Dalbir Singh v. IndusInd Bank Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRASDated:-7.08.2009Coram:-The Hon'ble Mr. Justice R.REGUPATHICrl.O.P. No.28359 of 2002andCrl.M.P. No.11786 of 20021. Dalbir Singh,Chairman and Managing Director,Central Bank of India,Central Office, Chandramukhi,Nariman Point, Mumbai-400 021.2. George Thomas,Assistant General Manager,Central Bank of India,Regional Office, PB No.377,Raheja Complex III Floor,834, Anna Salai, Chennai-2.... Petitionersvs.1. IndusInd Bank Ltd.,3, Village Road, Nungambakkam,Chennai-34, rep. By itsChief Manager M.Satyamurthi.2. The Branch Manager,Central Bank of India,Royapettah Branch, 220 Peters Road, Chennai-14.3. V. Pattabiraman,Former Branch Manager,Central Bank of India,Royapettah Branch,220 Peters Road, Chennai-14.4. C.N.Chandrasekar,Authorised Signatory, Central Bank of India,Royapettah Branch,220 Peters Rd., Chennai-14.5. B.Selvaraj,Authorised Signatory,Central Bank of India, https://hcservices.ecourts.gov.in/hcservices/ Mandaveli Branch,St. Mary's Road, Chennai-28.... RespondentsPetition under Section 482 of the Code of Criminal Procedure tocall for the records in C.C. No.8457 of 2002 on the file of XIVMetropolitan Magistrate's Court, Egmore,Chennai.For petitioner: Mr.T.R.Mani, Senior Counselfor Mr.T.M.HariharanFor respondent-1: Mr.R.SubramanianFor respondent-2: Mr.P.SoundarapandianFor respondent-3: Ms.P.V.RajeswariFor respondent-4: Ms.Aruna GaneshFor respondent-5: Dr.S.PadmaO R D E R The petitioners herein, who are A-2 and A-6 in the case takenas C.C. No.8457 of 2002 on file by the XIV Metropolitan Magistrate,Egmore, Chennai, for an offence punishable under Section 138 of theNegotiable Instruments Act, seek to quash the said proceedings.2. At the outset, it is represented by both the parties thatthe first petitioner herein has been given up as accused in thecase before the learned Magistrate and an endorsement also made tothat effect by the complainant. Therefore, this Court has todecide the case only in respect of the 2nd petitioner/A6 treatinghim as the sole petitioner in this Criminal Original Petition.3. The averments and allegations projected in the complaintbefore the trial court are, in brief, as follows:-The complainant viz., IndusInd Bank Ltd., Nungambakkam,Chennai, received a set of Bills from the beneficiary drawn underLetter of Credit No.25/7, dated 24.01.2002, issued by A1/R2 hereinfavouring M/s.Maharaja Timber Traders, No.168 Sydenhams Road, ParkTown, Chennai-600003. As per usual and accepted banking practice,prior to negotiation, the complainant presented the originaldocuments drawn under the aforesaid letter of credit to A1 andobtained a categorical confirmation to the effect that the Billswere in order and requested A1 to specify the date on which paymentwould be made to the complainant. Apart from that, an Executive ofthe complainant-Bank had personally visited A1 on 25.01.2002,pursuant to which, on the same day, a letter was issued by A1whereby it was confirmed that the documents submitted by thecomplainant under the Letter of Credit, issued by A1, were in orderand therefore, payment could be made in respect of the said Bill onthe due date ie., 25.04.2002. Subsequent to the categorical writtenconfirmation and declaration dated 25.01.2002, the complainant haddiscounted the bills drawn under the letter of credit. While so, on25.04.2002, A1 had honoured the commitment by issuing a Bankerscheque from its Royapettah Branch bearing No.013635 dated https://hcservices.ecourts.gov.in/hcservices/

25.04.2002 in favour of the complainant duly signed by the 4th and5th accused for Rs.56,27,862. According to the complainant, when thesaid cheque was forwarded for clearance, the cheque was returnedunpaid by the accused Bank on 26.04.2002 with an endorsement'payment stopped'. The first accused, having issued the Banker'sCheque; the 3rd accused, having issued the Letter of Credit; A4 andA5 having signed the cheque and A2& A6 being the ControllingAuthorities of A1 and involved in the affairs of the first accused,are jointly and severally liable for dishonour of the Banker'scheque in question; thus, they have committed offences punishableunder Sections 138(b), 141 and 142 of the Negotiable InstrumentsAct (NI Act). 4. Learned Senior Counsel for the petitioner, in hisartful endeavour to decipher the relevant provision in the NI Actto support his case, adverted to the scope of Section 138 that ifa cheque is dishonoured for insufficiency of funds or that itexceeds the amount arranged to be paid from that account, thedrawer is to be punished with imprisonment and therewith, outlinedhis position and view that the only requirement or element as perthe object, to attract the provision, being "insufficiency offunds", if a cheque, in spite of sufficiency of funds in theaccount of the drawer, is returned unpaid due to some other reasonor circumstance, the offence under Section 138 is not attracted.In the present case, there is a dispute regarding liability and theaccused, a Banking Organisation, had sufficient funds and in suchcircumstances, having regard to the object of the provision, theoffence is deemed to have been made out only in the event ofinsufficiency of funds. Because of the dispute regardingliability, a letter has been issued for 'stop payment' and suchcourse was adopted due to the reason that the transaction wasfraudulent. The complainant Bank itself lodged a police complaintagainst the persons, who committed fraud, but curiously, instead ofproceeding against those persons, on the mere ground that thecheque was issued by the accused/Bank, the complainant initiatedthe proceedings which exercise is nothing but an abuse of processof law. In a given case, the provision of law must be interpretedin a strict sense. The accused/Bank has more than 3100 branchesthroughout India and if at all any loss has been caused to thecomplainant, the same must be recovered only from the persons whoactually committed fraud. Moreover, for recovery of the money, thecomplainant has already initiated proceedings in O.A. No.282 of2003 before the Debts Recovery Tribunal as against the partners ofthe Firm who committed fraud since direct liability is attachedonly to those persons. Merely because of the reason that thecheques were issued by the accused Bank acting on the documentssubmitted by the firm indulged in fraud, liability cannot beinvariably fixed on the Banking Organisation of the petitioner.Further, no specific allegation having been made in particular asagainst the petitioner herein, the proceedings against him cannotbe maintained since the omnibus allegations made are not sufficientto constitute the offence. https://hcservices.ecourts.gov.in/hcservices/ It is further contended that the complainant having given upone of the accused viz., A2, should have also given up A-6, whostands on the same footing with A2. Simply because of the reasonthat the petitioner/A6 is holding a position in the BankingOrganisation, without application of mind, he is included as anaccused in the case, thus, this is a fit case to quash theproceedings before the trial court insofar as the petitioner isconcerned. Reiterating the submissions made, learned Senior Counsel, byreferring to a Book on the Negotiable Instruments Act by Bhashyam &Adiga, contended that an offence under Section 138 NI Act is madeout only in the event of 'insufficiency of funds' and in thepresent case, though the cheques were issued believing thetransaction as bona fide and later, on coming to know about thefraudulent transaction, a letter to stop payment was issued; insuch factual situation, it must be presumed that there is no debtor liability and under such circumstances, if the cheque isdishonoured, the maker of the cheque is not liable for prosecution.By drawing support from the case laws reported in 2001 (10) SCC 218(K.P.G. Nair vs. Jindal Menthol India Limited), 2002 (7) SCC 655(Katta Sujatha v. Fertilizers & Chemicals Travancore Limited), 2004(7) SCC 15 (Monaben Ketanbhai Shah v. State of Gujarat) and 2007(4) SCC 70 (S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla andanother), learned Senior Counsel has stated that there must bespecific allegation that the accused was in charge of and wasresponsible to the firm for the conduct of the business of the firmand in the absence of such specific allegations, the offence is notmade out. Further, a Director of a firm does not automaticallybecome vicariously liable for the offence committed by the companyand it has to be averred in the complaint that the person proceededagainst was in charge of and responsible to the company for theconduct of its business. According to him, since such elements aretotally absent in the case of the petitioner herein, the petitionmay be ordered, quashing the proceedings against him. 5. Per contra, learned counsel for the complainant submitsthat prima facie materials are available in the complaint toconstitute the offence against the petitioner. A specificallegation has been made at paragraph No.20 of the complaint to theeffect that the petitioner herein/A6 is the controlling authorityover the affairs of the first accused and that the accused arejointly and severally liable for dishonour of the cheque inquestion. Several documents were annexed along with the complaintto substantiate that the essential ingredients to attract Section138 of the Act are present and also to fix the responsibility onthe petitioner in his capacity as Assistant General Manager of theaccused Bank. A criminal complaint has been given against the firmand its partners who played fraud and the subject matter andallegations therein are different. The object behind introductionof Section 138 of the Act is to inculcate faith in the efficacy ofbanking operations and credibility in transacting business on https://hcservices.ecourts.gov.in/hcservices/ negotiable instruments and that being so, if a cheque is issued toclear certain liability, there is a presumption always in favour ofthe complainant that the cheque is regarding the discharge of theliability and it is for the accused to prove the contrary and torebut such presumption and the accused could do so only by adducingevidence during the course of trial. In support of his submission,learned counsel relied on a decision of the Apex Court in ModiCements Ltd. v. Kuchil Kumar Nandi (AIR 1998 SC 1057), wherein, ithas been held that merely because the drawer issues a notice to thedrawee or to the Bank for stoppage of payment, it will not precludean action under Section 138 of the Act by the drawee or the holderof a cheque in due course. In the present case, since prima faciematerials are available to proceed against the petitionerherein/6th accused, the Criminal Original Petition may bedismissed. 6. I gave my thoughtful consideration to the argumentsadvanced on either side having regard to the materials available onrecord. The complainant received a set of Bills from the beneficiarydrawn under a letter of credit issued by the first accused. Afterverification of the documents and receiving confirmation, the firstaccused issued the cheque, dated 25.04.2002, in favour of thecomplainant signed by A4 and A5 and the cheque, on presentment,was returned on the next day ie., 26.04.2002, with an endorsement'payment stopped'. Section 138 of the NI Act is a Penal Statuteand it creates strict liability and therefore if an instrument isissued with a view to discharge a debt or liability and returned bythe Bank with endorsements refer to drawer, exceeds arrangement,instruction for stoppage of payment and alike usual endorsement,the provision can be invoked and that being the legal position, Iam unable to appreciate the contention of the learned SeniorCounsel that the operation of the provision is only in an areawhere insufficiency of funds is the case. Further, on a closeperusal of the complaint, prima facie allegations are available inparticular against the petitioner herein. Though it is stated thatthe accused is a Banking Organisation and the petitioner is anofficial of such Organisation, the relevant aspect that requiresto be taken into consideration at the time of taking cognizance isthe question of liability, issuance of cheque and dishonour of thesame. Though it has been seriously contended that the accused Bankgot sufficient funds and since there is doubt regarding liability,the letter to stop payment came to be issued, I am of the view thatsuch aspect/defence is a matter to be canvassed during the courseof trial by adducing materials in support thereof. In respect ofthe communications sought to be relied on through additional typedset of papers, again, I am of the view that the same cannot belooked into by this Court while exercising inherent powers to quashthe proceedings, for, such disputed materials may have to beproduced during the course of trial. Merely because of the reasonthat a letter to stop payment has been issued, it cannot be https://hcservices.ecourts.gov.in/hcservices/ contended that the offence is not made out. In the abovecircumstances, I do not find any valid ground or reason to quashthe proceedings and therefore, the petition is liable to bedismissed. 7. In the result, the Criminal Original Petition is dismissed.Connected Miscellaneous Petition is closed. Sd/- Asst.Registrar/true copy/ Sub Asst.RegistrarJI.ToXIV Metropolitan Magistrate,, Chennai.+1 cc to Mr.T.M.Hariharan, Advocate, SR.No.36779 Crl.O.P.No.28359/2002SR {CO}TP/20.8.2009.