Case BriefsHigh Courts

Allahabad High Court: Ravi Nath Tilhari, J., addressed a matter wherein a person being the director of the company signed a cheque on behalf of the company and since the said cheque got dishonoured, he was made liable, without the company being made liable under the offence of Section 138 of Negotiable Instruments Act, 1881.

The instant petition was filed under Section 482 of the Code of Criminal Procedure, 1973 for quashing of summoning order passed by Additional Chief Judicial Magistrate under Section 138 of the Negotiable Instruments Act.

Facts as stated by the applicant

Applicant has been stated to be the Director of a Company and complainant/OP 2, an employee in the railways, by giving assurance of contract of road construction from his superior officers in favour of applicant’s company obtained post-dated cheque of 5 lakh rupees in terms of security money.

Complainant had assured the applicant that once he starts earning profits from the said contract work he would return the post-dated cheques.

However, applicant without any prior notice to the company, complainant presented the cheque in the bank which was dishonoured due to non-availability of funds. One of the legal notice, though was not received by the applicant, but the second notice was served.

Points that arose for consideration:

High Court formulated the following points of consideration:

  • Whether criminal prosecution against the person in charge of, and responsible for conduct of the business of the company under Section 138 NI Act, can be maintained, in the absence of any prosecution of the Company for such offence and without making the company an accused, in view of Section 141 of the NI Act?
  • Whether the cheque in question was issued by the applicant in his personal capacity or in the capacity of director of the company?
  • Whether the orders under challenge and the criminal proceedings against the applicant deserve to be quashed in the exercise of jurisdiction under Section 482 CrPC?

Analysis of the above points:

In order to consider the first point, Court referred to Sections 138 and 141 of the Negotiable Instruments Act, 1881.

On perusal of the said provisions, the essential ingredients of offence under Section 138 NI Act as laid down by the Bench were:

  • The person drew a cheque on an account maintained by him with the banker
  • When such a cheque is presented to the bank is returned by the bank unpaid
  • such cheque was presented to the bank within a period of six months from the date it was drawn or within the period of its validity, whichever is earlier;
  • the payee demanded in writing from the drawer of the cheque the payment of the amount of money due under the cheque to the payee
  • Such a notice of payment is made within a period of 30 days from the date of the receipt of the information by the payee from the bank regarding return of the cheque, as unpaid and
  • Inspite of the demand notice the drawer of the cheque failed to make the payment within a period of 15 days from the date of receipt of the demand notice

For the offence to be constituted under Section 138 NI Act, all the above ingredients need to co-exist.

Supreme Court decision in Aneeta Hada v. Godfather Travels and Tours (P) Ltd., (2012) 5 SCC 661, held that Section 141 of NI Act is concerned with the offences by the company. It makes the other persons, vicariously liable for commission of an offence on the part of the company.

The vicarious liability gets attracted when the condition precedent laid down in Section 141 NI Act stands satisfied. There can be no vicarious liability unless there is a prosecution against the company. For maintaining a prosecution under Section 141 NI Act, arraying of the company as an accused is imperative.

 In Supreme Court’s decision of Standard Chartered Bank v. State of Maharashtra, (2016) 6 SCC 62, it was held that there cannot be any vicarious liability unless there was a prosecution against the Company.

In Harihara Krishnan v. J Thomas, (2018) 13 SCC 663, Supreme Court held that Section 141 stipulates the liability for the offence punishable under Section 138 NI Act when the person committing such an offence happens to be a company.

In Aneeta Hada v. Godfather Travels and Tours (P) Ltd., (2012) 5 SCC 661, it was settled that for maintaining a prosecution against the person in charge of and responsible for conduct of the business of the company under Section 138 NI Act, arraigning of the Company as an accused is imperative in view of Section 141 of the Act, as such a person can only be held vicariously liable.

With regard to point 1, hence Court held that such a person, cannot be prosecuted unless there was prosecution of the company.

Second Point

 Whether the cheque in question was issued by the applicant in his personal capacity or in the capacity of the Director of the Company?

The above-stated question can be determined from perusal of the cheque itself. It is one of the essential ingredients to constitute an offence under Section 138 NI Act, that the person drew a cheque on an account maintained with the Banker and the existence of this ingredient is to be proved from the document itself, i.e. the cheque, and for its proof no other evidence is required. Hence, Court could determine if the cheque was issued as authorized signatory or in personal capacity by the applicant by exercising its jurisdiction under Section 482 CrPC.

On perusal of the copy f the cheque it was found that the said was signed by Sanjay Singh, the applicant for Udit Infraheights Private Limited, as its authorized signatory.

Hence the cheque was not issued in the applicant’s personal capacity.

In the absence of the company, as accused, any offence was not made out, even prima facie, against the applicant for his summoning under Section 138 read with Section 141 of the NI Act.

While referring to the Supreme Court decision in Ashoke Bafna v. Upper India Steel Manufacturing and Engineering Company Ltd., (2018) 14 SCC 202, it was held that before summoning an accused under Section 138 NI Act, the Magistrate is expected to examine the nature of the allegations made in the complaint and the evidence, both oral and documentary, in support thereof, and then to proceed further with the proper application of mind to the legal principle of the issue.

Last Point

 With regard to the last point of consideration, Bench referred to the decision of Supreme Court in Rishipal Singh v. State of U.P., (2014) 7 SCC 215, Supreme Court, while considering the scope of Section 482 CrPC held that when a prosecution at the initial stage is asked to be quashed, the test to be applied is as to whether the uncontroverted allegations as made in the complaint prima facie establish the case.

In Pooja Ravinder Devidasani v. State of Maharshtra, (2015) 88 ACC 613, Supreme Court held that the Superior Court should maintain purity in the administration of justice and should not allow the abuse of process of the Court.

Therefore, Court opined that the complaint was not filed against the company, as the company was not made a party accused and no vicarious liability could be imposed upon the accused applicant.

Since, the cheque was not signed by the applicant in his personal capacity, the complaint could not have proceeded against him and no offence could be made out against the applicant.

Petition was allowed and the orders challenged were quashed. [Sanjay Singh v. State of U.P., 2021 SCC OnLine All 120, decided on 10-02-2021]

Case BriefsDistrict Court

State Consumer Dispute Redressal Commission, Odisha (SCDRC): Dr D.P. Choudhury (President) modified the compensation amount awarded to a Law Student in light of being subjected to ‘Deficiency of Service’ and ‘Unfair Trade by ‘Amazon’.

The instant appeal was filed under Section 15 of the erstwhile Consumer Protection Act, 1986.

Factual Matrix

While the appellant was in his first year of law school, the OP had floated an offer for sale of a Laptop without Laptop Bag for Rs 190 against the price of Rs 23,499.

OP had confirmed for placing of the order and two hours after receiving the confirmation, the appellant received a phone call from the OP’s Customer Care Service Department stating that the subject order stood cancelled due to the price recession issue.

Since the complainant was in need of a laptop to prepare his project, he raised an objection for such cancellation.

On not receiving any response from the OP, complainant issued a legal notice.

Deficiency in Service

Appellant had to purchase another laptop but suffered from mental agony for such cancellation, hence filed a complaint alleging the deficiency in service and unfair trade practice.

Complainant claimed compensation of Rs 50,000 and Rs. 10,000 towards litigation cost.

District Forum had allowed the complaint partly by directing the OP to pay compensation of Rs 10,000 for mental agony and to pay Rs 2,000 towards the cost of litigation.

Hence, the aforesaid impugned order was challenged by the complainant/appellant stating that the District Forum committed error in law by not deciding to direct to pay Rs 50,000 as compensation.

Analysis, Decision and Law

Bench observed that “When there is an advertisement made for offer placed by the OP and made the offer as per the material available on record and complainant placed the order and same got confirmed, the agreement is complete.”

Another aspect to be noted was that, when the OP had allowed Rockery Marketing at his platform as per written version, the responsibility of the OP could not be lost sight of.

Since there was a breach of contract by OP, OP is held to be liable to pay the damages.

Commission agreed with District Forum’s observation that OP not only negligent in providing service but was also involved in unfair trade practice.

Taking all the factors discussed above for consideration, Bench concluded that compensation awarded should be of Rs 30,000 for unfair trade practice and punitive damages of Rs 10,000. Further, with regard to the cost of litigation Rs 5000 needs to be awarded.

On failing to make the above payments to the complainant within 30 days, the said amounts will carry interest at the rate of 12% per annum.

In view of the above, the appeal was disposed of. [Supriyo Ranjan Mahapatra v. Amazon Development Centre India (P) Ltd., First Appeal No. 492 of 2018, decided on 11-01-2021]


Read More:

District Consumer Forum directs ‘Amazon’ to pay compensation for “deficiency in services”

Case BriefsHigh Courts

Madhya Pradesh High Court: Rajendra Kumar Srivastava, J., while addressing a matter with regard to dishonour of cheque held that, Director/Managing Director/Joint Director/other officers and employees of company can not be prosecuted under Section 138 of NI Act unless the company is impleaded as an accused

Petitioner is aggrieved with the Order passed against him by JMFC framing a charge under Section 138 of Negotiable Instruments Act, 1881.

Complaint was filed by respondent-trade firm against the petitioner wherein it was mentioned that on account of business relations between the parties petitioner had borrowed an amount of Rs 2,00,000 from respondent, which was to be returned by within a period of four months.

In November 2017, petitioner handed over a cheque amounting to Rs 2,00,000 which when the respondent submitted in January, 2018 was dishonoured due to “stop payment” by the petitioner.

On the above-event’s occurrence respondent had sent a legal notice to the petitioner which was ignored by the petitioner and thus a complaint before JMFC was filed.

Petitioners Contention

Respondent had given the amount in question for business purpose and the petitioner had given the said cheque under the capacity of chairman of company namely ‘Well Built Industry India Ltd.’ but the respondent did not implead the company as a party in the complaint case.

The respondent/complainant also failed to specify the role of present petitioner on behalf of the company. Hence, in view of the provision of Section 141 NI Act, the proceedings under Section 138 NI Act are bad in law and deserves to be quashed. With the aforesaid, he prayed to allow this petition.

Section 138 NI Act: Dishonour of cheque for insufficiency, etc. of funds in the account.

Section 141 NI Act: Offences by Companies

“…if an offence is committed by a company under Section 138 of the Act, every person, at the time, the offence was committed, was in-charge and responsible to the company in the conduct of the business of the company, is liable along with the company to be proceeded against and punished accordingly.”

S.M.S Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89

“…Necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 NI Act is sought to be fastened vicariously on a person connected with a company, principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable.”

Bench while referring to several decisions held that the person (Director/Managing Director/Joint Director/other officers and employees) of company can not be prosecuted under Section 138 of NI Act unless the company is impleaded as an accused.

Thus, in the present matter it is to be noted that a demand notice was served only on the petitioner/accused, there was no demand notice against company, therefore, without arraying the company as an accused in complaint case, the petitioner can not be prosecuted for the offence of Section 138 NI Act.

Hence the present petition was allowed.[Bhupendra Suryawanshi v. Sai Traders, 2020 SCC OnLine MP 1277 , decided on 09-06-2020]

Case BriefsHigh Courts

Punjab and Haryana High Court: Ritu Bahri, J. partly allowed the petition with the directions that the petitioner was entitled to compensation when their plea for the compassionate appointment was rejected by the respondents.  

The husband of the petitioner was working with Haryana Police as Head Constable. He expired on 22.7.1998. His son was a minor at the time of his death. After attaining the age of majority in 2005, his son made an application for compassionate appointment and submitted all the relevant documents along with application. This claim was rejected on the ground that as per Instructions dated 28.2.2003 regarding Ex-gratia Appointment Rules, 2003 as per Clause 6(1) (b) the same had become time barred. 

The petitioner relied on the new policy dated 30.11.2005 “Haryana Compassionate Assistance to the Dependents of Deceased Govt. Employees Rules, 2005” and the notification dated 01.8.2006, whereby new rules known as Haryana Compassionate Appointment to the Dependents of Deceased Government Employee Rules 2006 was published by the State Government. The petitioner served a legal notice for grant of compassionate appointment as well as financial assistance. The Department in their reply to the said legal notice rejected the claim by saying that a compassionate appointment could not be given since any post could not be kept reserved for any minor child of a deceased employee. The petitioner also relied on Instructions dated 16.3.2011, whereby Chief Secretary to Government of Haryana as a one time measure had given relaxation for applying for ex gratia compensation in cases before 01.08.2006. As per these Instructions, a decision was taken that the Government was to reconsider all the old cases where the family of the deceased under Rule 4 (2) and 6(1)(c) of Rules 2003 and under Rule 4(2) and 6(4) of the Rules 2005 of the Ex-gratia Scheme could not exercise option within time due to lack of requisite knowledge and other reasons and because of which the family of the deceased could not avail the benefit under Ex-gratia Scheme as it became time barred.

The respondents stated that they had offered the petitioner some financial assistance, which the petitioner refused to accept and urged for the appointment of her son. While rejecting the case of the petitioner for ex-gratia appointment, reference was made to Clause 6 (1) (c) of Rules 2003. A perusal of these Rules showed that the Head of the concerned Department had to prepare the list of dependents which were valid for three years and appointments were to be given by the Department strictly in accordance with seniority so maintained. 

The only benefit that the petitioner could get was the payment of ex-gratia amount offered with regard to the Ex-gratia Appointment Rules 2003, as per Clause 6(1)(b) the same has become time-barred. Therefore, the question of grant of appointment on compassionate grounds did not arise. 

In view of the above-noted facts, the instant petition was partly allowed with the direction that it was the duty of the State Government after rejecting the case of compassionate appointment of petitioner, to give them Rs 2.5 lacs and that the petitioners were entitled for interest @ 6% interest per annum on the financial assistance from 01.12.2004 till the payment was made.[Asha Rani v. State of Haryana, CWP No. 2838 of 2017, decided on 14-12-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): The Bench of Ashok Kumar Gupta, Chairperson and Augustine Peter and U.C. Nahta, Members closed a case under Section 26(6) of the Competition Act, 2002 by laying down analysis of the detailed investigation report by the DG.

The present case is pertaining to the information filed by Jasper Infotech (P) Ltd. against Kaff Appliances India (P) Ltd. for the alleged contravention of Section 3(4) of Competition Act. The Informant displayed OP-Kaff’s products on its online portal ‘Snapdeal’ at a discounted price, aggrieved by which the OP displayed a caution notice on its website alleging that the OP’s products sold by Informant through its website are without authorization and are counterfeit. The stated caution notice said that OP will not honour warranties on its products sold through the said website and any purchase made from it would be at customer’s own risk.

Further, a legal notice was served in order to withdraw the caution notice alleging a violation of certain provisions of the Competition Act.

According to the Informant, the main grievance of OP was regarding the discounted price at which such products were sold by the Informant through its website and to substantiate the said claim it revealed an e-mail which attempted to impose a price restriction in the form of Minimum Operating Price (MOP) on the website to make sales at a minimum price and threatened to ban online sales if such prices were not maintained, which resultantly is a contravention of Section 3(4)(e) of the Competition Act.

The other contravention attempted by OP was to cut off supplies to distributors who were aiming to sell through an online channel which amounted to a violation of Section 3(4)(d) of Competition Act. On perusal of the facts, Commission directed DG for an enquiry.

DG in conclusion to its report said that, firstly OP is not involved in maintaining a resale price and secondly, it does not possess sufficient market power to cause AAEC as provided under Section 18(3) and accordingly no contravention could be established under the provisions of Section 3(4)(e) of the Act. Further, on the establishment of the said report by DG, further investigation was directed under Section 26(7) of the Act. In the said investigation, DG concluded that alleged conduct of OP did not lead to any AAEC under Section 19(3) of the Act.

Analysis

Commission observed that, distributors/dealers were using the services of the informant while selling the products of OP, it ipso facto becomes a part of distribution/vertical chain and thus, it would be incorrect to state that an Informant is only a market place facilitating interaction of the buyers and sellers online. Further, while not agreeing with DG’s observation it was stated by the Commission that the agreements between manufacturers/distributors and e-commerce players can be looked into under Section 3(4) read with Section 3(1) of the Act.

To establish a contravention under Section 3(4) read with Section 3(1), two conditions need to be fulfilled- firstly, agreement/arrangement/understanding ought to exist and secondly, such agreement/ arrangement/understanding has caused or has the potential to cause AAEC.

A Right of the manufacturer to choose the most efficient distribution channel ought not to be interfered with, unless the said choice leads to anti-competitive effects.

Commission found merit in justifications offered by OP and observed that evidence on record does not demonstrate the conduct/practice of OP led to any AAEC and presence of a large number of dealers who were competing with each other suggests a fair degree of intra-brand competition.

Thus, evidence on record did not reveal the existence of any price restriction of minimum RPM and intra-brand competition negated the anti-competitive impact of OP’s alleged conduct. The case was thereby closed. [Jasper Infotech (P) Ltd. v. KAFF Appliances (India) (P) Ltd., 2019 SCC OnLine CCI 2, Order dated 15-01-2019]