The High Court · 2025

Petition under Section 482 of Cr.P .C., praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition, the High Court may be pleased to QUAS'H the proceedings in C.C.No.7O of 2019, on the file of I Special Magistrate,Cyberabad At Hastinapuram. l.A. NO: I OF 2019 Petition under Section 482 of Cr,P.C., praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition, the High Court may be pleased to STAY all further proceedings including the appearance of the Petitioner/Accused in C.C.No.70 of 2019,on the file of I Special Magistrate, Cyberabad At Hastinapuram. l.A. NO: 1OF 2020 Petition under Section 482 of Cr.P.C., praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition,the High Court may be pleased to take up the matter under the caption of 'For Being Mentioned' to modify/rectify ihe mrstake wrongly mentioned the court name as'lSpecial Magistrate , Cyberabad At Hastinapuram" but wrongly typed in the order copy as 'll Metropolitan Magistrate Cum llAdditional Junior Civil Judge ,Cyberabad at L B Nagarin the orderdt: 06.11.2019in Crl.P.No.7040 of 2019. l.A. NO: 2 OF 2019 Petition under Section 482 of Cr.P.C. praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition, the High Court may be pleased to advance the date of hearing from 01.01.2020 to any other convenient date to this Honourable Court. This Petition coming on for hearing,upon perusing the Memorandum of Grounds of Criminal Petition and upon hearing the arguments of Sri K.S.SUNEEL, Advocate for the Petitioner and the Public Prosecutor (TG) on behalf of the Respondent No '1 and of Sri PALLE NAGESWARA RAO, Advocate for the Respondent No 2 The Court made the following: ORDER THE HONOURABLE SRI JUSTICE K.SURENDER CRIMINAL PETITION No.7O4O OF 2019 ORDER: This Criminal Petition is Iiled by the petitionet lA-l,to quash the proceedings in C.C.No.7O of 2019, on the file of I Special Magistrate, Cyberabad at Hasthinapurarn' The appellalt is charged with the offence under Section 138 of the Negotiable Instruments Act, 1881 (for short'N.I.Act").

2. Heard learned counsel for the petitioner and Sri M.Vivekananda Reddy, learned Assistant Public Prosecutor for the respondent - State. Perused the record.

3. The 2"a respondent/complainant filed the complaint on the ground that, towards discharge of debt of Rs.50,OO,OOO/-(Rupees Fifty Lakhs only), the cheques in question be-aring Nos.646238, 646239, 646278 and 646279, dr6wn on IDBI bank were issued in favour of the complainant.

4. As seen from the cheques, the same were issued by the Managing Partner, Dandamudi Bioteck, which is a partnership hrm. However, the firm Dandamudi Bioteck is 2 not arrayed as accused in the complaint. The petitioner was made an accused in his personal capacity.

5. Section 141 of N.I.Act reads as under: "141. Offences by companies. _ (1)lf the person committing an offence under section 13g 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 rvas committed without his knowledge, or that he had exercised all due diligence to prevent the commission ol such offence: Provided further that where a person is nominated as a DirecLor of a company by virtue of his holding any ofhce or employment in the Central Government or State Governmenl_ or a financial corporation owned or controlled by the Ccntral Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2)Notwithstanding anything contained in sub_sectron (1), where any olfcncc 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 attributabte to, any neglect on the part of, any director, I 3 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. Explanatio n.- For the purposes of this section,- (a)"company'' means anybody corporate and includes a firm or other association of individuals; and (b)"director", in relation to a hrm, means a partner in the hrm."

6. As seen from the provision, the liability of the person, who is in charge of the firm or a company, would arise only when they are made vicariously liable on behalf of the hrm or company. In the absence of making the company an accused, the question of making the persons, who are part of the compzrny or firm, vicariously liable does not arise. The issue is well settled.

7. The Hon'b1e Supreme Court in Bijoy Kumar Moni vs. Paresh Manna & Anrl, held as under: "44.|n yet one another decision of this Court in the case of N. Harihara Krishnan v. J. Thomas reported in (20 18) 13 SCC 663, while dealing with the issue of commission of an offence under Section 138 of the NI Act by a company, the Court observed that Section 138 only contemplates the ' 2024 SCC online i833 4 drawer of the cheque to be responsibie for the commission of the offence. It is only by virtue of Section 141 that certain persons other than the drawer of the cheque can be made liable for the offence in cases where the offence under Section 138 is committed by a company and not an individual person. The Court, in the facts of the case before it, further held that the identity of the drawer of the cheque was apparent from the cheque itself and thus it was not open to the payee/complainant to seek impleadment of thc company, that is, the drawer of the cheque, at a belated stage by hling an impleadment application when it had instituted the complaint only against the authorised signatory who had signed the cheque on behalf of [he company. The Court also held that the oflence under Section 138 is person specihc and in the absence of applicability of the principles of the eode of Criminal Procedure , 1973, the magistrate cannot take cognrzance of the complaint unless it is made against the drau,er of the cheque, as it is only the drawer who can be an accused under Section 138. The relevant observations are reproduced herein below: "20. The.offence under Section 138 of the Act is capable of being committed only by the drawer of the cheque. The logic of the High Court that since the offence is already taken cognizance of, there is no need to take cognizance of the offence against Dakshin is flawed. Section 147 stipulates the liability for the offence punishabie under Section person committing such 138 of the Act when the 5 an offence happens to be a company-in other words when the drawer of the cheque happens to be a company. [...] xxx

22. Th-e High Court failed to appreciate that the iiability of the appellant (if any in the context of the facts of the present case) is only statutory because of his legal status as the Director of Dakshin. Every person signing a cheque on behalf of a company on whose account a cheque is drawn does nol become the drawer of the cheque. Such a signatory is only a person duly authorised to sign the cheque on behalf of the company/drawer of the cheque. If Dakshin/drawer ol the cheque is sought to be summoned for being tried for an olfence under Section 138 of the Act beyond the period of limitation prescribed under the Act, the appellant cannot be told in view of the iaw declared by this Court in Aneeta Hada lAneeta Hada v. Godfather Travels & Tours (P) Ltd., (2OI2l 5 SCC 661 : (2012) 3 SCC (Civ) 350 : (2O 12) 3 SCC (Cri) 24ll tJnat he can make no grievance of that fact on the ground that Dakshin did not make any grievance of such summoning. It is aiways open to Dakshin to raise the defence thai the initiation of prosecution ggainst it is barred by limitation. Dakshin need not necessarily chalienge the summoning order. It can raise such a defence in the course of trial. xxx xxx xxx 27. By the nature of the offence under Section 138 of the Act, the first ingredient constituting the offence is the fact that a person drew a cheque. The identity of the drawer of the cheque is necessarily required to be known to the { 6 complainant (payee) and needs investigation and would not normall-.r be in dispute unless the person who is alleged to havb drawn a cheque disputes that very fact. The other facts required to be proved for securirig the punishment of the person who drew a cheque that eventualty got dishonoured is that the payee of the cheque did in fact comply with e ach one of the steps contemplated under Section 138 of the Act before initiatin g prosecutlon. Because it is already held by this Court that failure to comply u,ith any one of the steps contemplated under Section 138 would not provide "cause of action for prosecution". Therefore, in the context of a prosecution under Section 138 , the concept of taking cognizance of the offence but not the offender is not appropriate. Unless the complaint contains all the necessary factual allegations constituting each of the ingredients of the offence under Section 138, the Court cannot take cognizance of the offence. Disclosure of the name of the person drawing the cheque is one of the factual allegations which a complaint is required to contain. Otherwise in the absence of any authority of 1aw to investigate the offence under Section 138, there would be no person against whom a court can proceed. There cannot be a prosecution without an accused. The offence under Section 138 is person specific. Therefore, Parliament declared under Sectior-t 142 that th'e provisions dealing with taking cognizance contained in the CrPC should give way to the procedure prescribed under Section 142. Hence the opening of non obstante clause 142. It must also be remembered that under Section ,/ --./ 7 Section 142 does no[ either contemplate a report to the police or authorise the Court taking cognizance to direct the poli,ce to investigate into the complaint. (Emphasis supplied) iii. Meaning of the expression "on an account maintained by him" used in Section 138 of the NI Act

45.1t is of vital importancc to understand the import of the expression "on an account maintained by him with a banker" used in Section 138 of the NI Act. The expression, in our considered opinion, describes the relationship between the account holder and the banker' This relationship is fundamental to the application of Section 138. The act of maintaining an account is exciusively tied to the account holder and does not extend to any third party whom the account holder may authorize to manage the account on its behalf. Therefore, any delegation of authority to manage the account does not alter the intrinsic relationship existing between the account holder and the banker as envisaged under the NI Act. Corporate persons like companies, which are mere Iegal entities and have no soul, mind or limb to work physically, discharge their functions through some human agency recognised under the law to work. Therefore, if some function is discharged by such human agency for and on behalf of the company it vvould be an act of the company and not attributable to such human agent. One such instance of discharge of functions could be the authorit5r to manage the bank accounts of the company, issue and sign cheques 8 J on its behalf, etc. which may be delegated to an authorised signatory. However, such authorisation would not render the authorised signatory as the maker of those cheques. It is the company alone which would continue to be the maker of these cheques, and thus also the drawer within the meaning of Section 7 of the NI Act

46. The authorised signatory is merely the physical limb that signs and makes the cheque on behaif of the company's incorporeal personality. The company, for all purposes, continues to remain the drawer of the cheques. lf the interpretation as being canvassed by the complainant is acceptcd then even an employee of the Company, who on account of his being an authorized signatory signs a cheque. issued by the Company towards discharge of the debt or other liability of the Company, would be liable to prosecution and conviction under Section l3g of NI Act even after he resigns from the company and is no more in its employment. This certainly could not have been the intention of the legislature. Even the vicarious liability created under Section 138 of NI Act would not be attracted in respect of a Director or an employee of the Company who resigns and severs his connections with the company, unless the complainant is able to bring his case within the purview of sub-Section 2 of Section 141, by proving that the offence had been committed with his consent or connivance or was otherwise attributable to an1, neglect on his part. " 9

8. Since the hrm is not made a party, the question of prosecuting the petitioner, in his private capacity, does not allSe.

9. Accordingly, the Criminal Petition is allowed and the proceedings in C.C.No.70 of 2019 are quashed against the petitioner herein. Miscellaneous applications pending, if any, shall stand closed . SD/. MOHD. ISMAIL ASSISTANT REGISTRAR //TRUE COPY// SECTION OFFIGER l To, 1 The Court of ll Metropolitan Magistrate -cum- Jr;;tt;liLrog" ,Cvb"rabad at L B Nagar'Hv 2.TheStationHouseofficer'L.B.NagarPoliceStation,Hyderabad derabad ll Additional

3.TwoCCstothePublicProsecutor,HighCourtfortheStateofTelanganaat Hyderabad [OUT]

4. One CC to SRl. K S SUNEEL' Advocate [OPUC] 5. One CC to SRl. PALLE NAGESWARA RAO' Advocate IOPUCI 6. Two CD CoPies pcsd/PSL Vr HIGH COURT DATED:21 10212025 \ ORDER CRLP.No.7040 ot 2019 s -74 * u r i i: t-4 o '^:* .(Y o, / /<./ .)-. .s -\ \* \to .A !) ..|. t') ALLOWING THE CRIMINAL PETITION qco6"4 5*