CRLP/2328/2013 of Smt. Madhu Agarwal, Vs The State of Andhra Pradesh, on 30 December 2013

ORDER:

This criminal petition is filed by A-2 under Section 482 Cr.P.C.,seeking quashing of proceedings in CC No.173/2012 on the file of XII SpecialMetropolitan Magistrate, City Criminal Courts at Erramanzil, Hyderabad.

2. The second respondent herein filed a private complaint against thepetitioner and another for an offence punishable under Section 138 of theNegotiable Instruments Act, 1881 (for short “the Act”).

3. The allegations in the complaint would disclose that the complainant who is the second respondent herein is a Multinational Bank represented by its Power of Attorney holder Raghavan Mukunthan. Theaccused are alleged to have approached the second respondent for financialassistance and requested for business loan, assuring to repay the same withinterest in monthly instalments. Considering the request of the accused andrelying upon the representations made, the second respondent granted business loan vide Loan Agreement No.47679824. The said company wasrepresented by its Director A-1 and A-2 was the signatory of the A-1 company.As the accused committed default in payment of instalments, the secondrespondent reminded the accused for clearing the due amount. After muchpersuasion, the accused issued two cheques bearing Nos.804894 and 804895dt. 20-10-2011 drawn on ICICI Bank Ltd., for Rs.3,52,500/- each in partialdischarge of the debt. The said cheques when presented for collection werereturned unpaid with an endorsement “insufficient funds”. A legal notice dt. 11-11-2011 was issued demanding payment of the amount but the same wasreturned unserved on 19-11-2011. After complying with the necessary statutoryrequirements, the present complaint came to be filed.

4. The learned counsel for the petitioner mainly submits that muchprior to the issuance of cheques, the petitioner was deleted from the records ofthe company as an authorized signatory and on 15-10-2010 itselfher resignation was accepted and by way of form No.32 the same wascommunicated to the Registrar of Companies on 15-10-2010

itself. The learned counsel for the petitioner further submits that the petitionerhas not signed the cheques and as such continuation of proceedings would bean abuse of process of law. He further submits that the petitioner did notreceive any statutory notice as contemplated under the Act and as such thereis no cause of action for the second respondent to file a complaint against the petitioner.

5. The learned counsel for the second respondent opposed thecriminal petition contending that if really, the petitioner has resigned as Directorof the Company and that her name was deleted as one of the authorizedsignatories of the company, no explanation is forthcoming as to why chequesdt. 20-10-2011 contain the signature of the petitioner. According to him, theargument of the learned counsel for the petitioner that the cheques were notsigned by the petitioner is a disputed question of fact, which has to be gone intoduring the course of trial. He would further submit that even if the petitionerresigned as a Director of the Company, she is a co-borrower under the loanagreement and as such she being aware about the transaction is liable for anoffence punishable under section 138 of the Act. He would further submit thatthe contention of the learned counsel for the petitioner that the statutory noticeissued to the petitioner was not served is incorrect as the list of documents filedalong with the complaint show service of notice on 19-11-2011.

6. In order to constitute an offence under Section 138 of the N.I. Act,[1]the Apex Court in JUGESH SEHGAL V. SHAMSHER SINGH GOGInotedthe following ingredients which are required to be fulfilled:

“(i) a person must have drawn a cheque on an account maintained by him in a bank forpayment of a certain amount of money to another person from out of that account;

(ii) the cheque should have been issued for the discharge, in whole or in part, of any debtor other liability;

(iii) that cheque has been presented to the bank within a period of six months from thedate on which it is drawn or within the period of its validity whichever is earlier;

(iv) that cheque is returned by the bank unpaid, either because of the amount of moneystanding to the credit of the account is insufficient to honour the cheque or that itexceeds the amount arranged to be paid from that account by an agreement made withthe bank;

(v) the payee or the holder in due course of the cheque makes a demand for the paymentof the said amount of money by giving a notice in writing, to the drawer of the cheque,within 15 days of the receipt of information by him from the bank regarding the return ofthe cheque as unpaid;

(vi) the drawer of such cheque fails to make payment of the said amount of money to thepayee or the holder in due course of the cheque within 15 days of the receipt of the saidnotice.

Being cumulative, it is only when all the aforementioned ingredients are satisfied that theperson who had drawn the cheque can be deemed to have committed an offence underSection 138 of the Act.”

7. As held by the Apex Court, the criminal liability on account ofdishonour of a cheque primarily falls on the drawer, if it is a Company, thenDrawer Company and is extended to the officers of the company. The normalrule in the cases involving criminal liability is against vicarious liability. To put itclear, no one is to be held criminally liable for an act of another. This normal ruleis subject to exception on account of specific provision being made in statutesextending liability to others. Section 141 of the N.I. Act is an instance of specificprovision that in case an offence under Section 138 is committed by acompany, the criminal liability for dishonour of a cheque will extend to theofficers of the company. Section 141 contains conditions which have to besatisfied before the liability can be extended. The conditions have to be strictlycomplied with. A company being a juristic person, all its deeds and functionsare the result of acts of others. Therefore, the officers of the company, who areresponsible for the acts done in the name of the company, are sought to bemade personally liable for the acts which result in criminal action being takenagainst the company. In other words, it makes every person who, at the timethe offence was committed, was in-charge of, and was responsible to thecompany for the conduct of business of the company, as well as the company,liable for the offence……….. The liability under Section 141 of the N.I. Act issought to be fastened vicariously on a person connected with the company, theprincipal accused being the company itself. (See: APARNA A. SHAH V.SHETH DEVELOPERS (P) LTD=(2013) 8 SCC 71)

8. Keeping in view the principles of law enunciated by the Apex Court,I shall now proceed to deal with the case on hand.

9. As stated above, one of the main grounds urged by the learnedcounsel for the petitioner is that the petitioner resigned as a Director of theCompany much prior to the issuance of cheques and in view of the same, shecannot be fastened with any liability under the provisions of the Act.

10. The material on record would disclose that on 18-11-2009 and 7-5-2010 the Board of Directors of the Company have passed resolutions requesting lCICI Bank, Khairatabad Branch and Axis Bank, Begumpet Branch, respectively, to delete the name of the petitioner from their records withimmediate effect. The Board of Directors of the Company received a letterfrom the petitioner conveying her intention of discontinuing herself as a wholetime director of the company due to her pre-occupation which was accepted on15-10-2010 and the same was communicated to the Registrar of Companiesby way of filing Form 32. The said resolutions along with form No.32 werealleged to have been sent to the Registrar of Companies. Noacknowledgement with regard to the acceptance of Form 32 is filed before theCourt. If really, the Board has passed resolutions on 18-9-2009 and 7-5-2010deleting the name of the petitioner as an authorized signatory in the bankrecords and if the resignation of the petitioner as a whole time director wasconveyed to the Registrar of Companies by way of filing form 32, noexplanation is forth coming as to why the petitioner signed the cheques issuedto the second respondent on 20-10-2011 ie., nearly a year later.

11. The argument of the learned counsel for the petitioner that thepetitioner herein has not signed the cheques issued to the second respondentcannot accepted at this stage. A perusal of the cheques dt. 20-10-2011which were filed along with the present petition would show that they contain thesignature of the petitioner and another person. In the absence of anyexplanation as to the circumstances under which the cheques containing thesignature of the petitioner were issued to the second respondent, the argumentof the learned counsel for the petitioner cannot be accepted at this stage.

12. Even accepting the plea of the petitioner that the petitioner hasresigned herself as a whole time director much prior to the issuance ofcheques, but in view of the fact that the cheques contain the alleged signatureof the petitioner, burden lies upon her to establish the circumstances underwhich the cheques came to be issued.

13. The second contention raised by the learned counsel for thepetitioner is that notice issued subsequent to the dishonour of cheque was notserved on the petitioner. The issue with regard to the interpretation ofexpression ‘giving of notice’ under cl.(b) of proviso to section 138 of the Actcame up for consideration in K.BHASKARAN V. SANKARAN VAIDHYAN

[2]BALAN. Considering the said issue with particular reference to the schemeof section 138 of the Act, the Apex Court held that failure on the part of thedrawer to pay the amount should be within fifteen days ‘of the receipt’ of thesaid notice. ‘Giving notice’ in the context is not the same as ‘receipt of notice’.Giving is a process of which receipt is the accomplishment. The Court held thatit is for the payee to perform the former process by sending the notice to thedrawer at the correct address and for the drawer to comply with Clause (c) ofthe proviso. Emphasizing that the provisions contained in Section 138 of the Actrequired to be construed liberally, it was observed as under:-

“20. If a strict interpretation is given that the drawer should have actually received thenotice for the period of 15 days to start running no matter that the payee sent the noticeon the correct address, a trickster cheque drawer would get the premium to avoidreceiving the notice by different strategies and he could escape from the legalconsequences of Section 138 of the Act. It must be borne in mind that Court should notadopt an interpretation which helps a dishonest evader and clips an honest payee as thatwould defeat the very legislative measure.

21. In Maxwell's Interpretation of Statues the learned author has emphasized that"provisions relating to giving of notice often receive liberal interpretation," (vide page 99of the 12th Edn.) The context envisaged in Section 138 of the Act invites a liberalinterpretation for the person who has the statutory obligation to give notice because he ispresumed to be the loser in the transaction and it is for his interest the very provision ismade by the legislature. The words in Clause (b) of the proviso to Section 138 of the Actshow that payee has the statutory obligation to ‘make a demand’ by giving notice. Thethrust in the clause is on the need to ‘make a demand’. It is only the mode for makingsuch demand which the legislature has prescribed. A payee can send the notice for doinghis part for giving the notice. Once it is dispatched his part is over and the next dependson what the sendee does.”

14. After referring to various authorities the Apex Court in C.C.ALAVI

[3]HAJI V. PALAPETTY MUHAMMED, held that “ where the payee dispatchesthe notice by registered post with correct address of the drawer of the cheque, the principle incorporated in section 27 of the General Clauses Act would beattracted ie., the requirement of clause (b) of proviso to section 138 of the Actstands complied with and cause of action to file a complaint arises on the expiryof the period prescribed in clause (c) of the said proviso for payment by thedrawer of the cheque.

15. The Apex Court in the said case observed that the entire purposeof requiring a notice is to give an opportunity to the drawer to pay the chequeamount within 15 days of service of notice and thereby free himself from thepenal consequences of Section 138. The Apex Court categorically held thatany drawer who claims that he did not receive the notice sent by post, can,within 15 days of receipt of summons from the court in respect of the complaintunder Section 138 of the Act, make payment of the cheque amount and submitto the Court that he had made payment within 15 days of receipt of summons.In which event, the complaint is liable to be rejected. The Apex Court furtherheld that a person who does not pay within 15 days of receipt of the summonsfrom the Court along with the copy of the complaint under Section 138 of theAct, cannot contend that there was no proper service of notice as requiredunder Section 138, by ignoring statutory presumption to the contrary underSection 27 of the G.C. Act and Section 114 of the Evidence Act.

16. In the instant case, a legal notice as contemplated under the Actwas issued within 15 days from the date of intimation with regard to dishonourof cheqeus. Though the counsel for the petitioner tried to contend that the saidnotice was not served on the petitioner, but the list of documents filed along withcomplaint contain an acknowledgment card dt. 19-11-2011 showing proof ofservice. Though the petitioner denies receiving the legal notice sent to thecorrect address but it appears that the petitioner received summons sent fromthe court to the very same address. After service of summons, the petitionerdid not make any effort to pay the amount covered under two cheqeus.Therefore, the arguments of the learned counsel for the petitioner that there wasno cause of action for filing a complaint under section 138 of the Act against thepetitioner cannot be accepted.17. View from any angle, this court is of the view that there are nomerits in the criminal petition and the same is liable to be dismissed18. Accordingly, the Criminal Petition is dismissed. Miscellaneouspetitions, if any, shall stand dismissed.

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C.PRAVEEN KUMAR,J

Dt. 30-12-2013Kmr

30-12-2013:

After pronouncing the order, the learned counsel forthe petitioner seeks dispensation of the presence of the petitionerbefore the trial court on the ground that the petitioner is a lady and itwould be difficult for her to attend the court on every date ofadjournment. The counsel for the second respondent did not opposethe same.

Having to the facts and circumstances of the case, the presence of the petitioner in CC No.173/2012 on the file of XIISpecial Metropolitan Magistrate, City Criminal Courts at Erramanzil,Hyderabad, is dispensed with except on the dates when herpresence is specifically required.

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C.PRAVEEN KUMAR,J

GKV/KMR

[1](2009) 14 SCC 683(2009) 14 SCC 683

[2](1999) 7 SCC 510

[3](2007) 6 SCC 555