IN THE HIGH COURT OF DELHI AT NEW DELHI. SUBJECT : Negotiable Instruments Act. Judgement reserved on: January 07, 2009
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1 (1) Crl.M.C. No. 3011/2008 IN THE HIGH COURT OF DELHI AT NEW DELHI SUBJECT : Negotiable Instruments Act Judgement reserved on: January 07, 2009 Judgement delivered on: January 13, 2009 (2) Crl.M.C. No. 3012/2008 (3) Crl.M.C. No. 3013/2008
2 (4) Crl.M.C. No. 3014/2008 (5) Crl.M.C. No. 3015/2008 (6) Crl.M.C. No. 3016/2008
3 SUNIL GAUR, J. 1. The above titled six petitions pertain to six criminal complaints filed under Section 138 of the Negotiable Instruments Act read with Section 420 of the Indian Penal Code regarding dishonour of cheques (Rs.55,000/- in Crl. Complaint Case No.1797/03, Rs.55,000/- in Crl. Complaint case No.6050/1, Rs.47,500/- in Crl.Complaint case No.1799/1/03, Rs.95,000/- in Crl.Complaint case No.6102/1/04, Rs.37,500/- in Crl. Complaint Case No.1798/1/03 and Rs.55,000/- in Crl. Complaint Case No.6103/1/04) and the aforesaid cheques were issued on behalf of M/s Kedia Distilleries Limited towards discharge of their rental liability. Aforesaid cheques, on presentation, were dishonoured, which led to filing of the aforesaid criminal complaints through attorney Shri S.K. Pahwa. Petitioner has been summoned by the trial court vide order dated 6th August, 1998 (impugned in Crl.M.C.No.3011,3013 and 3015) and vide order dated 3rd September, 2008 (impugned in Crl.M.C.No.3012,3014 and 3016) in the aforesaid five criminal complaints as an accused, in the capacity of the Vice Chairman of the above said company. 2. Aforesaid summoning order has been assailed by the petitioner in these six petitions, which have been heard together and are being disposed of together by this common order. 3. On behalf of the petitioner, it has been contended that the petitioner was neither Director nor Manager nor Principal Officer of M/s Kedia Distilleries, (hereinafter referred to as accused-company) and vicarious liability cannot be fastened upon the petitioner with the mere allegation that the petitioner was the Vice Chairman of the accused company, as there is nothing on record to show that petitioner was In-charge and responsible for day to day affairs of the accused company. It is pointed out that the petitioner was neither the signatory to the alleged dishonoured cheques or the rental agreement signed between the accused company and the complainants. Reliance has been placed upon judgments reported in (2005) 4 Supreme Court Cases 417; 149 (2008) Delhi Law Times 591; 2008 VIII AD (DELHI) 693; AIR 2008 Supreme Court 247; 151 (2008) Delhi Law Times 333 and (2005) 8 SCC 89 to contend that the Director in a company cannot be deemed to be In-charge of and responsible to the company for the conduct of its business. Reliance is also placed upon a decision of this Court reported in 125 (2005) Delhi Law Times 109 wherein it has been held that the Company Act does not make a Chairman responsible for the conduct of the day to day business of the Company and it cannot be inferred that a person has consented or connived in the commission of offence, simply because of the fact he is the Chairman of the Company. 4. It has also been urged on behalf of the petitioner that the complaint under challenge has been filed on the basis of second notice of demand, without preferring the complaint on the first notice and thus the criminal complaints in question are time barred. Lastly, it is contended on behalf of the petitioner that he being the Vice Chairman of the accused company, cannot be deemed to be responsible for the day to day conduct of the
4 business of the accused company and petitioner has been illegally summoned and, therefore, the impugned order deserves to be set aside. 5. On behalf of the respondent, it has been urged that the question of second notice, of limitation and of the Vice Chairman of the accused company being responsible for the conduct/business of the company are questions which pertain to the realm of evidence and cannot be the basis for throwing out the case of the complainant at its threshold. It is pointed out that the first notice did not pertain to the cheques in question and is, therefore, of no consequence. As regards the Director, Chairman or Vice Chairman of the Company falling within the ambit of Section 141 of the Negotiable Instruments Act, reliance has been placed upon judgments reported in 2007 (2) JCC (NI) 205 and 2002 Crl.L.J Thus, it is submitted that the averments made in the complaint regarding petitioner being In-charge and responsible for day to day affairs of the accused- company in the capacity of the Vice Chairman of the accused-company is sufficient to summon the petitioner as an accused and there is no illegality or infirmity in the impugned order. 6. The dictum of the Apex Court in case of M/s M.M.T.C. Ltd and another V. M/s Medchl Chemicals and Pharma (P) Ltd and another reported in 2001 IX AD (SC) 457, is as under:- Inherent power of quashing criminal proceedings should be exercised very stringently and with circumspection. Court exercising inherent powers is not justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the complaint. The inherent powers do not confer an arbitrary jurisdiction on the Court to act according to its whim or caprice. At this stage the Court could not have gone into merits and/or come to a conclusion that there was no existing debt or liability and quash complaint. It is not necessary to allege specifically in the complaint that there was a subsisting liability and enforceable debt and to discharge the same, the cheques were issued. There is, therefore, no requirement that the complaint must specifically allege in the complaint that there was a subsisting liability. The burden of proving that there was no existing debt or liability was on the respondent. This they have to discharge in the trial. At this stage, merely on the basis of averments in the Petitions filed by them, the High Court could not have concluded that there was no existing debt or liability. 7. In the light of the aforesaid, I proceed to deal with the contentions raised in these petitions. 8. Whether the first notice pertains to the cheques in question, is a fact which is required to be established at trial and the question of limitation is also dependent upon it. These are the aspect which cannot be gone into at this stage and are required to be determined at trial. However, the question of Vice Chairman/Director of the accused company falling within the parameters of Section 141 of the N.I.Act stands determined by the Apex Court in its recent decision in case of N. Rangachari V Bharat Sanchar Nigam Limited reported in 2007 (2) JCC (NI) 205 while taking into consideration its earlier decision in the case of S.M.S. Pharmaceuticals Ltd Vs Neeta Bhalla and another reported in (2005) 8 SCC 89 and the latest view of the Apex Court in N. Rangacharis case (Supra) reads as under:- A person normally having business or commercial dealings
5 with a company, would satisfy himself about its credit-worthiness 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 of 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 is expected only to be aware generally of who are incharge of the affairs of the company. It is not reasonable to expect him to know whether the person who signed 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 peculiarly within the knowledge of the company and those in charge of it. So, all that 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 prima facie in that position 9. In the above said case, the averments of dishonoured cheques being issued by the company and the accused being the Director of the said Company and being In- charge of the affairs of the company was found to be sufficient and it was observed that it is not proper to split hairs in reading the complaint so as to come to a conclusion that the allegations as a whole are not sufficient to show that at the relevant point of time, the accused were not the alleged to be persons In-charge of the affairs of the company and too technical an approach is not warranted in the context of the purpose sought to be achieved by the introduction of Section 138 and 141 of the Negotiable Instruments Act. 10. In the decisions relied upon by the petitioner, N. Rangacharis case (supra) has not been considered and, therefore, in my view, aforesaid decisions, on which reliance has been placed by the petitioner are of no avail. A Single Bench decision of this Court in case of P.S. Shrinivasan and others V. M/s VLS Finance Ltd (Crl.M.C.No of 2006 decided by Dr. S. Murlidhar, J on 28th March, 2008), necessary averments were lacking and so decision rendered in the case of N. Rangachari (supra) by the Apex Court did not stand in the way of the accused to get the relief. It is not so in the instant case where the necessary averments are there but the words at the time of the commission of the offence are not there, which to my mind, are of consequential nature and are not sufficient to throw out the entire complaint of the complainant/respondent. 11. Apart from the above discussion, one distinguishing feature is there in the instant case which refrains this Court from interfering with the impugned order and that is, present complaint is not only under Section 138 of the Negotiable Instruments Act but is also for the offence under Section 420 of the Indian Penal Code. Furthermore, it is open to the petitioner to show before the trial court if there was any restriction on his power which would not make him liable and if there was existence of any special circumstance peculiarly in his knowledge which could establish at trial that at the relevant time, he was not the In-charge of the affairs of the company. 12. In view of the foregoing narration, no case for interfering with the impugned order by this Court while exercising extraordinary inherent jurisdiction is made out. Hence, these six petitions are dismissed with the observation that anything stated herein shall have no bearing on merits at trial.
6 13. Resultantly, these six petitions stand disposed of accordingly. January 13, 2009 Sd./- SUNIL GAUR, J.
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