published in http://judis.nic.in/supremecourt/filename=40479
Page 1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL No. 813 OF 2013
(Arising out of S.L.P. (Crl.) No. 9794 of 2010)
Mrs. Aparna A. Shah .... Appellant(s)
Versus
M/s Sheth Developers Pvt. Ltd. & Anr. .... Respondent(s)
J U D G M E N T
P.Sathasivam,J.
1) Leave granted.
2) This appeal is directed against the final judgment and
order dated 24.09.2010 passed by the High Court of
Judicature at Bombay in Criminal Writ Petition No. 1823 of
2010 whereby the High Court partly allowed the petition filed
by the appellant herein.
3) Brief facts:
a) M/s Sheth Developers Private Ltd.-the respondent
herein is a company incorporated under the provisions of the
1Page 2
Companies Act, 1956 having its registered office at 11, Vora
Palace, M.G. Road, Kandivali (West), Mumbai and is engaged
in the business of land development and constructions.
Aparna A. Shah (the appellant herein) and Ashish Shah, her
husband, are the Land Aggregators and Developers who
have been in the said business for the last 15 years and are
the owners of certain lands in and around Panvel.
b) According to the appellant, in January 2008, since the
Company was interested in developing a Township Project
and a Special Economic Zone (SEZ) project in and around
Panvel, Dist. Raigad, Maharashtra, one Virender Gala of
Mahavir Estate Agency - the Broker, introduced them to the
appellant herein and her husband as the land owners holding
huge land in Panvel. The appellant represented to the
Company that the said land was ideal for the development of
a Township Project and a Special Economic Zone (SEZ) and
also that they have no financial means and capacity to
develop the same single handedly. It was further
represented that they were also looking for a suitable person,
interested in developing the said land jointly with them.
2Page 3
(c) On believing the above said representations, the
respondent-Company agreed for the development of the said
land jointly with the appellant herein and her husband.
When the respondent-Company requested for inspection of
the title documents in respect of the said land, the appellant
and her husband agreed for the same upon the entrustment
of a token amount of Rs. 25 crores with an understanding
between the parties that the said amount would be returned
if the project is not materialize. Agreeing the same, the
respondent-Company issued a cheque of Rs. 25 crores in
favour of the appellant herein and her husband. However, for
various reasons, the proposed joint venture did not
materialize and it was claimed by the appellant herein that
the whole amount of Rs. 25 crores was spent in order to
meet the requirements of the initial joint venture in the
manner as requested by the respondent-Company.
(d) According to the appellant, again the respondentCompany expressed interest to start a new project and to
take financial facilities from their bank in order to submit a
tender for the purchase of a mill land. With regard to the
3
same, the respondent-Company approached the appellant
herein and her husband and informed that they are not
having sufficient securities to enable the bank to grant the
facility and the bank is to show receivables in writing.
Therefore, on an understanding between the respondent and
the appellant, a cheque of Rs. 25 crores was issued by the
husband of the appellant from their joint account. It is the
case of the appellant that in breach of the aforementioned
understanding, on 05.02.2009, the respondent deposited the
cheque with IDBI Bank at Cuffe Parade, Mumbai and the said
cheque was dishonoured due to “insufficient funds”
e) On 18.02.2009, a statutory notice under Section 138 of
the Negotiable Instruments Act, 1881 (in short ‘the N.I. Act”)
was issued to the appellant and her husband asking them to
repay the sum of Rs. 25 crores. On 06.03.2009, the
appellant and her husband jointly replied mentioning the
circumstances in which the said cheque was issued with the
supporting letters.
f) On 04.04.2009, a complaint was filed against the
appellant and her husband in the Court of the Metropolitan
4Page 5
Magistrate, Dadar, Mumbai and the same was registered as
Case No. 1171-SS of 2009. By order dated 20.04.2009,
process was issued against them.
g) On 12.01.2010, the appellant and her husband filed an
application objecting the exhibition of documents and the
same was registered as Exh. 28. By order dated 11.05.2010,
the said application was dismissed.
h) Against the issuance of process dated 20.04.2009 and
order dated 11.05.2010 dismissing the application by the
Magistrate, the appellant filed Writ Petition No. 1823 of 2010
before the High Court. The High Court, by impugned order
dated 24.09.2010, partly allowed the petition and quashed
the order dated 11.05.2010 and directed the Magistrate to
decide the objections raised by the counsel for the accused
after hearing both the sides, but refused to quash the
proceedings.
i) Aggrieved by the said order, the appellant has filed the
above appeal by way of special leave.
5
4) Heard Mr. K.V. Vishwanathan, learned senior counsel for
the appellant and Mr. Mukul Rohtagi, learned senior counsel
for respondent No.1.
Contentions:
5) Mr. K.V. Vishwanathan, learned senior counsel for the
appellant, by drawing our attention to Section 138 of the N.I.
Act as well as various decisions of this Court relating to
interpretation of the expression “drawer”, submitted that the
issuance of process by learned Magistrate cannot be
sustained. On the other hand, Mr. Mukul Rohtagi, learned
senior counsel for respondent No.1/the complainant
submitted that inasmuch as the instant case is squarely
covered by Section 141 of the N.I. Act and that the accused
persons, namely, Ashish Shah and Aparna Shah (appellant
No.1) are an association of individuals as envisaged under
Section 141, learned Magistrate was fully justified in issuing
process. He also submitted that the transaction with
respondent No.1 herein was negotiated by both the accused,
the cheque which had been issued by respondent No.1 was
deposited in the joint account maintained by both the
6
accused, the cheque bears the name and stamp of both the
accused and by suppressing all the materials, the appellant
has approached the High Court and this Court, hence her
claim has to be rejected on the ground of
concealing/suppressing material facts. He finally pointed out
that inasmuch as the trial has commenced and the appellant
will have her remedy during trial, the High Court was right in
dismissing her petition filed under Section 482 of the Code of
Criminal Procedure, 1973 (in short ‘the Code’).
6) We have carefully considered the rival submissions and
perused all the relevant materials.
Discussion:
7) In order to understand the rival contentions, it is useful
to refer Section 138 of the N.I. Act which reads as under:
“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 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 arrangement 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
7
term which may extend 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.
Explanation.-For the purposes of this section, “debt or
other liability” means a legally enforceable debt or other
liability”.
8) In order to constitute an offence under Section 138 of
the N.I. Act, this Court, in Jugesh Sehgal vs. Shamsher
Singh Gogi, (2009) 14 SCC 683, noted the 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 for payment 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 debt or other liability;
(iii) that 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;
8
(iv) that cheque is returned by the bank unpaid, either
because of the amount of money standing to the credit of
the 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 the bank;
(v) the payee or the holder in due course of the cheque
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 15 days of the receipt of information by
him from the bank regarding the return of the cheque as
unpaid;
(vi) the drawer of such cheque fails to make payment of
the said amount of money to the payee or the holder in
due course of the cheque within 15 days of the receipt of
the said notice.
Being cumulative, it is only when all the aforementioned
ingredients are satisfied that the person who had drawn
the cheque can be deemed to have committed an offence
under Section 138 of the Act.”
Considering the language used in Section 138 and taking
note of background agreement pursuant to which a cheque
is issued by more than one person, we are of the view that it
is only the “drawer” of the cheque who can be made liable
for the penal action under the provisions of the N.I. Act. It is
settled law that strict interpretation is required to be given to
penal statutes.
9) In Jugesh Sehgal (supra), after noting the ingredients
for attracting Section 138 on the facts of the case, this Court
concluded that there is no case to proceed under Section 138
9
of the Act. In that case, on 20.01.2001, the complainant filed
an FIR against all the accused for the offence under Sections
420, 467, 468, 471 and 406 of the Indian Penal Code, 1860
(hereinafter referred to as “IPC) and there was hardly any
dispute that the cheque, subject-matter of the complaint
under Section 138 of the N.I. Act, had not been drawn by the
appellant on an account maintained by him in Indian Bank,
Sonepat Branch. In the light of the ingredients required to be
fulfilled to attract the provisions of Section 138, this Court,
after finding that there is little doubt that the very first
ingredient of Section 138 of the N.I. Act enumerated above is
not satisfied and concluded that the case against the
appellant for having committed an offence under Section 138
cannot be proved.
10) In S.K. Alagh vs. State of Uttar Pradesh and
Others, (2008) 5 SCC 662, this Court held:
19. … …. If and when a statute contemplates creation of
such a legal fiction, it provides specifically therefor. In
absence of any provision laid down under the statute, a
Director of a Company or an employee cannot be held to
be vicariously liable for any offence committed by the
Company itself. (See Sabitha Ramamurthy v. R.B.S.
Channabasavaradhya, (2006) 10 SCC 581)”
10
11) In Sham Sunder and Others vs. State of Haryana,
(1989) 4 SCC 630, this Court held as under:
“9. The penal provision must be strictly construed in the
first place. Secondly, there is no vicarious liability in
criminal law unless the statute takes that also within its
fold. Section 10 does not provide for such liability. It does
not make all the partners liable for the offence whether
they do business or not.”
12) As rightly pointed out by learned senior counsel for the
appellant, the interpretation sought to be advanced by the
respondents would add words to Section 141 and extend the
principle of vicarious liability to persons who are not named
in it.
13) In the case on hand, we are concerned with criminal
liability on account of dishonour of a cheque. It primarily falls
on the drawer, if it is a Company, then Drawer Company and
is extended to the officers of the company. The normal rule
in the cases involving criminal liability is against vicarious
liability. To put it clear, no one is to be held criminally liable
for an act of another. This normal rule is, however, subject to
exception on account of specific provision being made in
statutes extending liability to others. For example, Section
11
141 of the N.I. Act is an instance of specific provision that in
case an offence under Section 138 is committed by a
company, the criminal liability for dishonour of a cheque will
extend to the officers of the company. As a matter of fact,
Section 141 contains conditions which have to be satisfied
before the liability can be extended. Inasmuch as the
provision creates a criminal liability, the conditions have to
be strictly complied with. In other words, the persons who
had nothing to do with the matter, need not be roped in. A
company being a juristic person, all its deeds and functions
are the result of acts of others. Therefore, the officers of the
company, who are responsible for the acts done in the name
of the company, are sought to be made personally liable for
the acts which result in criminal action being taken against
the company. In other words, it makes every person who, at
the time the offence was committed, was in-charge of, and
was responsible to the company for the conduct of business
of the company, as well as the company, liable for the
offence. It is true that the proviso to sub-section enables
certain persons to prove that the offence was committed
12
without their knowledge or that they had exercised all due
diligence to prevent commission of the offence. The liability
under Section 141 of the N.I. Act is sought to be fastened
vicariously on a person connected with the company, the
principal accused being the company itself. It is a departure
from the rule in criminal law against vicarious liability.
14) It is not in dispute that the first respondent has not filed
any complaint under any other provisions of the penal code
and, therefore, the argument pertaining to the intention of
the parties is completely misconceived. We were taken
through the notice issued under the provisions of Section
138, reply given thereto, copy of the complaint and the order
issuing process. In this regard, Mr.Mukul Rohatgi, learned
senior counsel for the respondent after narrating the
involvement of the appellant herein and her husband
contended that they cannot be permitted to raise any
objection on the ground of concealing/suppressing material
facts within her knowledge. For the said purpose, he relied
on Oswal Fats and Oils Limited vs. Additional
Commissioner (Administration), Bareilly Division,
13
Bareilly and Others, (2010) 4 SCC 728, Balwantrai
Chimanlal Trivedi vs. M.N. Nagrashna & Ors., AIR 1960
SC 1292, J.P. Builders & Anr. vs. A. Ramadas Rao &
Anr., (2011) 1 SCC 429. Inasmuch as the appellant had
annexed the relevant materials, namely, copy of notice, copy
of reply, copy of the complaint and the order issuing process
which alone is relevant for consideration in respect of
complaint under Section 138 of the N.I. Act, the argument of
learned senior counsel for Respondent No.1 that the stand of
the appellant has to be rejected for suppressing of material
facts or relevant facts, cannot stand. In such circumstances,
we are of the view that the case law relied upon by the
contesting respondent No.1 is inapplicable to the facts of the
present case.
15) Mr. Mukul Rohtagi, learned senior counsel for
respondent No.1, by drawing our attention to the definition of
“person” in Section 3(42) of the General Clauses Act, 1897
submitted that in view of various circumstances mentioned,
the appellant herein being wife, is liable for criminal
prosecution. He also submitted that in view of the
14
explanation in Section 141(2) of the N.I. Act, the appellant
wife is being prosecuted as an association of individual. In
our view, all the above contentions are unacceptable since it
was never the case of respondent No.1 in the complaint filed
before learned Magistrate that the appellant wife is being
prosecuted as an association of individuals and, therefore, on
this ground alone, the above submission is liable to be
rejected. Since, this expression has not been defined, the
same has to be interpreted ejusdem generis having regard to
the purpose of the principle of vicarious liability incorporated
in Section 141. The terms “complaint”, “persons”
“association of persons” “company” and “directors” have
been explained by this Court in Raghu Lakshminarayanan
vs. Fine Tubes, (2007) 5 SCC 103.
16) The above discussion with reference to Section 138 and
the materials culled out from the statutory notice, reply, copy
of the complaint, order, issuance of process etc., clearly show
that only the drawer of the cheque being responsible for the
same.
15
17) In addition to our conclusion, it is useful to refer some of
the decisions rendered by various High Courts on this issue.
18) Learned Single Judge of the Madras High Court in
Devendra Pundir vs. Rajendra Prasad Maurya,
Proprietor, Satyamev Exports S/o. Sri Rama Shankar
Maurya, 2008 Criminal Law Journal 777, following decisions
of this Court, has concluded thus:
“7. This Court is of the considered view that the above
proposition of law laid down by the Hon’ble Apex Court in
the decision cited supra is squarely applicable to the facts
of the instant case. Even in this case, as already pointed
out, the first accused is admittedly the sole proprietrix of
the concern namely, “Kamakshi Enterprises” and as such,
the question of the second accused to be vicariously held
liable for the offence said to have been committed by the
first accused under Section 138 of the Negotiable
Instruments Act not at all arise.”
After saying so, learned Single Judge, quashed the
proceedings initiated against the petitioner therein and
permitted the Judicial Magistrate to proceed and expedite
the trial in respect of others.
19) In Gita Berry vs. Genesis Educational Foundation,
151 (2008) DLT 155, the petitioner therein was wife and she
filed a petition under Section 482 of the Code seeking
quashing of the complaint filed under Section 138 of the N.I.
16
Act. The case of the petitioner therein was that the offence
under Section 138 of the Act cannot be said to have been
made out against her only on the ground that she was a joint
account holder along with her husband. It was pointed out
that she has neither drawn nor issued the cheque in question
and, therefore, according to her, the complaint against her
was not maintainable. Learned Single Judge of the High
Court of Delhi, after noting that the complaint was only under
Section 138 of the Act and not under Section 420 IPC and
pointing out that nothing was elicited from the complainant
to the effect that the petitioner was responsible for the
cheque in question, quashed the proceedings insofar as the
petitioner therein.
20) In Smt. Bandeep Kaur vs. S. Avneet Singh, (2008) 2
PLR 796, in a similar situation, learned Single Judge of the
Punjab and Haryana High Court held that in case the drawer
of a cheque fails to make the payment on receipt of a notice,
then the provisions of Section 138 of the Act could be
attracted against him only. Learned Single Judge further
held that though the cheque was drawn to a joint bank
17
account which is to be operated by anyone, i.e., the
petitioner or by her husband, but the controversial document
is the cheque, the liability regarding dishonouring of which
can be fastened on the drawer of it. After saying so, learned
Single Judge accepted the plea of the petitioner and quashed
the proceedings insofar as it relates to her and permitted the
complainant to proceed further insofar as against others.
21) In the light of the principles as discussed in the earlier
paras, we fully endorse the view expressed by the learned
Judges of the Madras, Delhi and Punjab & Haryana High
Courts.
22) In the light of the above discussion, we hold that under
Section 138 of the Act, it is only the drawer of the cheque
who can be prosecuted. In the case on hand, admittedly, the
appellant is not a drawer of the cheque and she has not
signed the same. A copy of the cheque was brought to our
notice, though it contains name of the appellant and her
husband, the fact remains that her husband alone put his
signature. In addition to the same, a bare reading of the
complaint as also the affidavit of examination-in-chief of the
18
complainant and a bare look at the cheque would show that
the appellant has not signed the cheque.
23) We also hold that
under Section 138 of the N.I. Act, in
case of issuance of cheque from joint accounts, a joint
account holder cannot be prosecuted unless the cheque has
been signed by each and every person who is a joint account
holder.
The said principle is an exception to Section 141 of
the N.I. Act which would have no application in the case on
hand.
The proceedings filed under Section 138 cannot be
used as an arm twisting tactics to recover the amount
allegedly due from the appellant.
It cannot be said that the
complainant has no remedy against the appellant but
certainly not under Section 138.
The culpability attached to
dishonour of a cheque can, in no case “except in case of
Section 141 of the N.I. Act” be extended to those on whose
behalf the cheque is issued.
This Court reiterates that it is
only the drawer of the cheque who can be made an accused
in any proceeding under Section 138 of the Act.
Even the
High Court has specifically recorded the stand of the
appellant that she was not the signatory of the cheque but
19
rejected the contention that the amount was not due and
payable by her solely on the ground that the trial is in
progress. It is to be noted that only after issuance of
process, a person can approach the High Court seeking
quashing of the same on various grounds available to him.
Accordingly, the High Court was clearly wrong in holding that
the prayer of the appellant cannot even be considered.
Further, the High Court itself has directed the Magistrate to
carry out the process of admission/denial of documents. In
such circumstances, it cannot be concluded that the trial is in
advanced stage.
24) Under these circumstances, the appeal deserves to be
allowed and process in Criminal Case No. 1171/SS/2009
pending before the Court of learned Metropolitan Magistrate
13th Court, Dadar, Mumbai deserves to be quashed,
accordingly, quashed against the appellant herein. The
appeal is allowed.
………….…………………………J.
(P. SATHASIVAM)
………….…………………………J.
2Page 21
(JAGDISH SINGH KHEHAR)
NEW DELHI;
JULY 01, 2013
Page 1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL No. 813 OF 2013
(Arising out of S.L.P. (Crl.) No. 9794 of 2010)
Mrs. Aparna A. Shah .... Appellant(s)
Versus
M/s Sheth Developers Pvt. Ltd. & Anr. .... Respondent(s)
J U D G M E N T
P.Sathasivam,J.
1) Leave granted.
2) This appeal is directed against the final judgment and
order dated 24.09.2010 passed by the High Court of
Judicature at Bombay in Criminal Writ Petition No. 1823 of
2010 whereby the High Court partly allowed the petition filed
by the appellant herein.
3) Brief facts:
a) M/s Sheth Developers Private Ltd.-the respondent
herein is a company incorporated under the provisions of the
1Page 2
Companies Act, 1956 having its registered office at 11, Vora
Palace, M.G. Road, Kandivali (West), Mumbai and is engaged
in the business of land development and constructions.
Aparna A. Shah (the appellant herein) and Ashish Shah, her
husband, are the Land Aggregators and Developers who
have been in the said business for the last 15 years and are
the owners of certain lands in and around Panvel.
b) According to the appellant, in January 2008, since the
Company was interested in developing a Township Project
and a Special Economic Zone (SEZ) project in and around
Panvel, Dist. Raigad, Maharashtra, one Virender Gala of
Mahavir Estate Agency - the Broker, introduced them to the
appellant herein and her husband as the land owners holding
huge land in Panvel. The appellant represented to the
Company that the said land was ideal for the development of
a Township Project and a Special Economic Zone (SEZ) and
also that they have no financial means and capacity to
develop the same single handedly. It was further
represented that they were also looking for a suitable person,
interested in developing the said land jointly with them.
2Page 3
(c) On believing the above said representations, the
respondent-Company agreed for the development of the said
land jointly with the appellant herein and her husband.
When the respondent-Company requested for inspection of
the title documents in respect of the said land, the appellant
and her husband agreed for the same upon the entrustment
of a token amount of Rs. 25 crores with an understanding
between the parties that the said amount would be returned
if the project is not materialize. Agreeing the same, the
respondent-Company issued a cheque of Rs. 25 crores in
favour of the appellant herein and her husband. However, for
various reasons, the proposed joint venture did not
materialize and it was claimed by the appellant herein that
the whole amount of Rs. 25 crores was spent in order to
meet the requirements of the initial joint venture in the
manner as requested by the respondent-Company.
(d) According to the appellant, again the respondentCompany expressed interest to start a new project and to
take financial facilities from their bank in order to submit a
tender for the purchase of a mill land. With regard to the
3
same, the respondent-Company approached the appellant
herein and her husband and informed that they are not
having sufficient securities to enable the bank to grant the
facility and the bank is to show receivables in writing.
Therefore, on an understanding between the respondent and
the appellant, a cheque of Rs. 25 crores was issued by the
husband of the appellant from their joint account. It is the
case of the appellant that in breach of the aforementioned
understanding, on 05.02.2009, the respondent deposited the
cheque with IDBI Bank at Cuffe Parade, Mumbai and the said
cheque was dishonoured due to “insufficient funds”
e) On 18.02.2009, a statutory notice under Section 138 of
the Negotiable Instruments Act, 1881 (in short ‘the N.I. Act”)
was issued to the appellant and her husband asking them to
repay the sum of Rs. 25 crores. On 06.03.2009, the
appellant and her husband jointly replied mentioning the
circumstances in which the said cheque was issued with the
supporting letters.
f) On 04.04.2009, a complaint was filed against the
appellant and her husband in the Court of the Metropolitan
4Page 5
Magistrate, Dadar, Mumbai and the same was registered as
Case No. 1171-SS of 2009. By order dated 20.04.2009,
process was issued against them.
g) On 12.01.2010, the appellant and her husband filed an
application objecting the exhibition of documents and the
same was registered as Exh. 28. By order dated 11.05.2010,
the said application was dismissed.
h) Against the issuance of process dated 20.04.2009 and
order dated 11.05.2010 dismissing the application by the
Magistrate, the appellant filed Writ Petition No. 1823 of 2010
before the High Court. The High Court, by impugned order
dated 24.09.2010, partly allowed the petition and quashed
the order dated 11.05.2010 and directed the Magistrate to
decide the objections raised by the counsel for the accused
after hearing both the sides, but refused to quash the
proceedings.
i) Aggrieved by the said order, the appellant has filed the
above appeal by way of special leave.
5
4) Heard Mr. K.V. Vishwanathan, learned senior counsel for
the appellant and Mr. Mukul Rohtagi, learned senior counsel
for respondent No.1.
Contentions:
5) Mr. K.V. Vishwanathan, learned senior counsel for the
appellant, by drawing our attention to Section 138 of the N.I.
Act as well as various decisions of this Court relating to
interpretation of the expression “drawer”, submitted that the
issuance of process by learned Magistrate cannot be
sustained. On the other hand, Mr. Mukul Rohtagi, learned
senior counsel for respondent No.1/the complainant
submitted that inasmuch as the instant case is squarely
covered by Section 141 of the N.I. Act and that the accused
persons, namely, Ashish Shah and Aparna Shah (appellant
No.1) are an association of individuals as envisaged under
Section 141, learned Magistrate was fully justified in issuing
process. He also submitted that the transaction with
respondent No.1 herein was negotiated by both the accused,
the cheque which had been issued by respondent No.1 was
deposited in the joint account maintained by both the
6
accused, the cheque bears the name and stamp of both the
accused and by suppressing all the materials, the appellant
has approached the High Court and this Court, hence her
claim has to be rejected on the ground of
concealing/suppressing material facts. He finally pointed out
that inasmuch as the trial has commenced and the appellant
will have her remedy during trial, the High Court was right in
dismissing her petition filed under Section 482 of the Code of
Criminal Procedure, 1973 (in short ‘the Code’).
6) We have carefully considered the rival submissions and
perused all the relevant materials.
Discussion:
7) In order to understand the rival contentions, it is useful
to refer Section 138 of the N.I. Act which reads as under:
“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 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 arrangement 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
7
term which may extend 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.
Explanation.-For the purposes of this section, “debt or
other liability” means a legally enforceable debt or other
liability”.
8) In order to constitute an offence under Section 138 of
the N.I. Act, this Court, in Jugesh Sehgal vs. Shamsher
Singh Gogi, (2009) 14 SCC 683, noted the 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 for payment 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 debt or other liability;
(iii) that 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;
8
(iv) that cheque is returned by the bank unpaid, either
because of the amount of money standing to the credit of
the 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 the bank;
(v) the payee or the holder in due course of the cheque
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 15 days of the receipt of information by
him from the bank regarding the return of the cheque as
unpaid;
(vi) the drawer of such cheque fails to make payment of
the said amount of money to the payee or the holder in
due course of the cheque within 15 days of the receipt of
the said notice.
Being cumulative, it is only when all the aforementioned
ingredients are satisfied that the person who had drawn
the cheque can be deemed to have committed an offence
under Section 138 of the Act.”
Considering the language used in Section 138 and taking
note of background agreement pursuant to which a cheque
is issued by more than one person, we are of the view that it
is only the “drawer” of the cheque who can be made liable
for the penal action under the provisions of the N.I. Act. It is
settled law that strict interpretation is required to be given to
penal statutes.
9) In Jugesh Sehgal (supra), after noting the ingredients
for attracting Section 138 on the facts of the case, this Court
concluded that there is no case to proceed under Section 138
9
of the Act. In that case, on 20.01.2001, the complainant filed
an FIR against all the accused for the offence under Sections
420, 467, 468, 471 and 406 of the Indian Penal Code, 1860
(hereinafter referred to as “IPC) and there was hardly any
dispute that the cheque, subject-matter of the complaint
under Section 138 of the N.I. Act, had not been drawn by the
appellant on an account maintained by him in Indian Bank,
Sonepat Branch. In the light of the ingredients required to be
fulfilled to attract the provisions of Section 138, this Court,
after finding that there is little doubt that the very first
ingredient of Section 138 of the N.I. Act enumerated above is
not satisfied and concluded that the case against the
appellant for having committed an offence under Section 138
cannot be proved.
10) In S.K. Alagh vs. State of Uttar Pradesh and
Others, (2008) 5 SCC 662, this Court held:
19. … …. If and when a statute contemplates creation of
such a legal fiction, it provides specifically therefor. In
absence of any provision laid down under the statute, a
Director of a Company or an employee cannot be held to
be vicariously liable for any offence committed by the
Company itself. (See Sabitha Ramamurthy v. R.B.S.
Channabasavaradhya, (2006) 10 SCC 581)”
10
11) In Sham Sunder and Others vs. State of Haryana,
(1989) 4 SCC 630, this Court held as under:
“9. The penal provision must be strictly construed in the
first place. Secondly, there is no vicarious liability in
criminal law unless the statute takes that also within its
fold. Section 10 does not provide for such liability. It does
not make all the partners liable for the offence whether
they do business or not.”
12) As rightly pointed out by learned senior counsel for the
appellant, the interpretation sought to be advanced by the
respondents would add words to Section 141 and extend the
principle of vicarious liability to persons who are not named
in it.
13) In the case on hand, we are concerned with criminal
liability on account of dishonour of a cheque. It primarily falls
on the drawer, if it is a Company, then Drawer Company and
is extended to the officers of the company. The normal rule
in the cases involving criminal liability is against vicarious
liability. To put it clear, no one is to be held criminally liable
for an act of another. This normal rule is, however, subject to
exception on account of specific provision being made in
statutes extending liability to others. For example, Section
11
141 of the N.I. Act is an instance of specific provision that in
case an offence under Section 138 is committed by a
company, the criminal liability for dishonour of a cheque will
extend to the officers of the company. As a matter of fact,
Section 141 contains conditions which have to be satisfied
before the liability can be extended. Inasmuch as the
provision creates a criminal liability, the conditions have to
be strictly complied with. In other words, the persons who
had nothing to do with the matter, need not be roped in. A
company being a juristic person, all its deeds and functions
are the result of acts of others. Therefore, the officers of the
company, who are responsible for the acts done in the name
of the company, are sought to be made personally liable for
the acts which result in criminal action being taken against
the company. In other words, it makes every person who, at
the time the offence was committed, was in-charge of, and
was responsible to the company for the conduct of business
of the company, as well as the company, liable for the
offence. It is true that the proviso to sub-section enables
certain persons to prove that the offence was committed
12
without their knowledge or that they had exercised all due
diligence to prevent commission of the offence. The liability
under Section 141 of the N.I. Act is sought to be fastened
vicariously on a person connected with the company, the
principal accused being the company itself. It is a departure
from the rule in criminal law against vicarious liability.
14) It is not in dispute that the first respondent has not filed
any complaint under any other provisions of the penal code
and, therefore, the argument pertaining to the intention of
the parties is completely misconceived. We were taken
through the notice issued under the provisions of Section
138, reply given thereto, copy of the complaint and the order
issuing process. In this regard, Mr.Mukul Rohatgi, learned
senior counsel for the respondent after narrating the
involvement of the appellant herein and her husband
contended that they cannot be permitted to raise any
objection on the ground of concealing/suppressing material
facts within her knowledge. For the said purpose, he relied
on Oswal Fats and Oils Limited vs. Additional
Commissioner (Administration), Bareilly Division,
13
Bareilly and Others, (2010) 4 SCC 728, Balwantrai
Chimanlal Trivedi vs. M.N. Nagrashna & Ors., AIR 1960
SC 1292, J.P. Builders & Anr. vs. A. Ramadas Rao &
Anr., (2011) 1 SCC 429. Inasmuch as the appellant had
annexed the relevant materials, namely, copy of notice, copy
of reply, copy of the complaint and the order issuing process
which alone is relevant for consideration in respect of
complaint under Section 138 of the N.I. Act, the argument of
learned senior counsel for Respondent No.1 that the stand of
the appellant has to be rejected for suppressing of material
facts or relevant facts, cannot stand. In such circumstances,
we are of the view that the case law relied upon by the
contesting respondent No.1 is inapplicable to the facts of the
present case.
15) Mr. Mukul Rohtagi, learned senior counsel for
respondent No.1, by drawing our attention to the definition of
“person” in Section 3(42) of the General Clauses Act, 1897
submitted that in view of various circumstances mentioned,
the appellant herein being wife, is liable for criminal
prosecution. He also submitted that in view of the
14
explanation in Section 141(2) of the N.I. Act, the appellant
wife is being prosecuted as an association of individual. In
our view, all the above contentions are unacceptable since it
was never the case of respondent No.1 in the complaint filed
before learned Magistrate that the appellant wife is being
prosecuted as an association of individuals and, therefore, on
this ground alone, the above submission is liable to be
rejected. Since, this expression has not been defined, the
same has to be interpreted ejusdem generis having regard to
the purpose of the principle of vicarious liability incorporated
in Section 141. The terms “complaint”, “persons”
“association of persons” “company” and “directors” have
been explained by this Court in Raghu Lakshminarayanan
vs. Fine Tubes, (2007) 5 SCC 103.
16) The above discussion with reference to Section 138 and
the materials culled out from the statutory notice, reply, copy
of the complaint, order, issuance of process etc., clearly show
that only the drawer of the cheque being responsible for the
same.
15
17) In addition to our conclusion, it is useful to refer some of
the decisions rendered by various High Courts on this issue.
18) Learned Single Judge of the Madras High Court in
Devendra Pundir vs. Rajendra Prasad Maurya,
Proprietor, Satyamev Exports S/o. Sri Rama Shankar
Maurya, 2008 Criminal Law Journal 777, following decisions
of this Court, has concluded thus:
“7. This Court is of the considered view that the above
proposition of law laid down by the Hon’ble Apex Court in
the decision cited supra is squarely applicable to the facts
of the instant case. Even in this case, as already pointed
out, the first accused is admittedly the sole proprietrix of
the concern namely, “Kamakshi Enterprises” and as such,
the question of the second accused to be vicariously held
liable for the offence said to have been committed by the
first accused under Section 138 of the Negotiable
Instruments Act not at all arise.”
After saying so, learned Single Judge, quashed the
proceedings initiated against the petitioner therein and
permitted the Judicial Magistrate to proceed and expedite
the trial in respect of others.
19) In Gita Berry vs. Genesis Educational Foundation,
151 (2008) DLT 155, the petitioner therein was wife and she
filed a petition under Section 482 of the Code seeking
quashing of the complaint filed under Section 138 of the N.I.
16
Act. The case of the petitioner therein was that the offence
under Section 138 of the Act cannot be said to have been
made out against her only on the ground that she was a joint
account holder along with her husband. It was pointed out
that she has neither drawn nor issued the cheque in question
and, therefore, according to her, the complaint against her
was not maintainable. Learned Single Judge of the High
Court of Delhi, after noting that the complaint was only under
Section 138 of the Act and not under Section 420 IPC and
pointing out that nothing was elicited from the complainant
to the effect that the petitioner was responsible for the
cheque in question, quashed the proceedings insofar as the
petitioner therein.
20) In Smt. Bandeep Kaur vs. S. Avneet Singh, (2008) 2
PLR 796, in a similar situation, learned Single Judge of the
Punjab and Haryana High Court held that in case the drawer
of a cheque fails to make the payment on receipt of a notice,
then the provisions of Section 138 of the Act could be
attracted against him only. Learned Single Judge further
held that though the cheque was drawn to a joint bank
17
account which is to be operated by anyone, i.e., the
petitioner or by her husband, but the controversial document
is the cheque, the liability regarding dishonouring of which
can be fastened on the drawer of it. After saying so, learned
Single Judge accepted the plea of the petitioner and quashed
the proceedings insofar as it relates to her and permitted the
complainant to proceed further insofar as against others.
21) In the light of the principles as discussed in the earlier
paras, we fully endorse the view expressed by the learned
Judges of the Madras, Delhi and Punjab & Haryana High
Courts.
22) In the light of the above discussion, we hold that under
Section 138 of the Act, it is only the drawer of the cheque
who can be prosecuted. In the case on hand, admittedly, the
appellant is not a drawer of the cheque and she has not
signed the same. A copy of the cheque was brought to our
notice, though it contains name of the appellant and her
husband, the fact remains that her husband alone put his
signature. In addition to the same, a bare reading of the
complaint as also the affidavit of examination-in-chief of the
18
complainant and a bare look at the cheque would show that
the appellant has not signed the cheque.
23) We also hold that
under Section 138 of the N.I. Act, in
case of issuance of cheque from joint accounts, a joint
account holder cannot be prosecuted unless the cheque has
been signed by each and every person who is a joint account
holder.
The said principle is an exception to Section 141 of
the N.I. Act which would have no application in the case on
hand.
The proceedings filed under Section 138 cannot be
used as an arm twisting tactics to recover the amount
allegedly due from the appellant.
It cannot be said that the
complainant has no remedy against the appellant but
certainly not under Section 138.
The culpability attached to
dishonour of a cheque can, in no case “except in case of
Section 141 of the N.I. Act” be extended to those on whose
behalf the cheque is issued.
This Court reiterates that it is
only the drawer of the cheque who can be made an accused
in any proceeding under Section 138 of the Act.
Even the
High Court has specifically recorded the stand of the
appellant that she was not the signatory of the cheque but
19
rejected the contention that the amount was not due and
payable by her solely on the ground that the trial is in
progress. It is to be noted that only after issuance of
process, a person can approach the High Court seeking
quashing of the same on various grounds available to him.
Accordingly, the High Court was clearly wrong in holding that
the prayer of the appellant cannot even be considered.
Further, the High Court itself has directed the Magistrate to
carry out the process of admission/denial of documents. In
such circumstances, it cannot be concluded that the trial is in
advanced stage.
24) Under these circumstances, the appeal deserves to be
allowed and process in Criminal Case No. 1171/SS/2009
pending before the Court of learned Metropolitan Magistrate
13th Court, Dadar, Mumbai deserves to be quashed,
accordingly, quashed against the appellant herein. The
appeal is allowed.
………….…………………………J.
(P. SATHASIVAM)
………….…………………………J.
2Page 21
(JAGDISH SINGH KHEHAR)
NEW DELHI;
JULY 01, 2013
