High Court · 2009

the writ petition being WP(C) No.4173/2002.

4. Similarly in the second case, i.e. the Writ Petition (Civil) being No. 2 009/2003 (titled as M/s Jindal Spicy Foods Tech. Ltd and others) the petitioners were the accused in Complaint Case No. 1949C/02 on the file of the Chief Judici al Magistrate, Kamrup, Guwahati (titled as Emjay Capfin Private Limited and othe rs Vs M/s Jindal Spicy Foods Tech Ltd. and others) whereof the learned CJM, Kamr up, Guwahati took cognizance on 21.12.2002 being prima-facie satisfied that a ca se has been made out against the accused to proceed with under Section 138 of th e Act which is under challenge in the instant writ petition being WP(C) No.200 9/2003.

5. In Complaint Case being 95C/2002 the complainant had alleged that the pe titioner Company acted as consignee agent of the accused no.1 for 1(one) year fr om 15.11.1999 in terms of consignment agency agreement between the complainant a nd the accused no.1 and by the said agreement the complainant started to act as Consignment Agent of the accused no.1 and also its associated companies viz. Son a Spicy Food Tech Ltd. and Sona Spices Pvt. Ltd. All the three companies name d Jindal Spicy Food Tech Ltd., Sona Spicy Foods Tech Ltd. and Sona Spices Pvt . Ltd. are also known as (cid:28)Sona Group of Companies (cid:29). While acting as Consignment Agent of the accused no.1, there arose a difference in course of business and ul timately the complainant expressed disinclination to act as Consignee Agent of t he accused which was agreed upon and it was settled on an amount of Rs.15,83,664 /-(Rupees fifteen lakhs, eighty three thousand, six hundred and sixty four) only being the amount of security deposit plus interest accrued thereon would be r efunded gradually in instalments by issuing 16 numbers of postdated account pa yee cheques drawn on the Bank of India , Guwahati Branch. However, the accused i ssued 15 numbers of cheques each for Rs.1,00,000/-(rupees one lakh) only. The c heques were issued by the accused no.2 for and on behalf of the accused no.1 in favour of the complainant company. The complainant presented 10 numbers of chequ es for collection through its Banker namely, Vijaya Bank, Guwahati Branch on 13. 12.2001, but the same were dishonoured by the drawer’s bank on 14.12.2001 with the remark (cid:28)payment stopped by the drawer (cid:29).

6. Thereafter legal notice of demand were issued to all the accused persons on 26.12.2001 asking them to pay the amount of Rs.10,00,000/-(rupees ten lakhs) only being the total amount of 10 (ten) dishonoured cheques within 15 (fifteen ) days of the receipt of the notice. Since the accused persons failed to make t he payment of the cheque amount, the complaint was filed under Section 138 of t he Act and accordingly, the complainant was examined under Section 200 of the Co de of Criminal Procedure (’Code’ for short) and on being prima-facie satisfied the learned Magistrate issued summons against which the accused petitioners have approached this Court praying for quashing the entire proceedings.

7. Similarly in Complaint Case No.1949C/2002, the complainant had alleged t hat in order to discharge the liability of payment arising out of the Consignmen t Agency Agreement dated 15.11.1999, as mutually settled by the accused wit h the complainant on 16.1.2001 after signing the Memorandum of Understanding (’ MOU’ for short), the accused issued 5 (five) postdated cheques on 18.6.2001 bei ng Cheque Nos.567440 dated 31.12.2001, 567441 dated 20.1.2002, 567442 dated 10. 2.2002, 567443 dated 2.3.2002 and 567444 dated 22.3.2002 for Rs.1,00,000/-(rupee s one lakh) each, all drawn on Bank of India, Guwahati Branch and handed over th e same to one Sri Prakash Sikaria, who was then the C&F Agent of the accused fo r Sona Brand Spices, with deceitful inducement to the complainant to release the stocks from its godown unto the custody of the accused with the assurances that on such release of stocks, Sri Prakash Sikaria would hand over the said cheque s to the complainant. Believing the accused in good faith, the complainant agree d and released the entire stocks within about eighty nine days starting from 18. 6.2001 itself. However, after getting a major portion of the entire stocks, the accused started putting some new conditions in order to deposit the lawful dues and instructed Sri Prakash Sikaria not to hand over the cheques to the complai nant without verifying the records to be produced before him by both the partie s and to be audited by a Chartered Accountant at Guwahati within 15 (fifteen) days from 18.6.2001, but the accused did not produce the record as assured. The said Prakash Sikaria, however, handed over the cheques to the complainant only in the month of October, 2001. It has further been alleged that the accused ind uced the complainant to part with Rs.5,00,000/-(Rupees five lakhs) only before e ntering into the aforesaid Consignment Agency Agreement dated 15.11.1999 which amount was paid by Bank Draft No.080629 dated 10.11.1999. Since the cheques issued were postdated, therefore, all the 5(five) cheques we re presented for payment on 17.5.2002 with their bankers viz. Vijaya Bank, Guw ahati Branch, but the same were dishonoured and returned by the Banker of the ac cused, i.e. Bank of India, Guwahati Branch vide their local clearing cheques re turn memo dated 18.5.2002 and the reasons for dishonour of cheques were mentione d as ’Account Closed’. Immediately thereafter, the notices were sent to all the accused in their respective addresses informing about the dishonour of cheques and demanded the payment of the amount within 15 days from the date of receipt o f the notices, which has been duly received by all the accused as admitted vide communication dated 24.6.2002. However, they refused to pay the amount and accor dingly the complaint was filed on 17.7.2002 under Section 138 of the Act to wh ich the cognizance was taken by the learned Chief Judicial Magistrate, Kamrup, G uwahati on 17.12.2002 against which the accused approached this Court by filing WP(C) No.2009/2003 praying therein for quashing the entire proceeding.

8. Mr. A.K. Bhattacharyya, learned Senior counsel assisted by Mr. BK Singh, learned counsel appearing for the petitioners have argued that perusal of the complaint would show that no allegation whatsoever have been made against th e petitioner No.3 in respect of Complaint Case No. 95c/2002 and petitioner Nos. 3 and 4 in respect of Complaint case No. 1949 C/2002 and they have been arrayed as accused only, they being Directors of the Company and as such taking cogniz ance of the offence against the above petitioners and issuing process against th em are bad in law and on this ground alone the proceedings are liable to be se t aside and quashed.

9. In support of his submission made hereinabove, the learned Senior counse l has referred the complaint and the initial deposition recorded by the learned Magistrate. To substantiate his arguments, the learned Senior counsel would urg e that in case of offence by Company, wherein vicarious liability of other pers ons have been alleged in the complaint, specific averments must be made agains t such persons in the complaint which is mandatory requirements under Sections 138 and 141 and in absence of such averments made in the complaint, no cogniza nce can be taken and as such it is a fit case where inherent power is required t o be exercised to secure the ends of justice.

10. The learned Senior counsel would further urge that in order to succeed i n the prosecution of the petitioners for alleged dishonour of cheques by the Ban k, the petitioners ought to have filed 15 complaint cases on the merit of each o f the 15 cheques and 15 notices ought to have been issued within the meaning of Section 138(b) of the Act. Thus the procedure as required under the law having not been followed, the entire proceeding is required to be interfered with in or der to prevent the abuse of the process of the court.

11. The learned Senior counsel has drawn the attention of the Court to the provisions of Section 138 (b) read with Section 142(b) of the Act which mandate that the complaints are required to be made within one month of the date on which the cause of action arose under clause (C) of proviso to Section 138 of the Act which are not the cases in hand and thus the learned trial court has co mmitted wrong in taking cognizance of the offence beyond the prescribed perio d of limitation and on this ground alone the proceedings in both the cases deser ve to be interfered with in order to secure the ends of justice.

12. o the following decisions: In support of his contention, the learned Senior counsel has referred t 1992 Supp.(1) SCC 355 (i) State of Haryana and others -Vs Chaudhury Bhajanlal and others, (ii) Nabin Chandra N. Majethia Vs. State of Maharastra and others, (2000) 7 SCC 640 (iii) SMS Pharmaceuticals Ltd Vs. Neeta Bhalla and another. (2005) 8 SCC 89 (iv) (2007) 3 SCC 693, Saroj Kumar Poddar -vs- State (NCT of Delhi) and another.

13. The private respondents herein, though, have filed their affidavit-in-op position in both the cases, but failed to appear, when the matter was called on for hearing. Therefore, the Court seems it fit to answer the points raised durin g arguments.

14. A conjoint reading of Section 138(b) , 139 and 142(b) of the Act, it w ould be clear that there is no legal bar to club the cheques in one complaint a nd so also there is no legal mandatory requirement in Section 138(b) of the Act to issue notice for each cheque separately and to file the complaint for each cheque separately as contended by the learned Senior counsel for the petitioners and therefore answered accordingly.

15. With regard to the question of limitation in filing the complaint, it is required to look into the date on which the cause of action arose. The notices were issued to the accused petitioners and they received the notice save and ex cept in case of Complaint Case No. 95C/2002 where notice was duly served on t he accused No.4 and the others could not be served as remarked by Post man ’Ret urned as the factory was found to be closed on repeated visits’. Clause(C) of t he proviso to Section 138 of the Act provides 15 days time to the accused and to make payment within the said period and it is only on expiry of the said st ipulated statutory period that the cause of action arose and Clause-(b) of Sect ion 142 of the Act provides a limitation period of one month from the date of the cause of action to file a complaint and accordingly, the complaints have bee n filed within the period of limitation and answered accordingly.

16. In regard to the question raised and the decisions cited relating to man datory requirements of averments to be made in the complaint petition, the Apex Court has dealt with the matter in Paresh P. Rajda Vs. State of Maharashtra and another, reported in 2008 AIR SCW 3899 wherein the judgment of three Judges Benc h of the Apex Court in SMS Pharmaceuticals reported in (2005) 8 SCC 89 (supra) h as been noticed. The Apex Court in SMS Pharmaceuticals (supra) has examined the scope and ambit of Section 141 of the Act and the liability created with respec t to the Directors and other persons responsible for the affairs of the Compan y. Three questions were posed:- (cid:28)(a) Whether for purposes of Section 141 of the Negotiable Instruments Act, 188 1, it is sufficient if the substance of the allegation read as a whole fulfil the requirements of the said Section and it is not necessary to specifically s tate in the complaint that the person accused was in charge of, or responsible f or, the conduct of the business of the company. (b) Whether a Director of a company would be deemed to be in-charge of, and res ponsible to, the company for conduct of the business of the company and, therefo re, deemed to be guilty of the offence unless he proves to the contrary. (c) Even if it is held that specific averments are necessary, whether in the absence of such averments , the signatory of the cheque and or the managing di rector or joint managing director who admittedly would be in-charge of the comp any and responsible to the company for conduct of its business could be proceede d against. (cid:29) The above questions were answered in the following terms: (cid:28)(a) It is necessary to specifically aver in a complaint under Section 141 that at the time offence was committed, the person accused was in-charge of, and r esponsible for the conduct of business of the company. This averment is an essen tial 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) The answer to the question posed in sub-para(b) has to be in the negati ve. Merely being a director of a company is not sufficient to make the person li able under Section 141 of the Act. A director in a company cannot be deemed to b e in-charge of and responsible to the company for the conduct of its business. T he requirement of Section 141 is that the person sought to be made liable shou ld be in-charge of and responsible for the conduct of the business of the compan y at the relevant time. This has to be averred as a fact as there is no deemed l iability of a director in such cases . (c) The answer to question (c) has to be in the affirmative. The question no tes that the managing director or joint managing director would be admittedly i n-charge of the company and responsible to the company for the conduct of its bu siness . When that is so, holders of such position in a company become liable un der Section 141 of the Act. By virtue of the office they hold as managing direct or or joint managing director, these persons are in-charge of and responsible fo r the conduct of business of the company. Therefore, they get covered under Sect ion 141. So far as the signatory of a cheque which is dis-honoured is concerned, he is clearly responsible for the incriminating act and will be covered under s ub-Section(2) of Section 141 (cid:29). 17. While considering the scope and ambit of Section 141 of the Act, the Ap ex Court in SMS Pharmaceuticals (supra) found that the necessary averments had b een made in the complaint so as to attract the provisions of Section 141 of the Act. The appeal filed by the company was accordingly dismissed.

18. The same question came up for consideration in N. Rangachary Vs. Bharat Sanchar Nigam Ltd. reported in (2007) 5 SCC 108 wherein at paragraph-21, the A pex Court has observed as thus: (cid:28)21. A person normally having business or commercial dealings with a company, wo uld satisfy himself about its creditworthiness and reliability by looking at its promoters and Board of Directors and the nature and extent of its business and its memorandum or articles of association. Other than that he may not be aware o f the arrangements within the company in regard to its management, daily routine etc. Therefore, when a cheque issued to him by the company is dishonoured, he i s expected only to be aware generally of who are in-charge of the affairs of the company. It is not reasonable to expect him to know whether the person who sign ed the cheque was instructed to do so, or whether he has been deprived of his authority to do so, when he actually signed the cheque . Those are matters pecu liarly within the knowledge of the company and those in-charge of it. So all tha t a payee of a cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in-charge of its affairs. The directors are p rima facie in that position. (cid:29) 19. In order to ascertain whether there are clear averments made in the comp laint or the evidence with regard to the role played by the Directors and as to whether they are in-charge and responsible for the conduct of the affairs as ren dered by the Apex Court in the decisions cited hereinabove, the complaint needs to be examined. Admittedly the Complaint Case No. 95C/2002 and Complaint Case No . 1949 c/2002 arose out of an agreement dated 15.11.1999 whereof the complainan t was appointed as Consignment Agent of the accused Jindal Spicy Foods Tech Ltd. and also its associated companies named Sona Spicy Foods Tech Ltd., Sona Spices Ltd which are known as ’Sona Group of Companies’. The accused in the complain ts have issued 15 numbers of cheques which were dishonoured and accordingly comp laint was filed after the statutory period as required under the law.

20. In the complaint petition the complainant has averred that the accused n o.1 Jindal Spicy Food Tech ltd. is a public limited company having its office a t 746, Industrial Area, Phase-ll, PS- Chandigarh, Chandigarh- 160002 and local o ffice at C/o- Ganga Banijya Warehousing Pvt. Ltd., Dr. B. Baruah Road, Ulubari, Guwahati-7 and presently local office is functioning at the residence of Ghanshy am Patel, situated at SW-4, Amarawati Palace, Amarawati Path, Christian Basti, G uwahati-781 005.

21. At paragraph-2 (a) of the complaint it has been averred that the accu sed Nos. 2, 3 and 4 are Directors of the accused No.1. They take active part in the day to day business of the accused No.1 and also look after its day to day b usiness activities. All of them are active Directors and in-charge and therefore responsible for the works of accused No.1. The said averments find place in the initial deposition wherein it has been specifically deposed that the case has b een filed by the complainant company against Jindal Spicy Foods Tech Ltd. and i ts Director named in the complaint. Sri Giridhari Lal Jindal (accused No.2) on b ehalf of accused No.1 issued cheques which were dishonoured with the remark ’pay ment stopped by the drawer’ and hence, the case has been filed as per Negotiable Instruments Act and under Section 420 IPC. The accused Nos. 2, 3 and 4 (Petitio ner Nos.2, 3 and 4 of the writ petitions) took active part in the business of ac cused No.1 and its day to day activities.

22. On perusal of the complaint petition alongwith its initial deposition, c lear allegations against all the accused petitioners have been made to the effec t that the accused Nos. 2, 3 and 4 are Directors of the accused No.1 and they ta ke active part in day to day business of the accused No.1 and also look after it s day to day business. All of them are active Directors and in-charge and respon sible for the works of the accused No.1.

23. There is no ambiguity in the decisions referred to and relied upon by th e learned counsel appearing for the petitioners. However, in view of the decisio ns rendered by the Apex Court in N. Rangachary (supra) and Paresh P. Rajda (supr a), this Court is of the opinion that at a stage where the trial has not yet sta rted, it would be inappropriate to quash the proceedings initiated against the p etitioners.

24. For the foregoing reasons as discussed above, the writ petitions are fou nd to be devoid of merit and dismissed accordingly. The interim orders passed ea rlier in both the cases stand vacated.

25. l be no order as to cost However, considering the facts and circumstances of the case, there shal