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Thursday, September 24, 2015

N.I.Act Sec.138 and sec.141 - Main person who received goods not made as a party and No notice was given but notice was given to the Sister Concern without any proper pleadings that the liability to discharge the debt was taken over by sister concern and issued cheques for those debts - It is not the specific case of the applicant made out in the complaint that the first accused in his capacity of proprietor of Shah Enterprises and the second accused in his capacity of power of attorney of Shah Enterprises had agreed to take over and discharge the liability of M/s. Shah Agency. Reliance is placed by the applicant on the letter at Exh.P-5. Apart from the fact that the said letter is no evidence to show that the liability of Shah Agency was taken over by Shah Enterprises, as stated earlier, the said case was never made out by the applicant in the complaint. The said case made out in the complaint is that the liability is of M/s. Shah Enterprises and not of M/s. Shah Agencies. The letter dated 7th December 2000 at Exh. P-5 is not signed by accused No.1 who according to the applicant is the proprietor or partner of Shah Enterprises. The letter has been sent by accused No.2 in his capacity as constituted attorney of Shah Agencies. Therefore, the letter cannot be termed as a document under which the liability of Shah Agencies was specifically agreed to be taken over by the Shah Enterprises or by the accused Nos.1 and 2.”“The notice under Section 138 is required to be given to the ‘drawer’ of the cheque so as to give the drawer an opportunity to make the payment and escape the penal consequences. No other person is contemplated by Section 138 as being entitled to be issued such notice. The plain language of Section 138 is very clear and leaves no room for any doubt or ambiguity. There is nothing in Section 138 which may even remotely suggest the issuance of notice to anyone other than the drawer.”“Normally an offence can be committed by human beings who are natural persons. Such offence can be tried according to the procedure established by law. But there are offences which could be attributed to juristic person also. If the drawer of a cheque happens to be a juristic person like a body corporate it can be prosecuted for the offence under Section 138 of the Act. Now there is no scope for doubt regarding that aspect in view of the clear language employed in Section 141 of the Act. In the expanded ambit of the word ‘company’ even firms or any other associations of persons are included and as a necessary adjunct thereof a partner of the firm is treated as director of that company.” “Thus when the drawer of the cheque who falls within the ambit of Section 138 of the Act is a human being or a body corporate or even firm, prosecution proceedings can be initiated against such drawer. In this context the phrase ‘as well as’ used in Sub-section (1) of Section 141 of the Act has some importance. The said phrase would embroil the persons mentioned in the first category within the tentacles of the offence on a par with the offending company. Similarly the words ‘shall also’ in Sub- section (2) are capable of bringing the third category persons additionally within the dragnet of the offence on an equal par. The effect of reading Section 141 is that when the company is the drawer of the cheque such company is the principal offender under Section 138 of the Act and the remaining persons are made offenders by virtue of the legal fiction created by the legislature as per the section. Hence the actual offence should have been committed by the company, and then alone the other two categories of persons can also become liable for the offence.” In our opinion, the High Court has correctly come to the conclusion that the liabilities of M/s. Shah Agencies were never taken over by M/s. Shah Enterprises. Therefore, the reasoning given by the High Court, in our opinion, is absolutely flawless and we find no ground to interfere with the concurrent findings of the Trial Court and the High Court. Therefore, the present appeal is devoid of any merit. Accordingly, this appeal is dismissed.

                                                              NON REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                       CRIMINAL APPELLATE JURISDICTION

                       CRIMINAL APPEAL NO.1001 OF 2010

JITENDRA VORA                                        …APPELLANT

                                   VERSUS

BHAVANA Y. SHAH & ANR.                        …RESPONDENTS





                                  JUDGMENT

Pinaki Chandra Ghose, J.

This appeal is directed against the judgment  and  order  dated  1st  April,
2009  passed  by  the  High  Court  of  Judicature  at  Bombay  in  Criminal
Application No.940 of 2008 whereby the High Court has  rejected  the  prayer
for  leave  to  appeal  against   the   judgment   of   the   Trial   Court.


The brief facts  of  this  case  are  as  follows:
The  appellant  supplied goods      to        M/s.     Shah    Agencies.  
 The    1st    and     2nd  respondents   carried   their
business in the names of M/s. Shah Enterprises and M/s.  Shah  Agencies.  In
part discharge of the liability of M/s. Shah Agencies, two cheques  for  Rs.
5 lakhs each, both dated 20th August, 2000, drawn on the  Vysya  Bank  Ltd.,
S.P. Road, Secunderabad, signed by Respondent  No.2  as  Power  of  Attorney
Holder of Respondent No.1, were issued on  an  account  maintained  by  M/s.
Shah Enterprises.



On presentation, both the  cheques  were  dishonoured  due  to  insufficient
balance in the account of M/s. Shah Enterprises. A demand notice  dated  8th
March, 2001 was served upon respondent Nos.1 & 2 which was duly received  by
them on 13th March, 2001. The respondents failed  and  neglected  to  comply
with the said notice of demand. Hence, a complaint  was  lodged  before  the
Metropolitan Magistrate, 28th Court, Esplanade, Mumbai. The  said  complaint
was numbered as CC No.505/S/01 dated 17th April, 2001.  The  said  complaint
was lodged against the accused respondents describing accused  No.1  as  the
Proprietor of M/s. Shah Enterprises and accused No.2  as  Power of  Attorney
Holder of the said M/s. Shah Enterprises.  The  Trial  Court  acquitted  the
respondents on the ground that the appellant  did  not  institute  the  case
against the partnership firm i.e. M/s. Shah Enterprises.



Being aggrieved by the said order passed  by  the  Metropolitan  Magistrate,
the appellant filed an application for leave  to  appeal  under  sub-section
(4) of Section 378 of the Code  of  Criminal  Procedure,  1973,  before  the
Bombay High Court.  The High Court by its order dated April  1,  2009   held
that the applicant has not made out a case for  grant  of  leave  to  appeal
under Section 378(4) Cr.P.C. and rejected the said application for leave  to
appeal. The High Court held that the case made  out  in  the  complaint  was
that the goods were sold and supplied  to  M/s.  Shah  Enterprises  and  the
liability was of M/s. Shah Enterprises. While in the affidavit  in  lieu  of
examination-in-chief, the appellant herein came out with  a  case  that  the
liability was that of M/s. Shah Agencies as goods were sold and supplied  to
M/s. Shah Agencies and it was  not  the  case  of  the  appellant  that  the
accused had agreed to take over and discharge the liabilities of  M/s.  Shah
Agencies.



The question which arose before us is whether the High Court was correct  in
coming to such a conclusion. The High  Court  duly  perused  the  complaint,
affidavit in lieu of  examination-in-chief  of  the  applicant,  his  cross-
examination and other material documents on record. From these documents  it
appears that notice of demand had been addressed to the first respondent  in
her capacity as a Proprietor of M/s. Shah Enterprises,  and  to  the  second
respondent in his capacity as the Power of  Attorney  Holder  of  M/s.  Shah
Enterprises.  In the notice itself it has been stated that  the  goods  were
sold and supplied to the Proprietor of M/s. Shah Agencies. In the notice  it
has been further stated  that  the  appellant  is  engaged  in  business  of
manufacturing and selling of synthetic Polymers/Resins and  in  response  to
the orders from the 2nd respondent  as  Proprietor  of  Shah  Agencies,  the
applicant has supplied goods from time to  time  and  the  disputed  cheques
were issued in discharge of the liabilities of such supply.  The notice  was
addressed to the Proprietor  and  the  constituted  Attorney  of  M/s.  Shah
Enterprises, but there is no specific averment that the  liability  of  M/s.
Shah Agencies was taken over by M/s. Shah Enterprises.   In  the  complaint,
the first respondent was impleaded as Proprietor of  M/s.  Shah  Enterprises
and the second respondent was impleaded as a Power  of  Attorney  Holder  of
M/s. Shah Enterprises.



After perusing the notice and the averments made in the  complaint  and  the
examination-in-chief, the High Court found that the case  made  out  by  the
appellant/applicant in the aforesaid affidavit is that accused No.1 was  one
of the partners of M/s. Shah Enterprises. It is not  asserted  that  accused
No.2 is the partner of the said firm but what  is  stated  is  that  accused
No.2 is the husband of accused No.1 and Power of  Attorney  Holder  of  M/s.
Shah Enterprises. After perusing the aforesaid facts, the  High  Court  came
to the conclusion as follows:



“It is not the specific case of the applicant  made  out  in  the  complaint
that the first accused in his capacity of  proprietor  of  Shah  Enterprises
and the second accused in  his  capacity  of   power  of  attorney  of  Shah
Enterprises had agreed to take over and  discharge  the  liability  of  M/s.
Shah Agency. Reliance is placed by the applicant on the letter  at  Exh.P-5.
Apart from the fact that the said letter is no evidence  to  show  that  the
liability of Shah Agency was taken over  by  Shah  Enterprises,   as  stated
earlier, the  said  case  was  never  made  out  by  the  applicant  in  the
complaint. The said case made out in the complaint is that the liability  is
of M/s. Shah Enterprises and not of M/s. Shah  Agencies.  The  letter  dated
7th December 2000 at Exh. P-5 is not signed by accused  No.1  who  according
to the applicant is the proprietor  or  partner  of  Shah  Enterprises.  The
letter has been  sent  by  accused  No.2  in  his  capacity  as  constituted
attorney of Shah Agencies. Therefore, the  letter  cannot  be  termed  as  a
document under which the liability of Shah Agencies was specifically  agreed
to be taken over by the Shah Enterprises or by the  accused  Nos.1  and  2.”




In these circumstances, the High Court held that no case  is  made  out  for
grant of leave and rejected the application.



Learned counsel appearing on behalf of the  appellant  contended  before  us
that both the Courts below have failed to appreciate that the complaint  was
essentially filed against the accused in their personal capacities since  at
the time of filing of the complaint, the appellant believed that  M/s.  Shah
Enterprises was  a  proprietary  concern  of  respondent  No.1.  He  further
contended that respondent No.2 was a signatory of the  cheques  and  he  was
incharge of the affairs of M/s. Shah Enterprises. According to  the  learned
counsel, both the Courts adopted highly technical view of the matter. It  is
not in dispute that the cheques were drawn from the account maintained  with
M/s. Shah Enterprises.  When this Court asked the learned  counsel  for  the
appellant whether there is any liability of M/s. Shah Agency,  then  it  was
submitted that the cheques were drawn  by  M/s.  Shah  Enterprises  but  the
liability, as would be evident from the  examination-in-chief,  is  that  of
M/s. Shah Agency. Learned counsel further submitted that Section 141 of  the
Negotiable Instruments Act, 1881 (hereinafter referred to as ‘the  NI  Act’)
has no application because the  partnership  firm  was  not  arrayed  as  an
accused. He further  submitted  that  respondent  No.2  is  liable  being  a
signatory of both the cheques and he was incharge of M/s. Shah  Enterprises.




On the contrary, it is submitted by the learned counsel appearing on  behalf
of the respondents that both the Trial Court  as  well  as  the  High  Court
rightly came to the conclusion  that  the  complaint  was  not  maintainable
against the partnership firm since cheques were  issued  on  behalf  of  the
first respondent. Furthermore M/s. Shah  Enterprises  was  never  given  any
statutory notice nor it was arrayed as an accused  before  the  Metropolitan
Magistrate. He further submitted that a three Judge Bench of this  Court  in
the case of Aneetha Hada vs. Godfather Travel and Tours Pvt. Ltd., (2012)  5
SCC 661, held that for maintaining the prosecution under  the  NI  Act,  the
company should be made a party irrespective of the fact  that  its  Director
has been arrayed  as  an  accused.   Learned  counsel  for  the  respondents
further submitted that this appeal should be dismissed  since  the  material
facts have been suppressed from the Court. The appellant ceased  to  be  the
Proprietor of M/s.  Satyen  Polymer  as  per  the  deed  of  assignment  cum
conveyance dated 3.4.2008. The said fact was  deliberately  suppressed  from
the High Court as well as from the Trial Court. The appellant did  not  make
M/s. Shah Enterprises as a party on whose  account  the  cheque  was  drawn.
Furthermore, M/s. Shah  Enterprises  had  no  outstanding  liabilities.  The
complainant himself admitted in his cross-examination that nothing was  sold
to Shah Enterprises  and  at  no  point  of  time  Shah  Agencies  has  been
prosecuted. The appellant further admits that he has no  account  with  Shah
Enterprises and  he  has   running  account  with  Shah  Agencies.  He  also
admitted  that  the  transactions  and  dealings  with  Shah  Agencies   are
reflected  in  the  books  of  accounts.   He  further  admitted  that  Shah
Enterprises is not liable to pay any amount M/s. Satyen Polymers, and  there
were  no  transactions  with  Shah  Enterprises.  Learned  counsel  for  the
respondents submitted that in these circumstances,  this  appeal  should  be
dismissed.



We have heard the learned counsel appearing for  the  parties  and  we  have
perused the evidence placed before us.  From a bare reading of  Section  138
of the NI Act, the first and foremost essential ingredient for attracting  a
liability under this Section is that the person who is  to  be  made  liable
should be the drawer of the cheque and should have drawn the  cheque  on  an
account maintained by him with a banker for payment of any amount  of  money
to another person from out of that account for discharge, in whole or  part,
of any debt or other liability. In this context, this Court in the  case  of
Krishna Texport and Capital Markets Ltd. v. Ila A. Agrawal & Ors, (AIR  2015
SC 2091), has held as under-



“The notice under Section 138 is required to be given  to  the  ‘drawer’  of
the cheque so as to give the drawer an opportunity to make the  payment  and
escape the penal consequences. No other person is  contemplated  by  Section
138 as being entitled to be  issued  such  notice.  The  plain  language  of
Section 138 is very clear and leaves no room for  any  doubt  or  ambiguity.
There is nothing  in  Section  138  which  may  even  remotely  suggest  the
issuance of notice to anyone other than the drawer.”



The learned counsel for the respondents has relied upon  the  case  of  Anil
Hada v. Indian Acrylic Ltd., (2000) 1 SCC 1, wherein this Court held –


“Normally an offence can be  committed  by  human  beings  who  are  natural
persons. Such offence can be tried according to  the  procedure  established
by law. But there are offences which could be attributed to juristic  person
also. If the drawer of a cheque happens to be a juristic person like a  body
corporate it can be prosecuted for  the  offence  under Section  138 of  the
Act. Now there is no scope for doubt regarding that aspect in  view  of  the
clear language employed in Section 141 of the Act. In the expanded ambit  of
the word ‘company’ even firms or  any  other  associations  of  persons  are
included and as a necessary  adjunct  thereof  a  partner  of  the  firm  is
treated as director of that company.”


(Emphasis supplied)


“Thus when the drawer of the cheque who falls within the  ambit  of  Section
138 of the Act  is  a  human  being  or  a  body  corporate  or  even  firm,
prosecution proceedings can  be  initiated  against  such  drawer.  In  this
context the phrase ‘as well as’ used in Sub-section (1) of  Section  141  of
the Act has some importance. The  said  phrase  would  embroil  the  persons
mentioned in the first category within the tentacles of  the  offence  on  a
par with the offending company. Similarly the words  ‘shall  also’  in  Sub-
section (2) are capable of bringing the third category persons  additionally
within the dragnet of the offence on an equal par.  The  effect  of  reading
Section 141 is that when the company  is  the  drawer  of  the  cheque  such
company is the principal offender under  Section  138 of  the  Act  and  the
remaining persons are made offenders by virtue of the legal fiction  created
by the legislature as per the section. Hence the actual offence should  have
been committed by the company, and then alone the other  two  categories  of
persons can also become liable for the offence.”





In our opinion, the High Court has correctly come  to  the  conclusion  that
the liabilities of M/s. Shah Agencies were never taken  over  by  M/s.  Shah
Enterprises. Therefore, the reasoning  given  by  the  High  Court,  in  our
opinion, is absolutely flawless and we find no ground to interfere with  the
concurrent findings of the Trial Court and the High  Court.  Therefore,  the
present  appeal  is  devoid  of  any  merit.  Accordingly,  this  appeal  is
dismissed.

                                                              …..……………………….J
                                                      (Pinkai Chandra Ghose)



                                                              …..……………………..J
                                (R.K. Agrawal)
New Delhi;
September 16, 2015

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