advocatemmmohan

My photo

ADVOCATEMMMOHAN -  Practicing both IN CIVIL, CRIMINAL AND FAMILY LAWS,Etc.,

WELCOME TO LEGAL WORLD

WELCOME TO MY LEGAL WORLD - FOR KNOWLEDGE IN LAW & FOR LEGAL OPINIONS - SHARE THIS

Tuesday, March 22, 2016

Cheque was issued from the personal account - company holds no liability for cheque bounce = the cheque which had been dishonoured may have been issued by the Respondent No.11 for discharging the dues of the Appellant No.1 Company and its Directors to the Respondent No.1 Company and the Respondent Company may have a good case against the Appellant No.1 Company for recovery of its dues before other fora, but it would not be sufficient to attract the provisions of Section 138 of the 1881 Act. The Appellant Company and its Directors cannot be made liable under Section 138 of the 1881 Act for a default committed by the Respondent No.11. An action in respect of a criminal or a quasi-criminal provision has to be strictly construed in keeping with the provisions alleged to have been violated. The proceedings in such matters are in personam and cannot be used to foist an offence on some other person, who under the statute was not liable for the commission of such offence.

                                   REPORTABLE

               IN THE SUPREME COURT OF INDIA

              CRIMINAL APPELLATE JURISDICTION

            CRIMINAL APPEAL NO. 1357 OF 2010
     (@ SPECIAL LEAVE PETITION(CRL) No.1361 of 2007)


P.J. Agro Tech Limited & Ors.                 ... Appellants

             Vs.

Water Base Limited                             ... Respondent



                     J U D G M E N T



ALTAMAS KABIR, J.



1.     Leave granted.


2.     The   Appellant   No.1   herein   is   an   agro-based

company having varied interests in providing feed

supplements, vaccines etc.        The Appellant Nos.2 and
                                                                         2


3 are the Managing Director and Chairperson of the

Appellant No.1 Company, which is based in Hyderabad

in    the    State   of        Andhra    Pradesh.         In    order    to

utilize the dealer network of the Appellant No.1

Company, the Respondent No.1 Company approached the

Appellants         for         distribution        of      prawn       feed

manufactured by it.              Inasmuch as, the said venture

did    not    turn       out     to   be    very       successful,       the

Appellant         No.1     Company         took    a      decision        to

discontinue its dealings with the Respondent No.1

Company. In furtherance of the above, the Appellant

Company      settled      all      its     outstandings         with     the

Respondent         No.1        Company      and        also     gave      an

authorization letter to the Respondent No.1 Company

to    collect      all     other        dues     directly       from    the

customers of the Appellant No.1 Company, who had

bought      the   feed    but     were     yet    to    pay    the     price

therefor.          The     concerned           customers       were     also

informed about the aforesaid decision. Thereafter,
                                                          3


on   4th   October,   2001,       the   Appellant    Company

requested the Respondent No.1 Company to coordinate

with one K. Balashankar Reddy, the then General

Manager at Nellore, for collecting the dues which

were still outstanding.          From the contents of the

said letter it appears that the Respondent Company

had accepted the said offer. However, in the course

of making collections from the customers directly,

it   was   found   that   some    of    its   employees   had

conspired with the said K. Balashankar Reddy and

had misappropriated some amounts of money and the

same was intimated by the Respondent No.1 Company

to the Appellant Company which asked the former to

take action against the said Balashankar Reddy and

its concerned employees.


3.     Subsequently, however, the Appellant and the

Proforma Respondents received a notice dated 13th

December, 2002, from the Respondent No.1 Company

purporting to be a notice under Section 138 of the
                                                                    4


Negotiable        Instruments          Act,    1881,      hereinafter

referred    to     as      "the     1881    Act",   wherein    it   was

stated that a cheque issued by K. Balashankar Reddy

on 25th November, 2002, drawn on the State Bank of

Hyderabad,       Nellore          Branch,     had    been     returned

dishonoured with the endorsement "Account closed".

The notice also demanded repayment of the cheque

amount from the Appellants.


4.     On receiving the said notice, the Appellants

replied to the same on 26th December, 2002, stating

that they never had any account with the State Bank

of Hyderabad and the cheque in question had not

been     issued       by      the     Appellant      No.1     Company.

Apparently, there was no response to the reply sent

on     behalf    of     the       Appellants       and   instead    the

Appellants were served with summons from the Court

of     XVIIIth     Metropolitan            Magistrate,       Saidapet,

Chennai, in Complaint Case No.1142 of 2003 based on

the     complaint       which        had    been     filed    by    the
                                                               5


Respondent      No.1      on   23rd   January,        2003.   The

Appellants     entered     appearance    in     the    aforesaid

complaint case and upon obtaining copies of the

complaint, they were surprised to learn that the

same had been filed against the Appellants on the

basis of a personal cheque issued by the Accused

No.11,    K.   Balashankar      Reddy,   from    out     of   his

personal savings bank account.              The said summons

was challenged by the Appellants and the Proforma

Respondents before the High Court on the ground

that the Company did not have any account with the

State Bank of Hyderabad and that the cheque had

been issued by K. Balashankar Reddy (Accused No.11)

from out of his personal savings bank account and

that   none    of   the   Directors   had   signed      the   said

cheque.    It was contended that the complaint was an

abuse of the process of Court and had been filed

with the sole motive of extracting money from the

Appellants.     On 14th September, 2006, the High Court
                                                                     6


dismissed the said petition holding that the cheque

which had been issued by K. Balashankar Reddy was

to meet the liability of the Appellant No.1 Company

and its Directors on their request and that as a

result     they    had     rightly     been      prosecuted       under

Section 138 of the 1881 Act.               The said order of the

High Court dismissing the Appellants' petition has

been challenged in the instant Appeal essentially

on the ground that the High Court had erred in

allowing     the       complaint     proceedings        to    continue

although the same were not maintainable against the

Appellants and the Proforma Respondents who were

not the drawers of the cheque, nor was the cheque

issued from any of their banks.


5.   Appearing for the Appellants, Mr.                       Siddharth

Dave,    learned       Advocate,     submitted     that       both   the

learned Magistrate as well as the High Court had

failed to consider in their proper perspective the

provisions        of    Section      138    of    the        Negotiable
                                                        7


Instruments Act, 1881.       It was pointed out by Mr.

Dave that in order to attract the provisions of

Section 138 of the 1881 Act, it was necessary that

a cheque would have to be drawn by a person on an

account maintained by him with his banker and if

the said cheque was dishonoured, it would be deemed

that   such   person   had   committed   an   offence   and

would, without prejudice to any other provision of

the Act, be punished with imprisonment for a term

which may be extended to two years or with fine

which may extend to twice the amount of the cheque

or with both.      Mr. Dave urged that in order to

maintain an action against a person under Section

138 of the 1881 Act, it would be necessary to show

that the cheque had been issued by such person on

an account maintained by him, which fact was absent

in the instant case as far as the Appellants are

concerned.     It was reiterated that the cheque in

question had been drawn by the Respondent No.11 in
                                                                 8


his     personal     capacity      on    his     bank    and    upon

dishonour      thereof,     only   he    could     be    prosecuted

under Section 138 of the 1881 Act.                It was further

submitted that the proceedings against the Company

and its Directors were not maintainable and the

High Court had erred in law in not quashing the

same.


6.    The stand taken on behalf of the Appellants was

vehemently opposed on behalf of the Respondent No.1

Company and a spirited attempt was made to involve

the Appellant No.1 Company and its Directors for

dishonour of the cheque which had been issued by

the Respondent No.11 from his own bank, which did

not attract the provisions of Section 138 of the

1881 Act against the Appellant No.1 Company and its

Directors.      It was urged that since the cheque had

been issued by the Respondent No.11 to liquidate

the     dues    of   the     Appellant         Company    and    its

Directors,     the   High    Court      had    quite    justifiably
                                                            9


refused     to    quash   the    complaint    filed    by   the

Respondent No.1 Company.


7.   From   the    submissions    made   on   behalf   of   the

respective parties, it is quite apparent that the

short point for decision in this Appeal is whether

a complaint under Section 138 of the 1881 Act would

be maintainable against a person who was not the

drawer of the cheque from an account maintained by

him, which ultimately came to be dishonoured on

presentation.


8.   Since the provisions of Section 138 of the 1881

Act have fallen for consideration in this Appeal,

the same are extracted hereinbelow :-


     "138.    Dishonour     of    cheque    for
     insufficiency, etc., of funds in the
     account - Where any cheque drawn by a
     person 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 the discharge, in whole or in
     part, of any debt or other liability, is
     returned   by  the  bank   unpaid,  either
                                              10


because of the amount of money standing to
the credit of that account is insufficient
to honour the cheque or that it exceeds
the amount arranged to be paid from that
account by an agreement made with that
bank, such person shall be deemed to have
committed an offence and shall, without
prejudice to any other provisions of this
Act, be punished with imprisonment for a
term which may be extended to two years,
or with fine which may extend to twice the
amount of the cheque, or with both:

      Provided that nothing contained     in
this section shall apply unless-

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

(b) the payee or the holder in due course
    of the cheque, as the case may be,
    makes a demand for the payment of the
    said amount of money by giving a
    notice in writing, to the drawer of
    the cheque, within thirty days of the
    receipt of information by him from the
    bank regarding the return of the
    cheque as unpaid; and

(c)   the drawer of such cheque fails to
      make the payment of the said amount of
      money to the payee or, as the case may
      be, to the holder in due course of the
      cheque, within fifteen days of the
      receipt of the said notice.
                                                        11



     Explanation.-For the purposes of this
     section, "debt or other liability" means a
     legally   enforceable   debt    or   other
     liability."


     From a reading of the said Section, it is very

clear   that   in   order   to   attract   the   provisions

thereof a cheque which is dishonoured will have to

be drawn by a person on an account maintained by

him with the banker for payment of any amount of

money to another person from out of that account

for the discharge, in whole or in part of any debt

or other liability.     It is only such a cheque which

is dishonoured which would attract the provisions

of Section 138 of the above Act against the drawer

of the cheque.


9.   In the instant case, the cheque which had been

dishonoured may have been issued by the Respondent

No.11 for discharging the dues of the Appellant

No.1 Company and its Directors to the Respondent
                                                              12


No.1 Company and the Respondent Company may have a

good case against the Appellant No.1 Company for

recovery   of    its   dues    before   other   fora,   but    it

would not be sufficient to attract the provisions

of Section 138 of the 1881 Act.                 The Appellant

Company and its Directors cannot be made liable

under Section 138 of the 1881 Act for a default

committed by the Respondent No.11.               An action in

respect of a criminal or a quasi-criminal provision

has to be strictly construed in keeping with the

provisions      alleged   to    have    been    violated.     The

proceedings in such matters are in personam and

cannot be used to foist an offence on some other

person, who under the statute was not liable for

the commission of such offence.


10. Having regard to the above, we allow the Appeal

and set aside the order passed by the High Court

and quash the complaint filed by the Respondent

No.1 Company as far as the Appellants and other
                                                                                     13


Proforma Respondents are concerned. In the event,

any of the Appellants and/or Proforma Respondents

have   been   released   on   bail,       they            shall               stand

discharged from their bail bonds forthwith.


11. The Appeal is allowed to the aforesaid extent.




                                          ................................................J.
                                                   (ALTAMAS KABIR)



                                     ................................................J.
                                 (DR.MUKUNDAKAM SHARMA)
New Delhi



Dated: 28.7.2010

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.