G. RAMESH versus KANIKE HARISH KUMAR UJWAL & ANR. on 5 April 2019

1. Leave granted.

2. This appeal arises from a judgment dated 13 June 2018 of alearned Single Judge of the High Court of Judicature at Hyderabad.[1]While allowing a petition under Section 482 of the Code of CriminalProcedure, 1973[2] instituted by the first respondent, the High Courtquashed the proceedings[3] on the file of the Special Judicial Magistrateof First Class arising out of a complaint under Section 138 of theNegotiable Instruments Act, 1881.[4]

3. The appellant is the complainant. The first accused is apartnership firm by the name of Vainqueur Corporate Services.

4. The third accused is the managing partner. The first respondent,who is arrayed as the second accused, is a partner of the firm. Thecomplaint alleges that the partnership firm was dealing in data entrywork. After obtaining contracts for data entry, sub-contracts wereentered into by the firm for the completion of the assignments. Paragraphs1 to 7 of the complaint are material to the controversy in the presentcase and are extracted below:

“1.That the accused No. 3 is the Managing Director andAccused No. 2 is one of the partners of M/s.Va i n q u e u rCorporate Services situated at Hyderabad and dealing indata entry work. They used to take contracts of dataentry and give sub contracts to others to complete saidassignment.

2. The accused persons have given sub contract of dataentryto the complainant in the month of August 2010 bytaking a caution deposit of Rs 1,00,000 which has paidthrough two cheques which were credited into their accountNo. 304011014832 at ING Vysya Bank on 30.08.2010.Thereafter, they have assigned the job of data entry to thecomplainant from the month of September 2010 to December2010.

1“Criminal Petition No. 5301 Of 2014"

2“CrPC”

3“Criminal M.P. No. 295 of 2014 in C.C. No. 751 of 2012"

4“The Act”

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SUPREME COURT REPORTS

A3.The complainant did the data entry work for said four monthsworth of Rs 8,50,000 as per rates of understanding. Theyhave issued cheque bearing No. 929605 dated 01.11.2010drawn on Axis Bank, Hyderabad for Rs 2,00,000 towardswork of September 2010 andcheque bearing No. 929620dated 18.12.2010 drawn on Axis Bank, Hyderabad forBRs 2,50,000 towards work of October 2010.

4. The complainant presented said two cheques for collectionthrough his bank i.e., HDFC, Mahabubnagar but saidcheques were returned unpaid due toinsufficient balance intheir bank account. The said fact of return of cheques wasCinformed to the accused with a request to pay the dishonouredcheque amount along with subsequent months i.e., for themonth of November and December 2010 amounts.

5. On that accused No. 2 transferred Rs. 1,00,000 from hisaccount No. 10141560000576 to the account No.D10141070007111 of complainant at HDFC Bank,Mahabubnagar on 08.02.2011 and 10.02.2011. They a l s oassured the complainant to pay the balance amount withinshort time. As the accused no. 2 is son of brother in law ofcomplainant, he believed them and kept quite for some time.EAs they have committed default in payment of amounts, thecomplainant could not continue said work from the month ofJanuary 2011, as he had no money to pay the salaries of hisemployees.

6. After repeated demands for the payment of balance amountFof Rs. 7,50,000 towards completed work and Rs.1,00,000given towards caution deposit, the accused No. 3 issued twomore cheques bearing No. 929675 and 929676 dated30.05.2011 and 19.07.2011 respectively each for Rs. 2,00,000drawn on Axis Bank Ltd., Hyderabad towards part paymentof due amount and assured to pay the balance amount withinGshort time.

7. The complainant presented said cheque bearing No. 929675but the same was returned unpaid due to insufficient fundsin their bank account on 30.05.2011. The complainant H

G. RAMESH v. KANIKE HARISH KUMAR UJWAL & ANR.[DR. DHANANJAYA Y CHANDRACHUD, J.]

informed the accused about the return of cheque and theyassured to honour both cheques on re-presentation in themonth of July 2011. As per their request, the complainantpresented cheques bearing No. 929675 and 929676 int h emonth of July 2011 but both cheques again returned unpaidon 14.07.2011 and 20.07.2011 respectively for insufficientfunds in their bank account. Since then the complainant istried to contact the accused to inform and for the paymentof cheques amount along with entire due amount but th eyhave avoided the complainant.”

In paragraph 8 of the complaint, there is an averment that a noticeof demand was issued within 30 days of the dishonour of the cheque on1 August 2011 in spite of which payment was not made.

5. The complaint was instituted on 19 September 2011 before theSpecial Judicial Magistrate First Class, Mahabubnagar. Non-bailablewarrants were issued against the first respondent as he failed to appearin the proceedings. The warrants were recalled. The first respondentinstituted proceedings under Section 482 of the CrPC. The High Courtquashed the proceedings by its impugned judgment and order.

6. The High Court held that the averments contained in paragraph5 of the complaint were not sufficient to implicate criminal liability uponthe first respondent for an offence punishable under Section 138. It isthis view of the High Court which falls for consideration in the presentappeal.

7. Ms. Bhabhna Das, learned counsel appearing on behalf of theappellant submits that the High Court was manifestly in error in quashingthe complaint. Besides relying on the decision of this Court in GunmalaSales Private Limited v. Anu Mehta and Others[5], learned counselsubmitted that the averments contained in the complaint are sufficient tomeet the requirement of Section 141.

8. On the other hand, Mr. Abhimanyu Bhandari learned counselappearing on behalf of the first respondent submits that under Section141(1), where the person committing an offence is a company, everyperson who, at the time the offence was committed was in charge ofand was responsible to the company for the conduct of the business of 5(2015) 1 SCC 103 (at paragraph 30 and 31)

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Athe company as well as the company shall be deemed to be guilty of theoffence. The submission is that there was no averment in the complaintthat the first respondent was incharge of and was responsible to the“company” for the conduct of the business. The defence of the firstrespondent is that, he resides in Kuwait where he is employed with theNational Bank of Kuwait. Hence, he has no day to day connection withBthe affairs of the partnership firm. In these circumstances, learnedcounsel submitted that the High Court having quashed the complaint,this Court ought not to exercise its jurisdiction under Article 136 tointerfere with the judgment and order of the High Court.

9. Section 141(1) provides as follows:-

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“1.If the person committing an offence under section 138 is acompany, every person who, at the time the offence wascommitted, was in charge of, and was responsible to the companyfor the conduct of the business of the company, as well as thecompany, shall be deemed to be guilty of the offence and shall beDliable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall renderany person liable to punishment if he proves that the offence wascommitted without his knowledge, or that he had exercised alldue diligence to prevent the commission of such offence:

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[Provided further that where a person is nominated as a Directorof a company by virtue of his holding any office or employment inthe Central Government or State Government or a financialcorporation owned or controlled by the Central Government orthe State Government, as the case may be, he shall not be liablefor prosecution under this Chapter.]

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2. Notwithstanding anything contained in sub-section (1), whereany offence under this Act has been committed by a companyand it is proved that the offence has been committed with theconsent or connivance of, or is attributable to, any neglect on thepart of, any director, manager, secretary or other officer of thecompany, such director, manager, secretary or other officer shallalso be deemed to be guilty of that offence and shall be liable tobe proceeded against and punished accordingly.”

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The explanation to the Section is in the following terms:- “Explanation – For the purposes of this section - (a) “company” means any body corporate and includes a firm orother association of individuals; and (b) “director”, in relation to a firm, means a partner in the firm.”

10. In terms of the explanation to Section 141, the expression“company” has been defined to mean any body corporate and to includea firm or other association of individuals. Sub-section (1) of Section 141postulates that where an offence is committed under Section 138 by acompany, the company as well as every person who, at the time whenthe offence was committed, was in charge of and was responsible to thecompany for the conduct of the business shall be deemed to be guilty ofthe offence.

11. In determining as to whether the requirements of the aboveprovision have been fulfilled, it is necessary to bear in mind the principleof law that a partnership is a compendious expression to denote thepartners who comprise of the firm. By the deeming fiction in Explanation (a) the expression company is defined to include a firm.

12. The issue is whether there are sufficient averments in thecomplaint to meet the requirement of Section 141(1). This is a matterwhich has to be determined on a holistic reading of the complaint. Fromthe averments in the complaint, the case of the complainant is that thepartnership firm of which the first respondent is a partner had obtainedcontracts for data entry, which were being sub-contracted to thecomplainant. The accused are alleged to have obtained a caution depositof Rs 1,00,000 and to have assigned the job of data entry to thecomplainant. After completing the job of data entry, the accused issuedtwo cheques dated 1 November 2010 and 18 December 2010 for theamount of Rs 2,00,000 and Rs 2,50,000 respectively. On presentation,the cheques were returned due to insufficiency of funds. It was thereafterthat the first respondent is alleged to have transferred an amount of Rs1,00,000 from his account on 8 February 2011 and 10 February 2011.The complaint contains the statement that the parties are related.Thereafter, two further cheques were issued by the managing partneron 30 May 2011 and 19 July 2011 each in the amount of Rs 2,00,000.

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AAfter the cheques were returned unpaid due to insufficiency of funds,the complainant is alleged to have informed the accused who are statedto have assured him that both the cheques would be honoured on re-presentation in the month of July 2011.

13. The submission is that the above averments are adequate toBmeet the requirements of Section 141 having regard to the fact that thefirst accused is a partnership firm.

14. While laying down the general principles which must apply tothis body of law, a two-Judge Bench of this Court in Gunmala SalesPrivate Limited (supra) held:

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“30. When a petition is filed for quashing the process, in a givencase, on an overall reading of the complaint, the High Court mayfind that the basic averment is sufficient, that it makes out a caseagainst the Director; that there is nothing to suggest that thesubstratum of the allegation against the Director is destroyedrendering the basic averment insufficient and that since offenceis made out against him, his further role can be brought out in thetrial. In another case, the High Court may quash the complaintdespite the basic averment. It may come across someunimpeachable evidence or acceptable circumstances which mayin its opinion lead to a conclusion that the Director could neverhave been in charge of and responsible for the conduct of thebusiness of the company at the relevant time and therefore makinghim stand the trial would be an abuse of process of court as nooffence is made out against him.”

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31. When in view of the basic averment process is issued thecomplaint must proceed against the Directors. But, if any Directorwants the process to be quashed by filing a petition under Section482 of the Code on the ground that only a bald averment is madein the complaint and that he is really not concerned with theissuance of the cheque, he must in order to persuade the HighCourt to quash the process either furnish some sterlingincontrovertible material or acceptable circumstances tosubstantiate his contention. He must make out a case that makinghim stand the trial would be an abuse of process of court. Hecannot get the complaint quashed merely on the ground that apart F

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G. RAMESH v. KANIKE HARISH KUMAR UJWAL & ANR.[DR. DHANANJAYA Y CHANDRACHUD, J.]

from the basic averment no particulars are given in the complaintabout his role, because ordinarily the basic averment would besufficient to send him to trial and it could be argued that his furtherrole could be brought out in the trial. Quashing of a complaint is aserious matter. Complaint cannot be quashed for the asking. Forquashing of a complaint it must be shown that no offence is madeout at all against the Director.”

15. In the present case, it is evident from the relevant paragraphsof the complaint which have been extracted above that the complaintcontains a sufficient description of (i) the nature of the partnership; (ii)the business which was being carried on; (iii) the role of each of theaccused in the conduct of the business and, specifically, in relation to thetransactions which took place with the complainant. At every place inthe averments, the accused have been referred to in the plural sense.Besides this, the specific role of each of them in relation to thetransactions arising out of the contract in question, which ultimately ledto the dishonour of the cheques, has been elucidated.

16. The complaint contains a recital of the fact that the first set ofcheques were returned for insufficiency of funds. It is alleged that thefirst respondent transferred an amount of Rs 1,00,000 on 8 February2011 and 10 February 2011. The complaint also contains an avermentthat after the second set of cheques were dishonoured, the accusedassured the complainant that they will be honoured on re-presentation inthe month of July 2011. The averments are sufficient to meet therequirement of Section 141(1).

17. The High Court proceeded on the basis that the first accusedwas a company in which the other two accused were directors. Section141 undoubtedly uses the expression “company” so as to include a firmor association of persons. The fact that the first accused, in the presentcase, is a partnership firm of which the remaining two accused arepartners has been missed by the High Court.

18. Be that as it may, for the reasons adduced above, we havecome to the conclusion that the High Court was in error in quashing thecriminal case against the first respondent.

19. We accordingly allow the appeal and set aside the impugnedjudgment and order of the High Court dated 13 June 2018.

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[2019] 5 S.C.R.

A20. At this stage, Mr. Abhimanyu Bhandari, learned counsel hassubmitted that the first respondent may be granted an exemption fromappearing before the Trial Court. We leave it open to the first respondentto move an application in that regard before the learned Trial Judgewhich would be considered in accordance with law.

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Devika Gujral

Appeal allowed.

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