3047 of 2017 and 1-4-2017 passed in Complaint No. 5229 of 2017 took the cognizance for the offence punishable under Section 138 of the NI Act against the petitioner and Respondents 2 to 4. Accused 5 to 8 were not summoned by the trial court.CC No. 3047 of 2017 and 5229 of 201723-2-2017 and 1-4-2017Fresh complaint received by way of assignment. It be checked and registered.Present : AR of the complainant with learned counsel evidence by way of affidavit tendered. Documents exhibited. Vide separate statement, pre-summoning evidence stands closed. Arguments on summoning of accused heard. Perused. The complaint appears to be well within the limitation period of law. From the perusal of complaint, affidavit tendered and documents filed, there are sufficient material-on-record to proceed against the accused under Section 138 of the NI Act.Accordingly, issue summons to Accused 1, 2, 3 and 4 only on filing of PF/RC returnable for 13-10-2017. Complainant is directed to send copy of complaint along with necessary documents to the accused.Steps be taken within 4 weeks from today, in case of non-availability/refusal/premises found locked, summons be served by way of affixation with photograph.

      As per the guidelines laid down in Damodar S. Prabhu v. Sayed Babalal H.⁷⁹, Ahlmad is directed to make a mention on the summons (add separate sheet if required) that the accused can make an application for compounding of the offence at the first or second hearing of the case and if such an application is made, compounding may be allowed by the court without imposing any cost on the accused.

    (iii) Submission before High Court

    Submission on behalf of petitioner

    • That the petitioner was a non-executive director of the company and was never involved in its day-to-day activities and the confirmation/undertaking was prior to the induction of the petitioner in Respondent 2. The counsel for the petitioner relied upon the judgments of Supreme Court in Sunita Palita v. Panchami Stone Quarry⁸⁰ and SMS Pharmaceuticals Ltd. v. Neeta Bhalla⁸¹, passed by the Supreme Court.

      Submission on behalf of respondent

    • That the petitioner primarily pleaded and argued that he is a non-executive director of Respondent 2 as such, there is no proximate and direct involvement of the petitioner being non-executive director of Respondent 2. The counsel for Respondent 1 further argued that as per the Form DIR-12 pertaining to the petitioner, the petitioner has been shown in the category of the promoter and non-executive director and was appointed as director on 10-1-2016. The petitioner as such, was the director when the cheques in question were issued and still he is continuing to be as one of the directors. The status of Respondents 3 and 4 in Respondent 2 is identical as that of the petitioner and as such, it cannot be pleaded that the petitioner is not full time director of Respondent 2. The counsel for Respondent 1 also referred Sections 2(69) and 149(6) of the Companies Act, 2013. The counsel for Respondent 1 argued that the case law relied upon by the petitioner is not relevant for the purpose of decision in the present petition. The counsel for Respondent 1 relied on the cases titled as Malwa Cotton and Spg. Mills Ltd. v. Virsa Singh Sindhu⁸² paras 8-11 and Krishna Murari Lal v. IFCI Factors Ltd.⁸³

    (iv) High Court observations

    • As mentioned hereinabove and reflecting from the Form DIR-12 that the petitioner was inducted as a director in the category of promoter which means that the petitioner was having control over the affairs of the company directly or indirectly and is not falling in the definition of an independent director. The Form DIR-12 clearly reflects that the petitioner was not away from the affairs of Respondent 2 and was directly or indirectly involved in the affairs of Respondent 2. The petitioner is not an independent director of Respondent 2 although the petitioner is named as non-executive director in Form DIR-12. Mere nomenclature in Form DIR-12 as non-executive director necessarily does not mean that the petitioner was not directly or indirectly related with the affairs of Respondent 2. If the petitioner is having the evidence that he was not responsible for the affairs of Respondent 2, it can be established and proved in accordance with law during the trial of the present complaints. The petitioner cannot be absolved from its liability qua the cheques in question by pleading that the confirmation letter were issued prior to his appointment of director, particularly, when the cheques in question were issued after the petitioner was appointed as director. The nomenclature of non-executive directors does not reflect and mean that the petitioner was a non-functional director in Respondent 2.
21. Vishal Arora v. Yes Bank Ltd.⁸⁴

    (i) Facts of the case

    • That the instant petition under Section 482 of the Criminal Procedure Code, 1973 seeking quashing of the Criminal Complaint No. 4162 of 2020 titled “Yes Bank Ltd. v. Oscar Investments Ltd.” and the summoning order dated 24-12-2020 passed by learned Metropolitan Magistrate (NI Act) 3, Rouse Avenue Court, New Delhi.
    • That the complainant/respondent Yes Bank Limited is a company engaged in offering wide range of banking services to its clients. Oscar Investments Limited (Accused 1) is a public listed company, promoters/directors of which are Accused 2 and 3.
    • That RHC Holding Pvt. Ltd. happens to be the holding company emanating from Oscar Investments Ltd./Accused 1. The petitioner in Crl. M.C. No. 2359 of 2022, namely, Mr Vishal Arora i.e. Accused 4, was employed as the Senior Manager-Finance in RHC Holding Pvt. Ltd., and the petitioner in Crl. M.C. No. 2360 of 2022, namely, Mr Hemant Dhingra i.e. Accused 5, was employed as Director (Finance) in RHC Holding Pvt. Ltd. Both the petitioners, however, were not part of the Board of Directors. For the ease of operations, the petitioners were appointed as the authorised signatories in the bank account of Oscar Investments Limited/Accused 1.
    • On 23-12-2016, Accused 1 availed credit facility from the complainant bank for a total sum of Rs 5,65,00,00,000 (rupees five hundred and sixty-five crores). The petitioners, in the capacity of authorised signatories of Accused 1, signed a declaration for submission of cheques towards discharge of the liability of Accused 1 under the credit facility. In furtherance, the cheque bearing No. 932400 drawn on Yes Bank Ltd. for an amount of Rs 2,00,00,00,000 (rupees two hundred crores) and cheque bearing No. 932401 drawn on Yes Bank Ltd. for an amount of Rs 25,00,00,000 (rupees twenty five crores) signed by the petitioners, were also submitted by Accused 1 to the complainant on 23-12-2016.
    • On 17-1-2017, the complainant and Accused 1 entered into a loan agreement, and a deed of guarantee was executed in favour of the complainant by Accused 2 i.e. the director of Accused 1.
    • Subsequently, petitioner in Crl. M.C. No. 2360 of 2022, Mr Hemant Dhingra, resigned from the employment of RHC Holdings Pvt. Ltd. with effect from 30-9-2017, and petitioner in Crl. M.C. No. 2359 of 2022, Mr Vishal Arora, also tendered his resignation on 27-8-2018.
    • That the total outstanding amount under the credit facility was Rs 4,41,72,87,888.67 as on 8-1-2020, the complainant presented the cheques dated 9-1-2020 issued by Accused 1 for encashment to recover its dues, but the said cheques were returned unpaid/dishonoured vide returning memo dated 9-1-2020 with remarks “funds insufficient”.
    • Statutory notice under Section 138 of the Negotiable Instruments Act, 1881 was sent by the complainant calling upon the accused Company to make good the amount mentioned in the cheques. The notice was addressed to the company, its directors, and the authorised signatories i.e. the petitioners herein.
    • The complainant, thereafter, proceeded to file a complaint under Sections 138/141/142 of the Negotiable Instruments Act, 1881 against the accused Company and its directors and signatories. After considering the material-on-record and pre-summoning evidence, learned trial court thought it fit to summon all the accused persons to answer the charge under Section 138 of the NI Act, 1881.

    (ii) Submission before High Court

    Submission on behalf of petitioners

    • That Accused 5 had ceased to be an employee of RHC Holdings Pvt. Ltd. with effect from 30-9-2017, and was also replaced as a member of the Asset Liability Management Committee with effect from 17-8-2017. It was further submitted Accused 4 also ceased to be an employee of RHC Holdings Pvt. Ltd. with effect from 27-8-2018, and was rather an employee of Hair Rejuvenation and Revitalisation Nigeria Ltd. when the cheques were allegedly dishonoured on 9-1-2020. It is stated that both the accused persons stopped having any association with the accused Company post their resignations. It was further stated that in view of the same, petitioners could clearly not have been the person in charge of or responsible for the conduct of day-to-day business of the accused Company in the year 2020.
    • It was stated that Accused 5 had addressed a letter dated 6-10-2017 to the Board of Directors of RHC Holdings Pvt. Ltd., informing that the cheques signed by him would no longer be valid and a request was made that the said cheques be replaced with ones executed by the authorised signatories of the company at the earliest. Accordingly, after the resignation of Accused 4 also, Mr Sanjeev Kumar Singhal, Mr Chandra Shekhar Jha, and Mr Rajendra Kumar were appointed as the new authorised signatories vide board resolution dated 30-8-2018. Thus, at the time of commission of offence, the petitioners were not the authorised signatories of the accused Company, and the said fact was in the knowledge of the complainant from the board resolution dated 30-8-2018 as well as from other publicly available documents, the same was also brought to its knowledge by Accused 5 vide reply to legal notice dated 3-2-2020.
    • That the cheques in dispute were issued by accused Company and not by petitioners in their individual capacities, and since they ceased to have any association with the accused Company long before the cheques were presented for encashment, there was no way they could have ensured that the cheques were honoured. It was further argued that even when the demand notice under Section 138 of the NI Act was issued, the petitioners were not in the position to comply with any demands raised in the said notice as it was the accused Company who was liable to make the payment.
    • Learned counsel states that it is settled law that when a person who had signed the cheque, resigned prior to the dishonour of the said cheque i.e. when the cause of action under Section 138 arose, he cannot be made vicariously liable under Section 141 of the NI Act because he would have no say in seeing that the cheque is not dishonoured. To advance his case, learned Senior Counsel places reliance upon the following judgments : (i) DCM Financial Services Ltd. v. J.N. Sareen⁸⁵; (ii) Kamal Goyal v. United Phosphorus Ltd.⁸⁶; and (iii) Nikhil P. Gandhi v. State of Gujarat⁸⁷.

      Submission on behalf of respondent

    • Learned counsel on behalf of respondent stated that once a cheque is tendered towards a liability and discharge of an obligation, the dishonour of the same makes the signatory liable to be prosecuted. In this regard, reliance has been placed on the decisions in Rajeshbhai Muljibhai Patel v. State of Gujarat⁸⁸ and Bhupesh Rathod v. Dayashankar Prasad Chaurasia⁸⁹. It is argued that the contentions of the petitioners that they had rendered the cheque undated is also misconceived and legally untenable under the provisions of the Negotiable Instruments Act, 1881, for which reliance is also placed on the decision in Mojj Engg. Systems Ltd. v. A.B. Sugars Ltd.⁹⁰ It is further stated that the petitioners were duly authorised to act on behalf of accused Company at the time of issuance of cheques in favour of respondent Bank towards discharge of the undisputed liabilities towards credit facility.
    • That specific allegations and averments have been made against the petitioners in the complaint, and accused persons have been summoned by the learned trial court after due application of mind and considering all the material before it. It is argued that as held in catena of judgments, the contentions raised on behalf of the petitioners are triable issues and thus, no mini trial is contemplated at this stage, more particularly when the complaint discloses a clear commission of an offence.

    (iii) High Court obseration

    • That the Supreme Court in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal⁹¹ carved out the following principles:

      (a) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every director knows about the transaction.

      (b) Section 141 does not make all the directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.

      (c) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.

      (d) Vicarious liability on the part of a person must be pleaded and proved and not inferred.

      (e) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.

      (f) If the accused is a director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint.

      (g) The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases.

    (iv) Conclusion

    • The petitioners herein were admittedly the employees in the holding company of Accused 1 and were its authorised signatories at the time when the credit facility was obtained from the respondent Bank. It is also not the case of petitioners that they had informed the respondent about their resignations, rather, they had merely asked the accused Company to do the same. Nothing is placed on record to show that the respondent Bank was informed by the accused Company about the resignations of the authorised signatories to cheques issued to it, before the same were presented for encashment. Further, respondent Bank was informed about the factum of resignations of the petitioners only through a reply to legal notice under Section 138 of the NI Act, 1888, dated 3-2-2020 by petitioner Hemant Dhingra. Therefore, the facts that emerge from the preceding discussion are that (i) the amount in dispute is rupees two hundred and twenty-five crores of public money; (ii) the petitioners are the signatories to the cheques which have been dishonoured; (iii) the liability of accused Company is also not disputed by the petitioners; (iv) statutory legal notices sent by the complainant were also addressed to the present petitioner; and (v) specific averments have been made against the petitioners in the complaint. Now, at this stage and under such circumstances, if the plea of petitioners is accepted that since they were not a part of the accused Company at the time when cheques signed by them were dishonoured, it would in fact, amount to snatching away the right of respondent Bank to examine the signatories of the cheques before the learned trial court. In such a situation, it would be prudent and appropriate to permit the respondent Bank to lead evidence in support of its claim, and dropping the proceedings against both the signatories of the cheques, at the very initial stage, would amount to throttling the trial
22. Satvinder Jeet Singh Sodhi v. State of Maharashtra⁹²

    (i) Facts of the case

    • Complaint was filed for offence under Section 138 of the Negotiable Instruments Act (“NI Act”, for short) alleging that, the complainant Company is engaged in business of various types of material handling equipments. Accused 1 is a company. Accused 10 is its secretary. Accused 11 and 12 are authorised signatory of Accused 1. Accused 2 to 9 are directors of Accused 1 Company. Accused 2 to 12 are responsible for day-to-day affairs of Accused 1 Company and they are responsible for transactions of this case. Accused 1 is the customer of complainant Company.
    • Directors of Accused 1 had placed orders with the complainant for electromagnetic oil cooled overband magnetics separator on behalf of Accused 1. As per requirement of Accused 1 Company, the complainant Company delivered the material to consignee at their instance. There was no objection from accused regarding quality and quantity of the goods. In discharge of the liability, Accused 1 issued a cheque signed by Accused 11 and 12.
    • The cheque was for an amount of Rs 29,31,849.30. The cheque was presented by complainant with their banker. It was dishonoured with reasons “funds insufficient”. Notice was duly served on Accused 1, 2, 3, 6, 9, 11 and 12 on 17-8-2013 and envelope returned to advocate with remark, “not claimed” regarding Accused 5 and 8. Regarding Accused 4, 7 and 10, complainant did not receive any postal acknowledgment. Complaint was filed on 30-9-2013, for the offence punishable under Section 138 of the Negotiable Instruments Act (“NI Act”, for short). Process was issued.

    (ii) Submission before High Court

    Submission on behalf of applicants

    • That the applicants are not responsible for day-to-day affairs of Accused 1 Company as they are non-executive independent directors of Accused 1 Company. The said fact is evident from the documents annexed to this application.
    • That the applicants have no knowledge or information about the transactions of this case. As per Section 149(12) of the Companies Act an independent director or non-executive director shall be held liable only in respect of such acts of omissions or commission by a company which had occurred with his knowledge, attributable through board processes and with his consent or connivance or where he had not acted diligently.
    • That Applicant 1 was not served legal notice demanding cheque amount.
    • That to prosecute the accused by invoking Section 141 of the Act, the person must be in charge of day-to-day activities and responsible for the conduct of business of the company.
    • That an independent director is a member of the Board of Directors who (i) does not have a material relationship with the company; (ii) is not part of company’s executive team; and (iii) is not involved with day-to-day operation of the company.
    • That to be able to list on certain exchanges, there are requirements for the member of independent Directors of the Board.
    • That a material relationship is a relationship that can interfere with the exercise of a director’s independent judgment.
    • That Board of Directors. It is mentioned that applicants are independent non-executive directors, Form 32 of Applicant 1 describes him, as independent director.
    • Being independent directors and lack of averments in complaint, the applicants cannot be prosecuted for the offence under Section 138 of the NI Act.

      Submission on behalf of respondent

    • That there are sufficient averments in the complaint to indicate the role of the applicants. The grounds urged by the applicants that they are independent non-executive directors or that there are no averments to satisfy the requirements of Section 141 of the NI Act is required to be appreciated during the trial. On the basis of the facts stated in the complaint that court took cognizance of the complaint. It is submitted that the applicants have not brought any unimpeachable evidence which leads to conclusion that the applicants were not in-charge and responsible for the conduct of business of the accused Company, at the time of commission of offence. The documents relied upon by the applicant cannot be considered at this stage. Statutory notices were dispatched to applicants on last known address. The postal envelopes returned with remarks not claimed. It is not incumbent upon the complainant to elaborate in the complaint, role played by each directors in the transaction forming the subject-matter of the complaint. Reliance is placed on the decision of the Supreme Court in Ashutosh Ashok Parasrampuriya v. Gharrkul Industries (P) Ltd.⁹³
    • That the corporate governance report for the year 2013-2014 refers to composition of Board of Directors as on 31-3-2014 and describes applicants as independent non-executive director. The complaint for offence under Section 138 of the NI Act was filed on 30-9-2013. In the complaint, it is averred that, Accused 1 Company. Accused 11 and 12 are authorised signatory of Accused 1. Accused 2 to 12 are responsible for day-to-day affairs of Accused 1 company and responsible for transactions in this case. The transaction referred to in the complaint is delivery of material as per requirement of Accused 1 Company and issuance of cheque singed by Accused 11 and 12 towards discharge of liability and dishonour of said cheque. Beyond the aforesaid averment, no overt act is attributed to the applicant.

    (iii) High Court observation

    • That Chintalapati Srinivasa Raju v. SEBI⁹⁴ it is held as follows:The documents on record indicate that the applicants are independent non-executive directors. In the light of the averments made in the complaint, role of independent directors, documents on record, petitioners cannot be prosecuted for the offences punishable under Section 138 of the NI Act by invoking Section 141 of the said Act.The applicants were independent non-executive directors of Accused 1 Company. Considering the facts of this case, in exercise of inherent powers of this Court under Section 482 CrPC, the proceedings against them are required to be quashed. Learned counsel for the respondent complainant submitted that the trial as against the other accused may be expedited.
23. Avneet Bedi v. State of W.B.⁹⁵

    (i) Facts of the case

    • Revisional application has been preferred challenging the proceedings being Complaint Case No. C/8804/2011 under Sections 138/141 of the Negotiable Instruments Act pending before the learned Metropolitan Magistrate, 9 Court, Calcutta including the orders passed therein.
    • The allegations made in the petition of complaint filed at the instance of Tata Steel Processing and Distribution Ltd. (hereinafter referred to as the “complainant Company”) against IDEB Projects (P) Ltd. (hereinafter referred to as “accused Company”) and its responsible persons were to the effect that in discharge of legally enforceable debts and liability arising out of supply of cut and bend reinforcement bar by the complainant Company, the accused Company issued a cheque of Rs 2,00,00,000. The said cheque bearing No. 022300 dated 19-7-2010 was drawn on AXIS Bank Ltd. Indiranagar, Bangalore (KT) Bangalore was signed by Accused 2 (Harkirat Singh Bedi) as a director and authorised person of the accused Company and handed over to the complainant Company at its office. The said cheque was presented by the complainant Company with its banker State Bank of India, CAG Branch, Reliance House, 2 Floor, 34 Chowringhee Road, Kolkata 700 071 within its validity period for encashment and collection of the proceeds. The said cheque was dishonoured and returned unpaid with remarks “insufficient fund” vide return memo dated 11-1-2011. The complainant received the said information of dishonoured cheque from AXIS Bank Ltd. Indiranagar, Bangalore (KT) Bangalore on 11-1-2011. The complainant Company thereafter send notice through speed post with A/D on 9-2-2011 demanding the amount covered by the dishonoured cheque within 15 days of receipt of the demand notice. The A/D card did not return, however, from the official website of India Post it was found that the said demand notice was duly served upon Accused 1 to 3 at its office address on 10-2-2011. The notice was sent to the correct address and therefore it is presumed that the same was duly served to the accused persons in the eye of the law. In spite of receiving the demand notice within 15 days the accused persons did not pay the amount covered by the dishonoured cheque or any part thereof. It was alleged that the accused persons as such has made themselves liable to be prosecuted under the provisions of Section 138 read with Section 141 of the Negotiable Instruments Act.
    • That the allegations made in the petition of complaint even if accepted to be true do not make out any offence so far as the present petitioner, namely, Avneet Bedi is concerned. To that effect the allegations relating to Section 141 of the NI Act as appearing in the relevant paragraph(s) of the petition of complaint, are set out as follows:

      (a) The accused in discharge of their legally enforceable debts and all liabilities arising out of supply of cut and bend reinforcement bar by the complainant Company Accused 1 Company issued a cheque of Rs 2,00,00,000 (Indian rupees two crores only) to the complainant Company bearing No. 022300 dated 19-7-2010 drawn on AXIS Bank Ltd., Indiranagar, Bangalore (KT), Bangalore. The said cheque was signed by Accused 2 as the director and authorised person of Accused 1 Company and handed over to the complainant Company at its office as mentioned above.

      (b) That the accused persons after receiving the said demand notice and being the responsible directors/officers of the said offending accused Company and in charge of the day-to-day business and affairs of the accused Company and liable for discharge of such liability of Accused 1 Company are also liable to be prosecuted and punished under Section 138 read with Section 141 of the said Act hence I pray for issuance of process.

    • The records of the case reflects that the complaint under Sections 138/141 of the NI Act was filed in the year 2010 and the case was transferred to the learned Metropolitan Magistrate, 9 Court, Calcutta on the same date. On 22-3-2011 the learned Magistrate after examining the complainant along with affidavit filed under Section 145 of the NI Act was prima facie satisfied and pleased to issue process fixing 17-5-2011 for service return and appearance. On and from 20-8-2011 summons and warrant were issued on different dates and finally the accused Company was allowed to be represented under Section 305 of the Code of Criminal Procedure and the individual accused persons i.e. the directors of the company were allowed to be represented through their learned lawyers under Section 205 of the Code of Criminal Procedure.

    (ii) High Court observation

    • The allegations made in paras 2 and 6 of the petition of complaint satisfies the requirement for proceeding against the petitioner. Till date there is nothing on record to suggest that the substance of the accusation which was read over to the accused was wrong or incorrect. The accused-petitioner therefore was able to understand the case against him. There has been a systematic delay in the proceedings for more than 10 years, the very purpose and object of the provisions of NI Act to provide speedy and efficacious remedy has been grossly ignored.
    • The issue taken up before the High Court is a belated plea, having regard to the stage of the case and evidence having commenced in this case, I am of the opinion that it would not be fit and proper to interfere with the proceedings pending before the learned Metropolitan Magistrate, 9 Court, Calcutta.
24. Subrata Bose v. Mithu Ghosh⁹⁶

    (i) Fact of the case

    • Present appeal has been preferred against the judgment and order of acquittal dated 5-9-2018 passed by the learned Additional Sessions Judge, FTC 3 Court, Barrackpore in connection with Criminal Appeal No. 6 of 2017 wherein the appellate court reversed the order of conviction and sentence passed by the learned Judicial Magistrate 5 Court, Barrackpore in C-Case No. 466 of 2009 (TR Case No. 324 of 2009) under Section 138 of the Negotiable Instruments Act.
    • The complainant/appellant filed a complaint before the learned ACJM, Barrackpore alleging commission of offence punishable under Section 138 of the Negotiable Instruments Act (hereinafter referred to as “NI Act”) against the accused-respondent, namely, Mithu Ghosh.
    • The allegations made in the petition of complaint were to the effect that the complainant and the accused had business relationship and as such they were known to each other. The accused was chairperson of M/s Sun Creative Images Pvt. Ltd. and on or about 25-6-2007 the complainant entered into an agreement for telecasting a serial “Ghatak” in Sun TV Bangla. It was agreed by and between the parties that there were number of episodes and each episode was of 23½ minutes. For the said purpose as security deposit a sum of Rs 3,00,000 was tendered. A further sum was demanded by the accused in order to incorporate the TV channel, namely, Sun TV Bangla, which the complainant collected from his friends and gave him with a hope that his serial “Ghatak” would be telecast.
    • It has been alleged that from 26-6-2008 to 12-12-2008 on different dates the complainant paid by cash a sum of Rs 9,70,000. In discharge of such debt and legal liability the accused issued an account payee cheque in favour of the complainant for a sum of Rs 9,70,000 bearing Cheque No. 767432 dated 12-12-2008 drawn on Punjab National Bank, GT Road Branch, Burdwan. The said cheque was presented several times i.e. on 12-12-2008, on 1-1-2009, on 27-4-2009 and on 14-5-2009 and on each occasion the same was dishonoured with the endorsement “fund insufficient”. Lastly the cheque was presented with the complainant’s banker i.e. United Bank of India, Titagarh Branch on 8-6-2009 which was dishonoured vide return memo dated 9-6-2009 issued by Punjab National Bank, 18, N.S. Road, Kolkata-1, Branch with the endorsement “fund insufficient” and the bank return memo along with the dishonoured cheque was received by the complainant on 9-6-2009.
    • The complainant sent notice of demand by registered post with A/D dated 23-6-2009 through his learned advocate demanding the amount of Rs 9,70,000 within 15 days from the date of receipt of the notice. The said notice/letter was sent on 23-6-2009 vide Postal Receipt No. 2981 dated 23-6-2009 which was returned with postal remarks “absence” or “refused” on 2-7-2009 and was received by the learned advocate for the complainant on 14-7-2009. The complainant alleges that the accused refused to accept the notice and neglected to pay the amount covered by the dishonoured cheque and as such made herself liable for commission of offence punishable under Section 138 of the Negotiable Instruments Act.

    (ii) Trial court proceedings

    • Complaint being filed before the learned ACJM, Barrackpore, cognizance of the offence was taken and the case was transferred to the Court of the learned Judicial Magistrate, 5 Court, Barrackpore for trial and disposal. Process was issued after considering the initial evidence under Section 200 of the Code of Criminal Procedure and under Section 145 of the NI Act. The accused appeared before the court and he was thereafter examined under Section 251 of the Code of Criminal Procedure and the substance of the acquisition was read over to her to which she pleaded not guilty and claimed to be tried.
    • Subrata Bose, complainant in his evidence stated that the affidavit-in-chief which was filed was drafted as per his instruction and he signed the same after going through the contents in each of the pages. The complainant in course of his examination-in-chief on dock also identified the cheque bearing No. 767432 dated 12-12-2008 drawn on Punjab National Bank, Bardhaman Branch, amounting to Rs 9,70,000 which was issued by the accused Mithu Ghosh. The witness also identified the deposit slips by way of which the same cheque was presented on 12-12-2008, 1-1-2009, 17-3-2009, 27-4-2009, 12-5-2009 and 8-6-2009; the witness also identified bank return memos in respect of each of the presentation so made which were dated 15-12-2008, 2-1-2009, 19-3-2009, 28-4-2009, 14-5-2009 and 9-6-2009, the deposit slips and the bank return memos were respectively marked as Ext. 2 and 2/1, Ext. 3 and 3/1, Ext. 4 and 4/1, Ext.5 and 5/1, Ext.6 and 6/1 and lastly Ext.7 and 7/1.
    • The demand notice which was sent to the accused dated 23-6-2009 was marked as Ext. 8 by the court and the postal receipt in respect of the demand notice was marked as Ext. 8/1, while the envelope which was refused by the accused was marked as Ext. 9. The complainant prayed for relief before the court. The complainant was confronted in cross-examination to which he answered he did not tender any trade license before the court, he did not tender any copy of his income tax returns before the court and he did not file any copy of the agreement before the court. The complainant was again cross-examined on 8-6-2016 on the said date he was confronted regarding the transaction in respect of which he answered that the transacted amount was not shown in his account, neither in the complaint or in evidence he has supplied or deposed regarding the exact date of transaction.
    • The learned trial court by its judgment dated 7-1-2017 was pleased to convict the accused-respondent and sentence her to pay compensation of Rs 19,40,000 (rupees nineteen lakh and forty thousand) only in default to suffer simple imprisonment for four months. The issues which weighed with the learned trial court for arriving at the finding of guilt were the documentary evidence relating to the cheque, the deposit slips, the return memos, the demand notice along with the copies of the notice being refused by the accused remaining unchallenged by the accused in course of the trial.
    • Being aggrieved by the order of conviction and sentence passed by the learned trial court in C-Case No. 466 of 2009 (TR Case No. 324 of 2009) the accused preferred an appeal being Criminal Appeal No. 6 of 2017 the said appeal was finally heard out by the learned Additional Sessions Judge, FTC 3 Court, Barrackpore, 24 Parganas North. The learned appellate court after finally hearing both the parties was pleased to set aside the judgment and order of conviction and sentence so passed by the learned trial court on 7-1-2017 and acquitted the accused-appellant. The reasons which weighed with the learned appellate court was that no agreement for telecasting of the TV serial was produced by the complainant/respondent, neither the trade licence or the income tax return was produced before the learned trial court.
    • Observation of appellant court that the debt referred to in the provision is a legally enforceable debt of law and therefore it is open to the accused to raise a defence regarding legality of any debt or liability. Additionally, the appellate court assigned the reasons that the complainant is required to prove independently that the cheque in question was issued by the accused in discharge of liability or a legally recoverable debt. The complainant in the present case has failed to discharge such liability as he has not been able to prove that any dates also in respect of which money was advanced or given as loan to the accused. It has been observed by the learned appellate court that the cheque in question was signed by the complainant with a different ink and the particulars regarding the date, name and the amount which has been filled up was with different ink, no chit of paper has been produced by the complainant in support of such transaction, the infirmities according to the appellate court are sufficient for drawing inference in favour of the accused that the cheque was never issued in discharge of liability. With the aforesaid observation the learned decided to set aside the order of conviction and sentence so passed by the learned trial court on 7-1-2017.

    (iii) Submission before High Court

    Submission on Behalf of appellant

    • That the appellant submitted that the cheque in question was admitted in evidence without any objection and the learned appellate court on its own stressed in the difference in ink with regard to the signature of the accused on the cheque and the body of the cheque. There was no material in evidence whereby the defence has challenged the signature or taken a plea of a lost cheque. The nature of cross-examination itself would reflect that the same was a case of mere denial and finding out certain minor inconsistencies in the prosecution case. No evidence was led by the accused to dislodge as to how the cheque came in possession of the complainant rather emphasis was made in cross-examination wherefrom complainant obtained the money to give loan to the accused. The appellate court according to the learned advocate ignored the provisions of Sections 139 and 118 of the NI Act and arrived at its finding of acquittal based on standard of proof beyond reasonable doubt as in Penal Code, 1860 offences which by no stretch of imagination can be an accepted proposition in cases under the provisions of Negotiable Instruments Act. Lastly prayer was advanced by the appellant for setting aside the order of acquittal and confirming the order of conviction and sentence passed by the learned trial court.

    Submission on behalf of respondent

    • That the respondent-accused supported the judgment of the appellate court and argued that a complainant in a case under the provisions of the NI Act cannot claim as of right the amount covered by the dishonoured cheque until and unless he substantiates his case that the cheque was issued in discharge of legally enforceable debt or liability. To that aspect learned advocate drew the attention of the court to relevant part of the cross-examination as also the findings of the appellate court to the effect that there was no agreement between the parties, no trade licence was produced, no money receipt was brought in evidence to show as to wherefrom the money was borrowed by the complainant, neither the persons whose names were disclosed in evidence (as those who gave money to the complainant) were examined in support of the prosecution case. Further the observation of the appellate court with regard to the difference in ink do support the defence case that the cheque was not issued in discharge of liability and as such the appeal should be dismissed.

    (iv) High Court observation

    • That the provisions relating to adjudication of offence under Section 138 of the NI Act. Section 139 of the NI Act is a statutory presumption which carries with it an expression “unless the contrary is proved”. The test of proportionality in such cases must guide the determination of the issue of rebuttal. As such what is required for the accused to do in such case is to raise a probable defence. It cannot be a probable defence that the complainant has no capacity to pay the money until and unless an initial defence is set up by a reply notice or the accused examines his witnesses and relies upon documentary evidence. In this case the signature in the cheque also has not been challenged, no evidence to that effect is reflected in the cross-examination of PW 1 (the sole witness in this case). Further, no materials have been produced to show as to how the cheque was in possession of the complainant as there are no allegations of lost cheque or the signature in the cheque being forged. Although it is permitted in a case of such nature to raise a probable defence from the available materials in the cross-examination of the prosecution witness only, but the nature of the cross-examination and the probable defence raised by the accused do not qualify as a rebuttal to the provisions under Section 139 of the NI Act and the learned appellate court unnecessarily resorted to the issue of difference in ink as no case has been made out by the accused for the cheque having been lost or the same was obtained by coercion.
    • The accused having failed to create or raise any defence to rebut the statutory presumption and having regard to the aforesaid three cited judgments of the Supreme Court the order of the appellate court calls for interference. Accordingly, the judgment and order of acquittal dated 5-5-2018 passed by the learned Additional Sessions Judge, FTC 3 Court, Barrackpore, in Criminal Appeal No. 6 of 2017 is hereby set aside and the judgment and order dated 7-1-17 passed by the learned Judicial Magistrate, 5 Court, Barrackpore in C-Case No. 466 of 2009 (TR Case No. 324 of 2009) is hereby confirmed.
25. Environ Energy – Tech Service Ltd. v. State of W.B.⁹⁷

    (i) Facts of the case

    • The appeal is against a judgment and order of acquittal dated 30-3-2015 passed by the learned Judicial Magistrate, 4 Court, Alipore, South 24 Parganas, in AC – 3120 of 2009.
    • The appellant/complainant’s case is that the accused/respondents in discharge of their liability, had issued an account payee cheque bearing Cheque No. 102631 dated 7-9-2009, for Rs 1,10,980, drawn on United Bank of India, Kali Temple Road Branch Kolkata – 700 026 in favour of the appellant/complainant, which was duly signed and sealed by the accused/Opposite Parties 3 and 4.
    • The cheque was deposited with United Bank of India, Thakurpukur Branch, banker of the complainant/appellant company, on 7-9-2009 for encashment but was returned dishonoured with the endorsement “fund insufficient” vide cheque return memo dated 9- 9-2009.
    • Upon receipt of such information regarding dishonour of the aforesaid cheque, the complainant/appellant served a demand notice as per Proviso (b) to Section 138 of the Negotiable Instruments Act, 1881, upon all the accused persons by registered post with acknowledgment due on 23-09-2009 through their learned advocate.
    • On 3-11-2009 the learned advocate for the complainant/petitioner received a registered letter dated 30-10-2009 from one Subrata Guhathakurta, advocate for the accused-respondents wherein he categorically refused to pay any amount and denied any liability with the complainant/appellant.
    • The learned Chief Judicial Magistrate, Alipore, upon receipt of the aforesaid petition of complaint in connection with Case No. AC-3120 of 2009, was pleased to take cognizance of the offence and transferred the case to the file of the learned Judicial Magistrate, 4 Court, Alipore, for enquiry and disposal.
    • On completion of trial, the trial court vide his judgment and order dated 26-3-2015 the accused persons were found not guilty and thus acquitted from the said case.

    (ii) Submission before the High Court

    • Learned amicus curiae submitted that the impugned judgment is an abuse of the process of court and against the principle of natural justice. There was no application of mind by the learned Magistrate who also failed to appreciate the facts and circumstances in the proper perspective.
    • That the learned trial court failed to appreciate that the accused persons failed to adduce any evidence to discharge the onus placed upon them by the presumption in law available under Section 139 of the Negotiable Instruments Act. Besides making a general denial of the fact that the cheque had been issued in discharge of legal debt and/or liability, the defence failed to adduce any evidence to rebut the presumption nor did it make out a case citing the reason for which the cheque can be held to have not been issued in discharge of legal debt and/or liability.
    • The learned trial court, by considering the legal presumption available under Section 139 of the Negotiable Instruments Act to have been rebutted merely on denial made by the accused-respondents, has clearly failed to appreciate the scope and purport of Section 139 of the Negotiable Instruments Act. The impugned order of acquittal is thus erroneous in law as also in facts and is thus liable to be set aside.
    • The learned trial court failed to appreciate that mens rea was not a required ingredient of the offence under Section 138 of the Negotiable Instruments Act.
    • The learned Magistrate clearly failed to appreciate that the cheque in question was issued by the Opposite Party 2 and thus, for initiation of prosecution against the drawer of the cheque, the complainant Company was under no requirement for invoking Section 141 of the Negotiable Instruments Act.

    (iii) High Court observation

    • That the complainant has only sent a demand notice on the cheque being dishonoured. There is nothing in either the petition of complaint or in the demand notice stating any facts leading to the issuance of the cheque. The accused have only denied their liability. No evidence has been adduced either oral or documentary regarding the cheque being issued in discharge of liability.

    (iv) Conclusion

    • That learned Magistrate will issue notice upon both sides and allow the parties to adduce fresh evidence in respect of the presumption under Section 139 of the NI Act and permit necessary amendment if necessary for proper adjudication and also provide sufficient opportunity to the accused/opposite parties to rebut the said presumption. And on consideration of the fresh materials-on-record including the evidence, decide the case a fresh and pass a judgment in accordance with law within six months from date of communication of this order.
    • The judgment/order under appeal dated 30-3-2015 passed in AC No. 3120 of 2009 by the learned Judicial Magistrate, 4 Court, Alipore, is here by set aside.
    • Copy of this order/judgment be sent to the trial court along with the lower court records for information and necessary Action.
26. Vivek Bhaskaran v. State of W.B.⁹⁸

    (i) Facts of the case

    • That the revisional application has been preferred by the petitioner challenging the proceedings being Case No. CS-27140 of 2017 under Sections 138/141 of the Negotiable Instruments Act, 1881, pending before the learned Metropolitan Magistrate, 15 Court, Calcutta.
    • That the complainant M/s Bengal Nestor’s Industries Ltd. has its registered office at 53-B, Mirza Ghalib Street, 4 Floor, Kolkata 700 016.
    • That Accused 1, M/s Otto Projects Pvt. Ltd. is a company having its registered office at 4, Bishop Lefroy Road, Flat No. 4, Calcutta Mansion, Kolkata-700 020 and Accused 2 to 5 are the directors, Accused 6 is the Managing Director and Accused 7 is whole time director of Accused 1 Company, they are responsible for the day-to-day affairs of the company that is Accused 1.
    • That the accused persons in order to liquidate their liabilities towards the complainant issued two cheques in favour of the complainant Company aggregating to a sum of Rs 45,94,000 (rupees forty-five lakh ninety-four thousand only).
    • The said cheques were presented for encashment with the complainant’s bankers but the same were dishonoured and after complying with all the formalities the complainant Company filed a complaint case under Section 200 of the Code of Criminal Procedure for offences under Sections 138/141 of the Negotiable Instruments Act being Case No. CS/54931/2016 before the learned Chief Metropolitan Magistrate, Calcutta.
    • That the learned Metropolitan Magistrate was pleased to take cognizance of the offences and transferred the case to the learned Metropolitan Magistrate, 15 Court, Calcutta, for enquiry, trial and disposal of the same. In course of the proceeding, the accused persons appeared before the learned court and were represented under Sections 205 and 305 of the Code of Criminal Procedure respectively.
    • On 28-10-2016 a terms of settlement was filed in the complaint case along with a petition under Section 257 of the Code of Criminal Procedure by the complainant for withdrawal of the complaint. That in terms of said settlement the accused persons issued several cheques and pay order for repayment of their legal debts and existing liabilities
    • To that effect the complainant has enclosed the photostat copies of the terms of settlement along with the court’s order dated 28-10-2016. The accused persons issued Cheque No. 667029 dated 30-11-2016 amounting to Rs 5,14,000 (rupees five lakh fourteen thousand only) drawn on Syndicate Bank, Kolkata as part of the said settlement.
    • The complainant presented the said cheque with its bankers, namely, Vijaya Bank, New Market Branch, PS New Market on 30-11-2016 for encashment within its validity period but the same was dishonoured by the bankers of the accused persons with an endorsement “funds insufficient”.
    • That the said information of dishonour was received by the complainant on 1-12-2016 and pursuant to the request made by the accused persons the complainant again presented the cheque on 31-1-2017 for encashment and the cheque was again dishonoured with the same endorsement. The complainant Company lastly on 21-2-2017 presented the cheque with its banker on the verbal assurance of the accused persons but the same was again dishonoured with the same endorsement of “funds insufficient”.
    • The complainant Company through its advocate issued a demand notice dated 20-3-2017, thereby demanding the amount covered by the dishonoured cheque i.e. Rs 5,14,000 (rupees five lakh fourteen thousand only) within 15 days from the date of receipt of the notice. The said notice was received by Accused 2 on 23-3-2017 and by all the accused persons on 21-3-2017. It has been alleged that in spite of receipt of demand notice the accused persons did not pay any amount towards the dishonoured cheque, as such according to the complainant Company the accused persons have committed offences punishable under Section 138 of the Negotiable Instruments Act read with Section 141 of the Negotiable Instruments Act.
    • That the learned Magistrate was pleased to take cognizance of the offence on 4-5-2017 and transferred the case to the learned Metropolitan Magistrate, 15 Court, Calcutta for enquiry and disposal according to law.
    • On 2-8-2017 the learned Magistrate after perusing the affidavit under Section 145 of the Negotiable Instruments Act along with the original documents and other papers was pleased to issue summons against the accused persons fixing 6-9-2017 for service return and appearance.
    • That as per the vide order dated 6-9-2017 reflects that some of the accused persons physically appeared and they were granted bail. The present petitioner (being Accused 4 as per complaint) filed an application before the learned Magistrate for discharging him from the case. The main thrust of contention of the present petitioner is that since he has resigned from the company, he cannot be made liable for the dishonoured cheque. Learned Magistrate after considering the materials appearing against him refused to discharge him and dismiss the petition which was filed on 6-9-2017.

    (ii) Submission before the High Court

    Submission on behalf of petitioner

    • That the petitioner is not a signatory to the subject cheque dated 30-11-2016. Learned advocate further submits that the averments in the petition of complaint would reflect that the signatory to the cheque happens to be Accused 2 (Muzaffar Shah) and not the petitioner. There is no specific allegation and averment in the petition of complaint i.e. how and in what manner the petitioner was in charge of the company and/or was involved in the day-to-day affairs of the company during commission of the alleged offences by the company.
    • That it is emphasised that the petitioner was a director of the accused Company till 29-9-2015, the petitioner submitted his resignation from the Board of Directors by letter dated 29-9-2015 and on 30-9-2016 the company accepted the resignation of the petitioner with effect from 29-9-2015 (attention has been drawn to pages 32 and 33 of the revisional application) for comparing name of the petitioner being deleted from the list of directors.
    • That the petitioner has also drawn the attention of this Court to the certified true copies of statutory Form Nos. 11 and 12 which was obtained from the office of the Registrar of Companies which would reflect that the resignation of the petitioner was available in the public domain.
    • It was submitted that the petitioner cannot be made vicariously liable by invoking the provisions of Section 141 of the Negotiable Instruments Act which makes a director liable and as the petitioner was never director of the company at the relevant period of time, he cannot be made liable as the cause of action of the instant case arose after 20-2-2017. In order to substantiate his arguments following authorities have been relied upon by the Rajasekar v. U.M.S. Radio Factory Ltd.⁹⁹; Harshendra Kumar D. v. Rebatilata Koley¹⁰⁰; K. Srikanth Singh v. North East Securities Ltd.¹⁰¹; Ashoke Mal Bafna v. Upper India Steel Mfg. and Engg. Co. Ltd.¹⁰²; Anil Khadkiwala v. State (NCT of Delhi)¹⁰³; Saroj Kumar Poddar v. State (NCT of Delhi)¹⁰⁴; DCM Financial Services Ltd. v. J.N. Sareen¹⁰⁵.

      Submission on behalf of respondent

    • That the learned counsel for respondent refuted the contentions advanced by the learned advocate for the petitioner

    (iii) High Court observation

    • Learned advocate appearing for the complainant/opposite party relied upon para 15 of Lalit Kumar Sharma v. State of U.P.¹⁰⁶:15. Evidently, therefore, the second cheque was issued in terms of the compromise. It did not create a new liability. As the compromise did not fructify, the same cannot be said to have been issued towards payment of debt.
    • Learned advocate for the opposite party emphasised on the following paras of NEPC Micon Ltd. v. Magma Leasing Ltd.¹⁰⁷:9. Learned counsel for the appellants, however, submitted that Section 138 being a penal provision, it should be strictly interpreted and if there is any omission by the legislature, a wider meaning should not be given to the words than what is used in the section. In our view even with regard to penal provision, any interpretation, which withdraws the life and blood of the provision and makes it ineffective and a dead letter should be averted. If the interpretation, which is sought for, were given, then it would only encourage dishonest persons to issue cheques and before presentation of the cheque close “that account” and thereby escape from the penal consequences of Section 138.15. In view of the aforesaid discussion we are of the opinion that even though Section 138 is a penal statute, it is the duty of the court to interpret it consistent with the legislative intent and purpose so as to suppress the mischief and advance the remedy. As stated above, Section 138 of the Act has created a contractual breach as an offence and the legislative purpose is to promote efficacy of banking and of ensuring that in commercial or contractual transactions cheques are not dishonoured and credibility in transacting business through cheques is maintained. The above interpretation would be in accordance with the principle of interpretation quoted above “brush away the cobweb varnish, and shew the transactions in their true light” (Wilmot, C.J.) or (by Maxwell) “to carry out effectively the breach of the statute, it must be so construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited”. Hence, when the cheque is returned by a bank with an endorsement “account closed”, it would amount to returning the cheque unpaid because “the amount of money standing to the credit of that account is insufficient to honour the cheque” as envisaged in Section 138 of the Act.

    (iv) Conclusion

    • As per the High Court observation the petitioner has challenged the proceedings at the very inception regarding the maintainability of the proceedings against him. However, if in course of proceedings the petitioner is able to rebut the presumptions so far as the proviso clause of sub-section (1) is concerned i.e. “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” he would be entitled to an order of acquittal. The stage at which petitioner has approached this Court is premature and as such this Court finds no reason to interfere with the proceedings.