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

Karnataka High Court: A Division Bench of Abhay Shreeniwas Oka, CJ and S Vishwajith Shetty, J., dealt with the following issues through the present petition:

  • whether the personal presence of the complainant is necessary when a complaint reduced into writing is sought to be filed by him in the Magistrate Court; Other issue in regards to complaints was in the context of Negotiable Instruments Act, 1881.
  • whether examination upon oath of the complainant as contemplated under Section 200 of the Code of Criminal Procedure, 1973 can be done on the basis of an affidavit of the complainant or affidavit of an authorized representative of the complainant.
  • Whether the personal presence of a party who files a proceeding under the Family Courts Act, 1984 is mandatory at the time of filing the proceedings.
  • Another issue that arose was, when a petition for seeking divorce by mutual consent is filed, whether appearance of both the parties before the Family Court at the time of filing the petition is necessary?
  • when summons is issued in the proceedings filed before the Family Court to the defendant/respondent, whether the personal appearance of the defendant/respondent is mandatory.

Bench while relying on the two decisions of Karnataka High Court, Komal S. Padukone v. Principal Judge, ILR 1999 KAR 1866; Cyprian D’Souza v. Rene D’Souza, ILR 2002 KAR5145 ; stated the following:

When a petition is filed to the Family Court, it can be presented by the petitioner either in person or through an authorized agent.

Further the Court observed that,

a petitioner can file a petition in the Family Court through an advocate acting as an authorized agent. In such a case, the personal presence of the petitioner at the time of presentation of the petition cannot be insisted upon.

Th same principle would apply for the respondent as well,

respondent may either appear in person or enter appearance through an advocate in his capacity as an authorized agent. The respondent can also file an application for grant of permission to engage services of an advocate.

Thus, Court held that

“there is no legal basis for the practice adopted by some of the Family Courts in the State when they insist on personal presence of the petitioner or petitioners at the time of filing the cases.”

Issue: Presence of complainant when a complaint in writing is governed by Section 200 CrPC is filed in Judicial Magistrate’s Court.

Court found no provision in CrPC that makes the presence of complainant who files a written complaint mandatory at the time of filing of the complaint in the Magistrate’s Court when the person is represented by an Advocate.

As far as the requirement of the Magistrate examining a complainant on oath in accordance with Section 200 of Cr.P.C is concerned, except in cases governed by clauses (a) and (b) of the proviso to Section 200 and the complaints alleging offences punishable under Section 138 of NI Act, the examination of the complainant upon oath as per Section 200 is mandatory.

As far as the statement of the complainant under Section 200 of CrPC is concerned, Supreme Court’s decision in Indian Bank Assn. v. UOI, (2014) 5 SCC 590, held that the affidavit filed by the complainant along with the complaint for taking cognizance of the offences is good enough at both the stages of pre-summoning and post-summoning.

In case of a complaint alleging offence punishable under Section 138 of NI Act, it is not necessary for the Magistrates to insist upon personal presence of the complainant for examining him upon oath as contemplated by Section 200 of CrPC, if such a complaint is accompanied by an affidavit of the complainant or his authorized representative.

Another issue in the context of COVID-19 was with regard to the judicial deposits and payment of amounts to the litigants:

Court stated that, “while passing an order directing payment of maintenance, it may be possible for the Judicial Officers to take the account details of the person to whom maintenance is payable on record and direct the person liable to pay maintenance to directly transfer the maintenance amount to the account of the beneficiary.”

Registrar (Computers ) has been directed to prepare an exhaustive note dealing with both the legal and technical issues concerning the treasury Rules and one week’s time os granted to file the same.[High Court of Karnataka v. State of Karnataka, 2020 SCC OnLine Kar 543 , decided on 03-06-2020]

Case BriefsHigh Courts

Jharkhand High Court: Amitav K. Gupta, J. acquitted the petitioners of the charges on an amicable settlement between the parties.

The relevant facts of the case are that the petitioner has been convicted for the offence under Section 138 of Negotiable Instrument Act, by the court of Judicial Magistrate, 1st Class, Jamshedpur and sentenced to undergo simple imprisonment of 18 days and pay the compensation of Rs 31,000 under Section 357 (3) CrPC. The said judgment and conviction has been affirmed in Criminal Appeal by the Sessions Judge, East Singhbhum, Jamshedpur. Hence the instant criminal revision.

The counsel Ashok Kumar Yadav for the petitioner submitted that in compliance of the order dated 31-01-2020, amount of Rs 31,000 has been paid. The counsel P. Mitra for the complainant submitted that amount has been handed over by the petitioner and since the entire amount has been paid he does not want to proceed with the case. The Court relied on the judgment titled Meters & Instrument (P) Ltd. v. Kanchan Mehta; (2018) 1 SCC 560  held that the object of the provision of the Negotiable Instrument Act is primarily compensatory and the court can in the interest of justice discharge the accused on amicable settlement of the matter. In view of the above arguments the petitioner is acquitted of the charges and the judgment dated 08.05-2019 is set aside. [Alok Kumar v. State of Jharkhand, Cr. Revision No. 694 of 2019, decided on 06-03 2020]

Case BriefsHigh Courts

Delhi High Court: Manoj Kumar Ohri, J., while allowed the present petition and quashed the impugned order summoning the petitioners under Section 138 Negotiable Instruments Act, 1881.

Petitioners in the present case were summoned for the offence punishable under Section 138 NI Act.

Respondent filed a complaint stating that the accused were regular purchasers of goods from the complainant on a credit basis and made regular payment towards sale consideration from time to time in the past. There was an outstanding balance payable by the accused against which 4 account payee cheques were issued. However, the same were returned unpaid to the complainant vide bank’s return with remarks “Funds Insufficient”.

Complainant issued a legal notice of demand calling upon the accused to make payment within 15 days from the date of receipt. Since no payment was made within the statutory period of 15 days, a complaint under Section 138 read with Sections 141/142 of NI Act was filed.

Counsel for the petitioner contended that, petitioners were the independent non-executive Additional Directors and were never involved in the day to day affairs of the company at any point of time. Further, he referred to the complaint where the present petitioners were wrongly described as Directors.

It is an admitted case of the respondent that the petitioners were neither the Managing Directors nor the signatories to the cheques in question.

Further, the Counsel for the respondent submitted that the petitioners were named as Directors in the complaint on the basis of the information which was downloaded from the official website of ROC.

Decision

While concluding its decision, Court stated that, Vicarious liability of a person arises in terms of Section 141 of NI Act, and referred to S.M.S Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89.

Another Supreme Court’s decision that the bench referred was a recent one,

Chintalapati Srinivasa Raju v. Securities and Exchange Board of India, (2018) 7 SCC 443, wherein it was held that

Non-Executive Directors are, therefore, persons who are not involved in the day-to-day affairs of the running of the company and are not in charge of and not responsible for the conduct of the business of the company.

Thus, in view of the above, Court stated that the petitioners were neither the Managing Directors nor the authorized signatories of the accused company.

Further, the Court noted that, a perusal of the complaint filed by the respondent shows that except for general allegation stating that petitioners were responsible for control and management and day to day affairs of the accused company, no specific role had been attributed to petitioners.

To fasten the criminal liability under The Negotiable Instruments Act, 1881, the above generalised averment without any specific details as to how and in what manner, the petitioners were responsible for the control and management of affairs of the company, is not enough.

Hence the impugned order summoning the petitioners under Section 138 NI Act is quashed. [Sunita Palta v. Kit Marketing (P) Ltd., Crl. MC No. 1410 of 2018, decided on 03-03-2020]

Case BriefsHigh Courts

Himachal Pradesh High Court: Sandeep Sharma, J. compounded and quashed the impugned judgments and acquitted the petitioner of the charge framed under Section 138 of Negotiable Instruments Act, 1881

The brief facts of the case are that the respondent-complainant instituted a complaint under Section 138 of the Act against the present petitioner-accused, alleging he lent sum of Rs 1,00,000 to the petitioner-accused to buy a car. The petitioner accused with a view to discharge his liability issued a cheque in favour of the complainant which was dishonored on its presentation on account of insufficient funds. Since petitioner-accused failed to make the payment within the stipulated period despite issuance of legal notice, respondent/complainant initiated proceedings under Section 138 of the Act. 

The trial Court held the petitioner-accused guilty under Section 138 of the Act and sentenced him accordingly. Being aggrieved, accused preferred an appeal in the court of learned Sessions Judge, Una, which also came to be upheld by the trial court. Hence the present petition seeking acquittal and setting aside of the judgments of conviction recorded by the courts.

The counsel Dheeraj K. Vashishat for the petitioner informed the Court that parties have resolved to settle their dispute amicably inter-se for a total sum of Rs 1,15,000 and Rs 15,000 stands already paid, remaining amount shall be paid on or before 18.2.2020. It was further submitted by learned counsel for the parties that entire sum of Rs 1,15,000 stands received by the respondent complainant in terms of compromise arrived inter-se between them. 

The counsel Leena Guleria for respondent states that since amount in terms of compromise arrived inter-se parties stands received by the complainant, the complainant shall have no objection in case prayer made on behalf of the petitioner for compounding the offence is accepted. Respondent-complainant (Rahul Kumar), who is present in Court stated on oath that he of his own volition and without there being any external pressure has entered into compromise stated to have no objection in case petitioner is acquitted of the charge under Section 138 of the Negotiable Instruments Act. 

The Court while exercising power under Section 147 of the Act and relying on the Judgment titled Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC 663, wherein it has been categorically held that, while exercising power under Section 147 of the Act, Court can proceed to compound the offence even after recording of conviction.

Consequently, in view of the above, the present matter was compounded and impugned judgments quashed and set-aside and the petitioner-accused was acquitted of the charge framed against him under Section 138 of the Act.

In view of the above, the petition was disposed of. [Satish Kumar v. Rahul Kumar, 2020 SCC OnLine HP 338, decided by 03-03-2020]

Case BriefsHigh Courts

Rajasthan High Court: Vijay Bishnoi, J., allowed a criminal revision petition seeking to set aside judgments convicting the petitioner with regard to offences under the Negotiable Instruments Act. 

In the present case, the petitioner being aggrieved by the orders of the trial court and the appellate court wherein he was convicted for an offence under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”) has filed this criminal revision petition. 

Learned counsel representing the petitioner, Umesh Shrimali submitted that in view of the fact that the parties have entered into a compromise, the impugned orders under challenge may be set aside and the petitioner may be acquitted from the charges.

The public prosecutor representing the respondent, Laxman Solanki submitted that the respondent has agreed to the compromise entered into and it does not want to press any charges for the offence punishable under the NI Act.

The Court perused Section 147 of the NI Act and stated that every offence punishable under the Act is compoundable hence the impugned orders are set aside and the criminal revision petition is set aside. However, the Court upon placing reliance on the Supreme Court judgment Damodar S. Prabhu v Sayed Babalal H, (2010) 5 SCC 663 and directed the petitioner to submit 15% of the cheque amount by way of the cost before the Legal Services Authority. [Jasmel Singh v. State of Rajasthan,2020 SCC OnLine Raj 334, decided on 03-03-2020]

Case BriefsHigh Courts

Kerala High Court: R. Narayana Pisharadi J., allowed a criminal revision petition in part in a matter relating to Section 138 of Negotiable Instruments Act, 1881.

In the present case, the accused had obtained an amount of Rs 5, 00,000 from the complainant on the promise that he would arrange a licence for the complainant for conducting petrol pump. Upon demanding the repayment of the amount the accused issued a cheque dated 05-02-2007 for Rs 5,00,000 in discharge of the liability. The cheque was dishonoured upon presenting it to the bank for the reason that there was no sufficient amount in the account of the accused. 

The trial court had found the petitioner guilty of offence punishable under Section 138 of Negotiable Instruments Act, 1881 and sentenced him to simple imprisonment for a period of four months and to pay a fine of Rs 5,00,000. The appellate court had also affirmed the conviction and the sentence imposed on the petitioner and dismissed the appeal. 

High Court upon perusal of the facts and circumstances allowed the revision petition in part. The Court affirmed the conviction passed by the trial court and affirmed by the appellate court thereafter but the sentence imposed upon the petitioner has been set aside. In supersession of the sentence, accused has been sentenced to pay a fine of Rs 5,10,000 and in default of payment of fine, to undergo simple imprisonment for a period of two months. [C.K. Mohini v. Varghese. M. Mathew, 2020 SCC OnLine Ker 492, decided on 05-02-2020]

Case BriefsHigh Courts

Delhi High Court: Rajnish Bhatnagar, J., dismissed a petition filed against the order of the Sessions Court whereby it had dismissed the review petition filed by the petitioners against the order of the Metropolitan Magistrate taking cognizance of offences under Section 138 and Section 141 of the Negotiable Instruments Act, 1881, against the petitioner.

The respondent company instituted a complaint under Section 138 read with Section 142 against the petitioners in respect of non-payment against the four dishonoured cheques for the total amount of Rs 16 crores issued on behalf of and/or by petitioner company in favour of the respondent’s company. The Metropolitan Magistrate had passed an order taking cognizance. Aggrieved, the petitioners filed a revision petition before the Sessions Court, which was dismissed. The petitioners now invoked the jurisdiction of the High Court under Sections 482 CrPC (inherent powers).

It was contended by the petitioners that the demand notice was defective as the demand had been made over and above the cheque amount and the legal demand notice was vague and ambiguous. Rejecting this point, the High Court held that the notice should be read as a whole. The perusal of the notice clearly set out the details of the cheque which had been dishonoured, so it could not be said that the demand made was ambiguous or in any way confusing the petitioners as there was no denial that the cheque in question were not issued or that they were not dishonoured for insufficient funds.

Besides the above point, a procedural issue arose as to whether the petitioners having availed of the remedy of revision should be allowed to take recourse to Section 482 CrPC as a substitute for virtually initiating a second revisional challenge or scrutiny which is clearly barred under Section 397(3) CrPC.

Perusing various provisions of the Negotiable Instruments Act, the High Court observed: “The provisions of Sections 142 to 147 lay down a Special Code for the trial of offences under Chapter 17 of the NI Act.” Reliance was placed on the Supreme Court decision in Mandvi Coop. Bank Ltd. v. Nimesh B. Thakore, (2010) 3 SCC 83, which held that the provisions of Sections 143, 144, 145 and 147 expressly depart from and override the provisions of CrPC, the main body of adjective law for criminal trials.

In the instant case, Court did not find any material which could be stated to be of sterling and impeccable quality warranting invocation of the jurisdiction of the High Court under Section 482 CrPC at this stage. More so, the defence as raised by the petitioners requires evidence, which could not be appreciated, evaluated or adjudged in the proceedings under Section 482. The petitioners, therefore, could not be allowed to take recourse to Section 482 as a substitute for initiating a second revision petition when there was nothing to show that there is a serious miscarriage of justice or abuse of the process of law.

Accordingly, the court found no infirmity in the order passed by the Session Judge and, therefore, dismissed the petition. [Tathagat Exports (P) Ltd. v. PEC Ltd., 2020 SCC OnLine Del 405, decided on 20-01-2020]

Case BriefsHigh Courts

Kerala High Court: R. Narayana Pisharadi, J., dismissed a revision petition which was filed against the judgment of the trial and the appellate court by the petitioner holding him guilty of the offence punishable under Section 138 of the Negotiable Instruments Act, 1881.

According to the complainant, the accused had borrowed an amount of Rs 2,50,000 from the complainant promising that he would repay the amount within three months which he failed to repay later the accused issued a cheque dated 17-08-2011 for Rs 2,50,000 to the complainant in discharge of the liability, the complainant presented the cheque in the bank but it was returned unpaid for the reason that there was no sufficient amount in the account of the accused further the complainant sent notice to the accused demanding payment of the amount of the cheque, the accused received the notice and replied to the complainant raising false contentions and did not pay the amount of the cheque. The accused contended that he was the manager of the petrol pump conducted by his brother-in-law and the complainant was the watchman in that petrol pump and that he had kept a signed blank cheque in the petrol pump and the complainant committed theft of the cheque and misused it and filed the case although no evidence was presented by the accessed to support his contentions.

The Court while dismissing the petition held that the courts above have properly analyzed the evidence in the case and come to the right conclusion. [T. Sunilkumar v. State of Kerela,  2020 SCC OnLine Ker 201, decided on 17-01-2020] 

Case BriefsHigh Courts

Bombay High Court: Vibha Kankanwadi, J., allowed a criminal revision application filed against the order of the Additional Sessions Judge whereby the appeal filed by the applicant against the decision of the trial court convicting him for dishonour of cheque punishable under Section 138 of the Negotiable Instruments Act, 1881, was dismissed for non-payment of fine. 

The applicant was convicted by the trial court under Section 138. He was sentenced to suffer simple imprisonment of 1 year and pay a fine of Rs 6.58 lakhs. The applicant filed an appeal against the decision of the trial court. The Additional Sessions Judge suspended his sentence pending the disposal of appeal subject to deposit of 20 percent of the fine amount as imposed by the trial court. However, the applicant failed to fulfill that condition within the prescribed limit and remained absent for a long time. In such circumstances, the Additional Sessions Judge dismissed the appeal in default for want of prosecution. Aggrieved thereby, the applicant file the instant revision application. 

The High Court gave due consideration to the submissions made by S.S. Bora, Advocate appearing for the applicant, and S.J. Salunke, Advocate representing the respondent. 

The Court relied on Bani Singh v. State of U.P., (1996) 4 SCC 720 and Vijay D. Salvi v. State of Maharashtra, (2007) 5 SCC 741, and reiterated that a criminal appeal cannot be dismissed for non-payment of fine, it will have to be disposed of on merits. 

In such view of the matter, the High Court held that the order passed by the Additional Sessions Judge was not a valid legal order and, therefore, quashed the said order. 

However, at the same time, the Court deprecated observed that the applicant cannot take the system for a ride. When the suspension of the sentence against him was conditional, then he was bound to obey those conditions. Deprecating the conduct of the applicant, the Court imposed costs of Rs 25,000 on him. [Adesh Prakashchand Jain v. Harish Punamchand Une, 2020 SCC OnLine Bom 96, decided on 08-01-2020]

Case BriefsHigh Courts

Bombay High Court: K.R. Shriram, J., dismissed a criminal appeal filed against the order of the trial court whereby it had acquitted the accused of charges under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881.

As per the complainant, she had given a loan of Rs 4.5 lakhs to the accused, for repayment of which, he had issued a cheque in favour of the complainant. However, on presenting the cheque for encashment, it was dishonoured. Per contra, the accused took the stand that the cheque in question was given to one Sanjay, who was a former business partner of the accused. The cheque was given to Sanjay to be handed over to a third party to connect with a mutually agreed transaction. However, subsequently, disputes arose between the accused and Sanjay. It was submitted that the Sanjay and complainant were very close friends and lived in the same house. The accused submitted that Sanjay dishonestly handed over the blank cheque in question to the complainant and fraud was being played upon him.

The High Court perused Section 138 (dishonour of cheque) along with its Explanation and noted that the keyword “legally enforceable debt or other liability”. Similarly, discussing Section 139 (presumption in favour of the holder), the Court noted that the presumption is rebuttable and the onus is on the accused to raise a probable defence.

The Court then reproduced the principles summarised and enumerated by the Supreme Court in Basalingappa v. Mudibasappa, (2019) 5 SCC 418, and observed that the standard of proof for rebutting the presumption is that of the preponderance of probabilities and not beyond a reasonable doubt. It was also noted as settled law that Section 139 imposes an evidentiary burden and not a persuasive burden.

On the factual score, it was found that there was no evidence as to when the amount in question was handed over to the accused. No receipts were produced. Also, there was no evidence to show that the complainant had Rs 4.5 lakhs to give to the accused, and it was also admitted that she was not even paying income tax. Moreover, the fact of the dispute between Sanjay and the accused was also admitted. All this, according to the High Court went on to prove that the accused had raised a probable defence that the complainant had not proved that there was a legally enforceable debt or other liability.

Accordingly, finding no fault with the order of the trial court, the High Court dismissed the present appeal and upheld the acquittal of the accused. [Tasneem Murshedkar Mazhar v. Ramesh, 2020 SCC OnLine Bom 20, decided on 02-01-2020]

Case BriefsHigh Courts

Bombay High Court: Vibha Kankanwadi, J., while allowing a writ petition, quashed a complaint under Section 138 of the Negotiable Instruments Act, 1881, filed against the petitioner in a cheque dishonour case. It was held that the complaint filed by the respondent-complainant could not be treated as a “complaint” in the eyes of law.

The complainant, in her complaint, had alleged that the petitioner had taken a loan from her, which he failed to repay. He issued a cheque for the discharge of the said liability, which was dishonoured on presenting for encashment. Therefore, she filed the subject complaint before the Magistrate against the petitioner.

Aggrieved, the petitioner filed the instant petition praying for quashing of the complaint against him. His counsel, M.D. Thube-Mhase, submitted that when, as per the contents of the complaint, the accused had refused to accept the notice on 3-1-2017, the period of 15 days for the compliance after the service or refusal of the notice would have been till 18-1-2017, and the complainant could have filed the complaint on or after 19-1-2017 within the statutory period. However, when she has filed the complaint on 18-1-2017 itself, it cannot be taken as a complaint, and therefore, the complaint is liable to be quashed.

Per contra, A.N. Gaddime and A.V. Indrale Patil, counsel for the complainant, contended that though the complaint was filed on 18-1-2017, the complaint was registered on the next date, i.e., 19-1-2017, and the cognizance was taken by order of issuing process on 15-04-2017, therefore the complaint was maintainable.

The High Court considered the law as laid down in Yogendra Pratap Singh v. Savitri Pandey, (2014) 10 SCC 713, wherein the Supreme Court disapproved the view that if the complaint under Section 138 is filed before the expiry of 15 days from the date on which notice has been served on the drawer/accused, the same is premature and if on the date of taking cognizance a period of 15 days from the date of service of notice on the drawer/accused has expired, such complaint was legally maintainable.

Finally, observing that the date of 15th day or conversely the day on which the refusal was there should be excluded, the High Court held that complaint, which was filed on 18-1-2017, was definitely premature, i.e., before the expiry of 15 days of the refusal of the notice. Therefore, it was held, that the subject complaint could not be treated as a “complaint” in the eyes of law. Consequently, the writ petition was allowed and the complaint was quashed. [Afroj Khan v. Mandodra, 2019 SCC OnLine Bom 5422, decided on 12-12-2019]

Case BriefsHigh Courts

Kerala High Court: R. Narayana Pisharadi, J. rejected this petition in which the petitioner prayed to file an appeal against the judgment passed by the trial court, for an offence punishable under Section 138 of the Negotiable Instruments Act, 1881.

This petition was filed by the petitioner to seek relief against the order of the trial court where the trial court acquitted the accused under Section 255(1) of the Code of Criminal Procedure, 1973. Section 255(1) of CrPC states that if the Magistrate, after recording the evidence, finds that the accused is not guilty, he shall record an order of acquittal.

This petition was filed by the complainant in the trial court by the case S.T. No. 114 of  2017 on the file of the Court of the Chief Judicial Magistrate, Thodupuzha. The case was filed under the offence punishable under Section 138 of the NI Act. It consists of dishonour of cheque for insufficiency, etc., of funds in the account, punishable with imprisonment for a term which may extend to 2 years or with fine which may extend to twice the amount of the cheque.

During the trial, the prosecution as well as the accused, both were examined and documents were also marked, complying with the needs of Section 255 CrPC.

The facts of the present petition is that the petitioner wants to file an appeal because the trial court acquitted the accused under Section 255(1) CrPC on the ground that the cheque drawn by him was not on an account maintained by the accused himself, in the bank. Rather it was drawn on an account maintained by one Kavitha Chandrasekharan. The Manager of the Bank of the said account gave evidence that the said account did belonged to Kavitha Chandrasekharan. The counsel for the petitioner contended that the trial court should have charged the accused for an offence punishable under Section 420 of the Penal Code.

It was upheld in a Supreme Court judgment, Jugesh Sehgal v. Shamsher Singh, (2009) 14 SCC 683, that one of the basic ingredients of offence punishable under Section 138 of the Act is that the cheque shall be drawn on an account maintained in the bank in the name of the drawer himself. Hence, the Court here upheld the decision of the trial court.

After noting the contentions of the counsel for the petitioner, Latheesh Sebastian, and the counsel for the respondent, C.N. Prabhakaran, Senior Public Prosecutor, High Court held that the decision given by the Chief Judicial Magistrate was correct as the case did not satisfy all the ingredients that are needed to punish someone under Section 138 of the NI Act. Secondly, this Court also said that it was not necessary for the trial court to convert this case into a warrant case and start a de novo trial. Hence, the prayer for granting leave to file an appeal was rejected and the petition was dismissed. [Areeplavan Finance v. Chandrasekharan, 2019 SCC OnLine Ker 5330, decided on 11-12-2019]

Case BriefsHigh Courts

Delhi High Court: Suresh Kumar Kait, J., allowed a petition wherein directions were sought for quashing the complaint case filed against the petitioner under Section 138 (dishonour of cheque) read with Sections 141 (offences by companies) and 142 (cognizance of offence) of the Negotiable Instruments Act, 1881.

The petitioner- Society, Employees Welfare Fund of the employees of Hindustan Aeronautics Ltd., had issued four cheques for a total sum of Rs 4.1 Crores in favour of the respondent-complainant. According to the complainant, the petitioner had drawn to said cheques in the discharge of legally recoverable debt pursuant to the terms of the MoU/ Agreement to Sell concerned, however, on presentation of encashment, the subject cheques got dishonoured. The complainant-builder was represented by Nimesh Chib and Siddharth Chaturvedi, Advocates.

Per contra, Vikas Gupta and Ieshaan Gupta, Advocates, submitted on behalf of the petitioner that the proceeding initiated by the complainant was an abuse of the process of law, and the complaint does not satisfy ingredients of the offence punishable under Section 138 NI Act.

The High Court noted that the subject cheques were issued by the petitioner-Society on behalf of its individual members to facilitate the transaction in getting their houses constructed by the respondent. Since the individual members of the Society immediately doubted whether the respondent would be able to complete the flats, they did not deposit the amount with the Society and, thus, the cheques issued by the Society got dishonoured.

Being of the opinion that the petitioner-Society was not liable under Section 138, the High Court observed: “It is not disputed that the society was constituted for the welfare of its members who were interested in getting their houses constructed by the respondent. Therefore, the society played a role only to facilitate its members in getting their houses constructed and the society had no liability as per Section 138 NI Act on the date of signing of the MoU.”

It was further opined that even if it is presumed that the said was paid to the respondent as advance money, even then there appeared to be no criminal liability or any liability which was recoverable under provisions of Section 18.

In such view of the matter, the court allowed the instant petition and quashed the complaint case filed against the petitioner as also all proceedings emanating therefrom. [Employees Welfare Fund v. KRA Infrastructure Developer (P) Ltd., 2019 SCC OnLine Del 11245, decided on 19-11-2019]

Case BriefsHigh Courts

Bombay High Court: K.R. Shriram, J., dismissed a criminal appeal filed against the order of the trial court whereby the accused was acquitted of the charge under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881.

The appellant had initiated a complaint under Section 138 against the accused alleging dishonour of cheque issued by him in favour of the appellant. It was alleged that the subject cheque was issued by the accused for payment of outstanding liability in relation to purchase of grapes from the appellant. The accused did not deny the purchase of grapes; he, however, contended that the subject cheque was given only as a security cheque and the outstanding payment was already made in three installments. The accused was tried for the offence as aforesaid. At the conclusion of the trial, the accused was found not guilty and was, therefore, acquitted. Aggrieved, the appellant preferred the instant appeal.

 The High Court reiterated the well-settled law that it is settled law that the important ingredient for the offence punishable under Section 138 is that cheque must have been issued for the discharge in whole or in part of any debt or other liability. If the cheque is not issued for the discharge of any debt or other liability, Section 138 can not be invoked.

Perused the facts of the instant case, the Court found that the appellant, in his cross-examination, had admitted that the cheque issued was only for guarantee. Relying on its earlier decisions, the Court noted that if the cheque is issued only as security for performance of a certain contract or an agreement and not towards the discharge of any debt or other liability, offence punishable under Section 138 is not made out.

Following the aforenoted position of law, and noting the admission of the appellant in his cross-examination, the Court concluded that there could be no other conclusion that the cheque was not issued for the discharge of any debt or other liability. The important ingredient for the offence punishable under Section 138, therefore, was missing.

Moreover, it was found that the appellant had been giving different dates on which the cheque was issued, which shows that he was economical with the truth. Reiterating that a person, who’s case is based on falsehood, has no right to approach the Court, the High Court dismissed the instant appeal. [Shantaram Namdeo Sathe v. State of Maharashtra, 2019 SCC OnLine Bom 4354, decided on 15-11-2019]

Case BriefsHigh Courts

Delhi High Court: Suresh Kumar Kait, J., dismissed a criminal petition wherein the petitioner sought quashing of the summoning order passed by the Metropolitan Magistrate and also the criminal complaint under Section 138 read with 142 of the Negotiable Instruments Act, 1881.

The petitioner represented by Ehraz Zafar, Akash Tyagi and Sataya Anand, Advocates, submitted that the complaint in question was filed on 2-5-2013, however, the cognizance was taken by the court by issuing summons against the petitioner on 17-04-2017. The punishment under Section 138 is two years and the cognizance taken by the trial court is after more than four years. It was contended that, therefore, the complaint was liable to be rejected.

At the outset, the High Court noted the fact remains that the instant was not the case of a warrant. The complaint was filed under Section 138 NI Act which is a summary trial. Relying on the Supreme Court decision in Indra Kumar Patodia v. Reliance Industries Ltd., (2012) 13 SCC 1, the High Court held that, The limitation provided under Section 468 is not applicable,

It was further held that, ”Moreover, the cognizance of the complaint was taken by the CMM concerned, who thereafter marked the case to the trial court concerned. The trial court after going through the contents of the complaint and evidence on record, issued summons. However, it is provided in Section 138 and 142 of the NI Act that the summons shall be issued within the prescribed time.”

In such view of the matter, the Court did not find any merit in the instant petition and, therefore, dismissed the same. [Uma Kant Umesh v. State (NCT of Delhi), 2019 SCC OnLine Del 10754, decided on 22-10-2019]

Case BriefsHigh Courts

Bombay High Court: S.S. Shinde, J. refused to interfere with the order of the Magistrate whereby process was issued against the applicants (directors of the accused company) for the commission of offence under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.

The complainant’s case was that the accused company had issued a post-dated cheque on their favour on account of payment for supply of certain bio-medical equipment’s. However, on presentation, the said cheque was dishonoured and, therefore, the complainant instituted the current proceedings against the accused company as well as the applicants (directors of the accused company).

The applicants submitted that the Magistrate erred in issuing process against them as he failed to consider that the applicants had, at the time of commission of the offence, already resigned from their offences. Per contra, the complainant rebutted their submission with the help of Section 168 of the Companies Act, 2013 (resignation of directors).

Perusing Section 168, the High Court opined that the said provision make it abundantly clear that, the Director who wishes to resign from his office, has to give notice in writing to the company and the Board shall on receipt of such notice, take note of the same and company shall intimate the Registrar in such manner, within such time and in such form as may be prescribed and shall also place fact of such resignation in the report of the directors laid in the immediately following general meeting of the company provision.

Considering the record of the case, it was noted that although the applicants had forwarded their resignation from the office of Director, however, the same was not yet approved by the Board as contemplated by the section discussed above.

Holding that the documents produced by the applicants cannot be considered as uncontroverted or of unimpeachable character, the Court was of the view that the order of issuance of process against the applicants passed by the Magistrate needs no interference.

In such view of the matter, the Court held the instant criminal application to be devoid of merits and rejected the same. [Kulwant Chauhan v. State of  Maharashtra, 2019 SCC OnLine Bom 2280, decided on 23-09-2019]

Case BriefsHigh Courts

Delhi High Court: Mukta Gupta, J. allowed a petition filed against the order of the trial Judge whereby the petitioner’s complaint filed for the commission of offence under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881, was dismissed for non-prosecution.

The petitioner had advanced a loan to the respondent who defaulted in repaying the same. The cheque given by the respondent for the discharge of the said liability was also dishonoured. After fulfilling the codal formalities, the petitioner filed a complaint under Section 138.

The petitioner along with his counsel was present when the Metropolitan Magistrate issued summons against the respondent. Thereafter, on the next date, counsel for the petitioner was present but Metropolitan Magistrate was not available on account of training, Thereafter, counsel for the petitioner was present and bailable warrants were issued against the respondent. When notice was required to be framed, the case was transferred to another Metropolitan Magistrate. On the subsequent date, none appeared before the Metropolitan Magistrate as the advocates were on strike. On the date of the impugned order, the complaint was dismissed on account of non-appearance on behalf of the petitioner.

The High Court was of the view that the petition ought to be allowed. It was considered that neither the complainant nor his counsel could appear due to strike as mentioned above and that the clerk of the counsel wrongly noted the next date, and therefore the complainant or his counsel could not again appear on the date of the impugned order. In such circumstances of the case, the Court thought it fit to restore petitioner’s complaint on the file of the Metropolitan Magistrate. The petition was accordingly allowed. [Rajeev Kumar v. Gagan Makhija, 2019 SCC OnLine Del 9708, decided on 07-08-2019]

Case BriefsHigh Courts

Kerala High Court: B Sudheendra Kumar, J. allowed the petition and quashed the complaint and further proceedings against the petitioners which were filed by the Respondent 2.

In the instant case, Respondent 2, Branch Manager, had filed a complaint against the petitioners, trustees of a trust, alleging offence under Section 138 of the Negotiable Instruments Act, 1881. Hence, the instant criminal cases had been filed by petitioners, praying for quashing the complaint and further proceedings against them. The Court appointed Advocate Jamshed Hafiz as amicus curiae.

The learned counsel for the petitioners, Shaji Chirayath had argued that no successful prosecution against the petitioners, invoking the provisions under Section 141 of the NI Act, could be sustained, as the “Trust” was not an “association of individuals”. The learned counsel for the Respondent 2, Salil Narayanan K.A. argued that the “Trust” was an “association of individuals” and hence, the petitioners were vicariously liable under Section 141 of the NI Act. The learned amicus curiae, Jamshed Hafiz submitted that the “Trust” will not come within the ambit of “association of individuals” and hence, the provisions of Section 141 of the NI Act could not be made applicable to prosecute the petitioners under Section 138 of the NI Act.

The first issue involved in the instant case was that the “trust” was a body corporate or not. As per the Sections 3,11,13,47 and 48 of the NI Act, it was clear that the trustees were the owners of the property and were bound to maintain and defend all suits for the preservation of the trust. Thus it appeared that the “Trust” was not capable of suing and being sued in a Court of law. Therefore, a “Trust” was not a juristic person and was not like a body corporate, which had a legal existence of its own.

The second issue involved was that the “trust” was an “association of individuals” or not. For this, the Court placed reliance on Ramanlal Bhailal Patel v. State of Gujarat, (2008) 5 SCC 449, in which it was held that an “association of persons/body of individuals” was one in which two or more persons join in a common purpose and common action to achieve some common benefit. As per Section 3 of the NI Act, the trustees do not get benefit out of the trust. Therefore, it could not be said that the trustees were persons joined together for a common action to achieve some common benefit. Since, the common purpose of the “Trust” was not to achieve benefit to the trustees, the “Trust” could not be said to be an “association of persons/body of individuals”.

In view of the above, it was held that the “Trust” was neither a “body corporate” nor an “association of individuals” as provided in the explanation to Section 141 of the NI Act. Therefore, no prosecution against the petitioners, the trustees, invoking the provisions under Section 141 of the NI Act could be maintained. Consequently, no successful prosecution against the petitioners, invoking the provisions of Section 141 of the NI Act, could be sustained as the petitioners did not sign the cheque involved in the instant case. The complaint and further proceedings against the petitioners in the instant case were quashed.[N.M. Nabeesa v. State of Kerala, 2019 SCC OnLine Ker 2481, decided on 06-02-2019]