REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 1534 OF 2017
(Arising out of SLP(Crl.) No.1439 of 2017)
N. Harihara Krishnan … Appellant
Versus
J. Thomas … Respondent
J U D G M E N T
Chelameswar, J.
1. Leave Granted
2. M/s. Norton Granites & Spinners (P) Ltd. (hereafter NORTON) sold
three parcels of land by three separate registered sale deeds dated
14.5.2007 to one M/s. Srivari Exports, a partnership firm (hereafter
FIRM). The appellant herein is the managing partner of the FIRM and
the respondent, it appears, is the power of attorney holder for the
managing director of NORTON. It appears from the record that the
appellant is also a director of a company known as M/s. Dakshin
Granites Pvt. Ltd. (hereafter DAKSHIN).
3. The respondent herein filed a complaint on 08.10.2012 bearing CC
1
No. 2925 of 2012 on the file of the VII Metropolitan Magistrate, George
Town at Chennai against the appellant herein invoking Sections 138
and 142 of the Negotiable Instruments Act, 1881 (hereinafter referred to
as “THE ACT”). The substance of the complaint is that the appellant
herein drew a cheque bearing No. 064159 dated 10.8.2012 for a sum of
Rs.39 lakhs (Rs.39,00,000/-) on the Syndicate Bank, Armenian Street,
Chennai in favour of the respondent. According to the complaint, the
said amount of Rs. 39 lakhs is the amount due from the appellant
towards the balance of the sale consideration in connection with the
sale transactions referred to above.
4. The said cheque was presented for collection by the respondent
through his bank (Indian Bank, High Court Branch, Chennai) on
28.8.2012 which was dishonoured on the ground that the account on
which the cheque was drawn had been closed.
5. On 10.9.2012, the respondent issued a notice contemplated under
clause (b) of the proviso to Section 138 of THE ACT. By the said notice,
the appellant was informed that the cheque had been dishonored and
further the appellant was called upon to pay the sum of Rs.39 lakhs
within 15 days from the date of the receipt of the notice. According to
the complaint, the notice was served on the petitioner on 14.9.2012 but
2
the petitioner neither responded to the notice nor made the payment.
Hence the complaint.
6. On 19.8.2015, Crl.M.P. No. 6771 of 2015 came to be filed in the
above-mentioned CC No. 2925 of 2012 by the respondent herein
purporting to be an application under Section 319 of the Code of
Criminal Procedure, 1973 (for short “CrPC”) with prayer as follows:-
“3. In the above circumstances, it is therefore prayed that this Hon’ble
Court may be pleased to implead M/s DAKSHIN GRANITES PVT. LTD.,
NO. 3B, EEBROS Centre, 40, Montieth Road, Chennai – 600 008 as
accused A1, in C.C. No. 2925 of 2012 pending on the file of this Hon’ble
Court and thus render justice.”
7. According to the said application, it came to the notice of the
respondent during the course of cross-examination of the appellant
herein at the trial of the CC No.2925 of 2012 that the cheque in
question was drawn on the account of DAKSHIN and the appellant is
only a signatory on behalf of the DAKSHIN in his capacity as a Director
of DAKSHIN. The respondent had initially failed to lodge the complaint
against DAKSHIN by inadvertence and hence the application.
8. The application was contested by the appellant. The learned
Metropolitan Magistrate by his Order dated 21.4.2016 allowed the said
application. The petitioner carried the matter in Criminal R.C. No. 774
of 2016 to the Madras High Court unsuccessfully. Hence the instant
3
SLP.
9. Xerox copies of the three sale deeds are placed before us and
according to the said documents, the sale consideration for the three
sale deeds is Rs. 2,80,000/-, Rs. 2,50,000/- and Rs. 1,20,000/-, in all
Rs. 6,50,000/-. Nonetheless, the respondent filed the complaint stating
that the cheque in question for Rs.39 lakhs was drawn towards the
balance of the sale consideration of the transactions covered by the
above-mentioned three sale deeds. Prima facie, it is very doubtful
whether the cheque was drawn for any amount which is legally due to
the respondent from the appellant.
10. A xerox copy of the cheque is placed before us. The number of the
account on which the cheque was drawn is not very clear from the said
copy. But from the content of the application from out of which the
instant appeal arises and from the xerox copy of the cheque it appears
that it was drawn on the account of DAKSHIN by somebody who claims
to be a Director of DAKSHIN. It is a case of the respondent that the
cheque was signed by the appellant. There appears to be some dispute
regarding the identity of the person who signed the cheque. It can be
seen from para 2 of the complaint, the said cheque was handed over to
4
the respondent through “an unknown person at Chennai High Court
premises”.
11. Assuming for the sake of argument that an amount of Rs. 39 lakhs
was due towards the balance of the sale consideration of the
above-mentioned three sales from the FIRM of which the appellant is
said to be the Managing Partner. The cheque in question was drawn by
a private company (DAKSHIN) (a third party to the sale transactions and
such a payment is permissible under the Indian Contract Act) and
allegedly signed by the appellant in his capacity as the Director of
DAKSHIN.
12. The learned Counsel for the appellant argued;
(a) Since the cheque in question was drawn on the account
of DAKSHIN, the person primarily liable for punishment
under Section 138 of THE ACT would be DAKSHIN. The
appellant herein being the alleged signatory in his capacity as
the Director of DAKSHIN would only be vicariously liable (if at
all) for the offence committed by DAKSHIN. In view of the law
declared by this Court in Aneeta Hada1
the prosecution
1
Aneeta Hada v. Godfather Travels & Tours Private Limited, (2012) 5 SCC 661
5
against the appellant could not be successfully maintained
without prosecuting DAKSHIN. Since the complaint was
originally lodged only against the appellant, the respondent
resorted to the device of filing an application on 19.8.2015
under Section 319 CrPC to ‘implead’ (in substance summon)
DAKSHIN as an accused/ respondent to the complaint.
(b) Section 142(1)(a) of THE ACT inter alia stipulates that a
complaint regarding the commission of the offence under
Section 138 must be “made within one month of the date on which
the cause of action arises under clause (c) of the proviso to Section 138”.
The application under Section 319 of CrPC by which
DAKSHIN is sought to be impleaded (summoned) is in
substance a complaint against DAKSHIN which is filed some
three years after the expiry of the period of 15 days stipulated
under clause (c) of the proviso to Section 138. Therefore
barred by the stipulation contained in Section 141(1)(b) of
THE ACT. No valid explanation for condoning such a long
delay is offered by the respondent. Both the courts below
erred in coming to the conclusion that once the offence is
6
taken cognizance of, the question of delay does not arise.
(c) Section 1382
stipulates inter alia that (i) the payee of the
cheque must give a notice in writing to the drawer of the
cheque within 30 days from the “receipt of the information by him
from the bank regarding the return of the cheque as unpaid”; (ii) the
notice must contain a demand for the payment of the amount
due on the cheque; and (iii) upon the receipt of the notice, if
the drawer of the cheque fails to make payment within 15
days of the receipt of the notice, prosecution could be
launched within one month thereafter. The timelines
stipulated under clauses (a) to (c) of the proviso to Section
138 are mandatory.3
2
“Section 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 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, 20 [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.”
3
7
(d) The (instant) application under Section 319 CrPC came
to be filed (on 19.08.2015) some three years after the
dishonour of the cheque by the bank (on 30.8.2012). If the
respondent were to file complaint under Section 138 against
DAKSHIN on 19.8.2015, such a complaint would be clearly
not maintainable as it would have been far beyond the
permissible time within which a complaint could have been
filed under Section 138 of THE ACT. Therefore, both the
courts below erred in allowing the application.
13. On the other hand, the learned counsel for the respondent
submitted that the trial court and the High Court rightly impleaded the
appellant. The learned counsel submitted that the proviso to clause (b)
of Section 142 of THE ACT enables the Court to take cognizance of the
offence even beyond the prescribed period of limitation, if the
complainant satisfies the Court that he had sufficient cause for not
making the complaint within the period of limitation. The respondent
D. Vinod Shivappa v. Nanda Belliappa, (2006) 6 SCC 456
“14. ...There is good authority to support the proposition that once the complainant, the payee of the cheque, issues
notice to the drawer of the cheque, the cause of action to file a complaint arises on the expiry of the period prescribed for
payment by the drawer of the cheque. If he does not file a complaint within one month of the date on which the cause of
action arises under clause (c) of the proviso to Section 138 of the Act, his complaint gets barred by time.”
C.C. Alavi Haji v. Palapetty Muhammed and Another, (2007) 6 SCC 555
“9. ….It was further observed that once the payee of the cheque issues notice to the drawer of the cheque, the
cause of action to file a complaint arises on the expiry of the period prescribed for payment by the drawer of the cheque.
If he does not file a complaint within one month of the date on which the cause of action arises under Clause (c) of the
proviso to Section 138 of the Act, his complaint gets barred by time. …”
8
only got to know that the cheque in question was drawn on the account
of DAKSHIN only during the course of trial. Therefore, the respondent
made out a case for condonation of the delay.
14. It is rather difficult to understand the decision of the trial court.
We are given to understand that the order is made in vernacular and
only a translated copy4
of the same is placed before us. Be that as it
may, the ‘relevant’ portion of the translated copies reads as follows:-
“Hence whether cheque was drawn by company trial on the complaint
can be possible only if company is impleaded in complaint.
Hence as far as this case on hand, without impleading Dakshin Granite
(P) Ltd trial can not be conducted for impleading the company and
conditions as per Section 138 should be fulfilled. As per Section 138
Notice has been sent to Dakshin Granites – hence conditions fulfilled.
It is prayed by complainant that he should be permitted to implead
company and also condone the delay.
As per Section 142, complaint is to be filed with one month which has
been done. Hence as per Section 142(b) no separate petition is
required after cognizance of offence.
The offenders of crime can be decided. To take conginsance it is not
required to take cognizance in the case of each accused.
In view of the above the petition is allowed and I order for impleading
the company and summons to be served.”
15. While examining the legality of the trial court’s order, the High
Court took note of the fact that two applications were filed by the
respondent, one to condone the delay (of 1211 days) and other to
implead (summon?) DAKSHIN invoking Section 319 of the CrPC. The
High Court recorded an interesting finding:-
4
We are not informed whether it is an official translation by either of the courts below or any
one of the learned counsel who appeared in the case or by the parties.
9
“In this case, the present revision is preferred only against the order
passed in Crl.M.P. No. 6771 of 2015 in C.C. No. 2925 of 2012, which
was filed to implead M/s. Dakshin Granites Private Ltd., as an accused
in the private complaint and no appeal or revision was preferred against
the order passed in Crl.M.P. No. 1257 of 2016 by either side.”
16. We say it is an interesting finding because from the translation of
the trial court’s order placed before us, the trial court is silent about the
application for condonation of the delay. On the other hand, the trial
court observed “Hence as per Section 142(b) no separate petition is required after
cognizance of offence.”
After recording such a finding, the High Court proceeded to say;
“…The Trial Court, after considering the arguments of both sides, came
to a conclusion that since the case was already taken on file and
cognizance of the offence was taken, in this case, separate petition to
condone the delay of 1211 days is not necessary and M/s. Dakshin
Granites Private Ltd. was impleaded as an accused. Admittedly,
statutory notice under Section 138(b) of the Negotiable Instruments Act
was issued to M/s. Dakshin Granites Private Ltd., and M/s. Dakshin
Granites Private Ltd., has not preferred any revision before this Court.
Hence, the present petitioner is only the signatory. Even according to
the present petitioner, who is an individual person and who signed the
cheque represents the company.”
The High Court, concluded that as no revision is filed by DAKSHIN
the “revision preferred by the petitioner is not maintainable. No merits in the
petition.”
17. We are of the opinion that it is difficult to understand the
conclusions recorded by both the courts below. They are wholly
illogical, to use a very mild expression.
18. Section 142 of THE ACT inter alia stipulates that no court shall
10
take cognizance of any offence punishable under Section 138 unless a
complaint is made within one month of the date on which the cause of
action arises under clause (c) of the proviso to Section 138. The
relevant portion of Section 142 reads as follows:-
“142 Cognizance of offences. —Notwithstanding anything contained in
the Code of Criminal Procedure, 1973—
(a) no court shall take cognizance of any offence punishable under
section 138 except upon a complaint, in writing, made by the payee or,
as the case may be, the holder in due course of the cheque;
(b) such complaint is made within one month of the date on which
the cause of action arises under clause (c) of the proviso to section 138:
Provided that the cognizance of a complaint may be taken by the
Court after the prescribed period, if the complainant satisfies the Court
that he had sufficient cause for not making a complaint within such
period.”
19. The preliminary facts constituting an offence5
under Section 138 of
the Act are; (i) that a cheque is drawn, and (ii) that cheque is dishonored
by the Bank when presented by the payee. Under the scheme of Section
138 both the drawer of the cheque and the bank upon which the cheque
5
However, this Court in MSR Leathers v. S. Palaniappan and Another, (2013) 1 SCC 177 held;
10. Proviso to Section 138, however, is all important and stipulates three distinct conditions precedent, which must
be satisfied before the dishonour of a cheque can constitute an offence and become punishable. The first condition is that
the cheque ought to have 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. The second condition is that the payee or the holder in due course of
the cheque, as the case may be, ought to make 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. The third condition is that the drawer of such a cheque should have failed to make
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. It is only upon the satisfaction of all the three conditions mentioned
above and enumerated under the proviso to Section 138 as clauses (a), (b) and (c) thereof that an offence
under Section 138 can be said to have been committed by the person issuing the cheque.
11
is drawn are parties against whom the payee of the cheque can have
various legal rights, which may have either civil or criminal
consequences or perhaps both depending upon the facts of a given case.
Section 138 prescribes only one of the consequences, i.e. the
prosecution and punishment of only the drawer of the cheque. It is
possible in a given case that a bank may without any valid justification
decline to honor a cheque drawn on it. For which act of the bank, the
drawer of the cheque may in no way be responsible either in fact or in
law. In such a fact situation, the payee of the cheque may have legal
rights and remedies for the redressal of the injury (if any) caused by the
Bank in addition to his rights against the drawer of the cheque.
20. The offence under Section 138 of THE ACT is capable of being
committed only by the drawer of the cheque. The logic of the High Court
that since the offence is already taken cognizance of, there is no need to
take cognizance of the offence against DAKSHIN is flawed. Section 141
stipulates the liability for the offence punishable under Section 138 of
THE ACT when the person committing such an offence happens to be a
company - in other words when the drawer of the cheque happens to be
a company. Relevant portion of Section 141 reads as follows:-
“Section 141. Offences by companies.—
12
(1) If the person committing an offence under section 138 is a company,
every person who, at the time the offence was committed, was in charge
of, and was responsible to the company for the conduct of the business
of the company, as well as the company, shall be deemed to be guilty of
the offence and shall be liable to be proceeded against and punished
accordingly:”
21. This Court in Aneeta Hada, had an occasion to examine the
question “whether an authorised signatory of a company would be liable for
prosecution under Section 138 of the Negotiable Instruments Act, 1881 (for brevity
“the Act”) without the company being arraigned as an accused” and held as
follows:-
“59. In view of our aforesaid analysis, we arrive at the irresistible
conclusion that for maintaining the prosecution under Section 141 of
the Act, arraigning of a company as an accused is imperative. The
other categories of offenders can only be brought in the drag-net on the
touchstone of vicarious liability as the same has been stipulated in the
provision itself. …”
Yet the High Court reached a conclusion that the revision filed by
the petitioner is not maintainable because DAKSHIN did not choose to
challenge the trial court’s order.
The High Court failed to appreciate that the liability of the
appellant (if any in the context of the facts of the present case) is only
statutory because of his legal status as the DIRECTOR of DAKSHIN.
Every person signing a cheque on behalf of a company on whose
account a cheque is drawn does not become the drawer of the cheque.
13
Such a signatory is only a person duly authorised to sign the cheque on
behalf of the company/drawer of the cheque. If DAKSHIN/drawer of
the cheque is sought to be summoned for being tried for an offence
under Section 138 of THE ACT beyond the period of limitation
prescribed under THE ACT, the appellant cannot be told in view of the
law declared by this Court in Aneeta Hada that he can make no
grievance of that fact on the ground that DAKSHIN did not make any
grievance of such summoning. It is always open to DAKSHIN to raise
the defense that the initiation of prosecution against it is barred by
limitation. DAKSHIN need not necessarily challenge the summoning
order. It can raise such a defense in the course of trial.
Coming to the view of the High Court that only the offence is taken
cognizance of and there is no need to take cognizance of an offence
accused-wise is an erroneous view in the context of a prosecution under
THE ACT. Most probably the High Court recorded such conclusion
(though not expressly stated) on the basis of the judgment of this Court
in Raghubans Dubey v. State of Bihar, AIR 1967 SC 1167, where it
was stated:
“Para 9. … In our opinion, once cognizance has been taken by the
Magistrate, he takes cognizance of an offence and not the offenders;
once he takes cognizance of an offence it is his duty to find out who the
offenders really are and once he comes to the conclusion that apart from
14
the persons sent up by the police some other persons are involved, it is
his duty to proceed against those persons. …”
Such a statement of law was made by this Court in the background of
the scheme of the CrPC.
22. The CrPC is an enactment which is designed to regulate the
procedures governing the investigation of crimes in order to get the
perpetrators of the crime punished. A crime is an act or omission
prohibited by law attracting certain legal consequences like
imprisonment, fine etc. Obviously, acts or omissions constituting
offences/crimes are capable of being committed only by persons either
natural or juridical.
The CrPC imposes a duty on the investigating agencies to gather
evidence necessary to establish the occurrence of a crime and to trace
out the perpetrators of the crime in order to get them punished.
Punishment can be inflicted only by a competent Court but not by the
investigating agency. Courts are authorised to inflict punishment if only
they are satisfied that the evidence gathered by the investigating agency
is sufficient to establish that (1) a crime had been committed; and (2)
the persons charged with the offence (accused) and brought before the
Court by the investigating agency for trial are the perpetrators of the
15
crime.
Under the Scheme of the CrPC, any investigating agency (normally
the police) is bound to investigate by following the procedure prescribed
therein once it receives either information regarding the commission of a
cognizable offence or an order from a Magistrate to investigate into the
allegation of the occurrence of a non-cognizable offence and submit a
report under Section 173. Section 173(2)(i)(d) inter alia stipulates that
the report should contain a statement:
“Whether any offence appears to have been committed and if so by
whom?”
The conclusions reached by the police after investigation into the above
two questions are required to be scrutinized by a competent Court. It is
only after the Court is satisfied that the evidence collected by the
investigating agency is sufficient in law to punish the accused, such
accused can be punished. Taking cognizance of an offence by the Court
is one of the initial steps in the process. Thereafter, the investigating
agency is required to collect evidence (investigate) and place the same
before the Court under Section 173 CrPC.
23. The scheme of the prosecution in punishing under Section 138 of
THE ACT is different from the scheme of the CrPC. Section 138 creates
16
an offence and prescribes punishment. No procedure for the
investigation of the offence is contemplated. The prosecution is
initiated on the basis of a written complaint made by the payee of a
cheque. Obviously such complaints must contain the factual allegations
constituting each of the ingredients of the offence under Section 138.
Those ingredients are: (1) that a person drew a cheque on an account
maintained by him with the banker; (2) that such a cheque when
presented to the bank is returned by the bank unpaid; (3) that such a
cheque was presented to the bank within a period of six months from
the date it was drawn or within the period of its validity whichever is
earlier; (4) that the payee demanded in writing from the drawer of the
cheque the payment of the amount of money due under the cheque to
payee; and (5) such a notice of payment is made within a period of 30
days from the date of the receipt of the information by the payee from
the bank regarding the return of the cheque as unpaid. It is obvious
from the scheme of Section 138 that each one of the ingredients flows
from a document which evidences the existence of such an ingredient.
The only other ingredient which is required to be proved to establish the
commission of an offence under Section 138 is that inspite of the
demand notice referred to above, the drawer of the cheque failed to
17
make the payment within a period of 15 days from the date of the
receipt of the demand. A fact which the complainant can only assert
but not prove, the burden would essentially be on the drawer of the
cheque to prove that he had in fact made the payment pursuant to the
demand.
24. By the nature of the offence under Section 138 of THE ACT, the
first ingredient constituting the offence is the fact that a person drew a
cheque. The identity of the drawer of the cheque is necessarily required
to be known to the complainant (payee) and needs investigation and
would not normally be in dispute unless the person who is alleged to
have drawn a cheque disputes that very fact. The other facts required to
be proved for securing the punishment of the person who drew a cheque
that eventually got dishonoured is that the payee of the cheque did in
fact comply with each one of the steps contemplated under Section 138
of THE ACT before initiating prosecution. Because it is already held by
this Court that failure to comply with any one of the steps contemplated
under Section 138 would not provide “cause of action for prosecution”.
Therefore, in the context of a prosecution under Section 138, the
concept of taking cognizance of the offence but not the offender is not
appropriate. Unless the complaint contains all the necessary factual
18
allegations constituting each of the ingredients of the offence under
Section 138, the Court cannot take cognizance of the offence.
Disclosure of the name of the person drawing the cheque is one of the
factual allegations which a complaint is required to contain. Otherwise
in the absence of any authority of law to investigate the offence under
Section 138, there would be no person against whom a Court can
proceed. There cannot be a prosecution without an accused. The
offence under Section 138 is person specific. Therefore, the Parliament
declared under Section 142 that the provisions dealing with taking
cognizance contained in the CrPC should give way to the procedure
prescribed under Section 142. Hence the opening of non-obstante clause
under Section 142. It must also be remembered that Section 142 does
not either contemplate a report to the police or authorise the Court
taking cognizance to direct the police to investigate into the complaint.
25. The question whether the respondent had sufficient cause for not
filing the complaint against DAKSHIN within the period prescribed
under THE ACT is not examined by either of the courts below. As
rightly pointed out, the application, which is the subject matter of the
instant appeal purportedly filed invoking Section 319 CrPC, is only a
device by which the respondent seeks to initiate prosecution against
19
DAKSHIN beyond the period of limitation stipulated under the Act.
26. No doubt Section 142 authorises the Court to condone the delay in
appropriate cases. We find no reason to condone the delay. The
justification advanced by the respondent that it is during the course of
the trial, the respondent realized that the cheque in question was drawn
on the account of DAKSHIN is a manifestly false statement. On the face
of the cheque, it is clear that it was drawn on account of DAKSHIN.
Admittedly the respondent issued a notice contemplated under clause
(b) of the proviso to Section 138 to DAKSHIN. The fact is recorded by
the High Court. The relevant portion is already extracted in para 16.
27. The judgment under appeal is contrary to the language of THE ACT
as expounded by this Court in Aneeta Hada (supra) and, therefore,
cannot be sustained. The judgment is, accordingly, set aside. The appeal
is allowed. In the circumstances, the costs is quantified at Rs.
1,00,000/- (Rupees One Lakh Only).
….....................................J.
(J. CHELAMESWAR)
……. ………….....................J.
(S. ABDUL NAZEER)
New Delhi
August 30, 2017
20
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 1534 OF 2017
(Arising out of SLP(Crl.) No.1439 of 2017)
N. Harihara Krishnan … Appellant
Versus
J. Thomas … Respondent
J U D G M E N T
Chelameswar, J.
1. Leave Granted
2. M/s. Norton Granites & Spinners (P) Ltd. (hereafter NORTON) sold
three parcels of land by three separate registered sale deeds dated
14.5.2007 to one M/s. Srivari Exports, a partnership firm (hereafter
FIRM). The appellant herein is the managing partner of the FIRM and
the respondent, it appears, is the power of attorney holder for the
managing director of NORTON. It appears from the record that the
appellant is also a director of a company known as M/s. Dakshin
Granites Pvt. Ltd. (hereafter DAKSHIN).
3. The respondent herein filed a complaint on 08.10.2012 bearing CC
1
No. 2925 of 2012 on the file of the VII Metropolitan Magistrate, George
Town at Chennai against the appellant herein invoking Sections 138
and 142 of the Negotiable Instruments Act, 1881 (hereinafter referred to
as “THE ACT”). The substance of the complaint is that the appellant
herein drew a cheque bearing No. 064159 dated 10.8.2012 for a sum of
Rs.39 lakhs (Rs.39,00,000/-) on the Syndicate Bank, Armenian Street,
Chennai in favour of the respondent. According to the complaint, the
said amount of Rs. 39 lakhs is the amount due from the appellant
towards the balance of the sale consideration in connection with the
sale transactions referred to above.
4. The said cheque was presented for collection by the respondent
through his bank (Indian Bank, High Court Branch, Chennai) on
28.8.2012 which was dishonoured on the ground that the account on
which the cheque was drawn had been closed.
5. On 10.9.2012, the respondent issued a notice contemplated under
clause (b) of the proviso to Section 138 of THE ACT. By the said notice,
the appellant was informed that the cheque had been dishonored and
further the appellant was called upon to pay the sum of Rs.39 lakhs
within 15 days from the date of the receipt of the notice. According to
the complaint, the notice was served on the petitioner on 14.9.2012 but
2
the petitioner neither responded to the notice nor made the payment.
Hence the complaint.
6. On 19.8.2015, Crl.M.P. No. 6771 of 2015 came to be filed in the
above-mentioned CC No. 2925 of 2012 by the respondent herein
purporting to be an application under Section 319 of the Code of
Criminal Procedure, 1973 (for short “CrPC”) with prayer as follows:-
“3. In the above circumstances, it is therefore prayed that this Hon’ble
Court may be pleased to implead M/s DAKSHIN GRANITES PVT. LTD.,
NO. 3B, EEBROS Centre, 40, Montieth Road, Chennai – 600 008 as
accused A1, in C.C. No. 2925 of 2012 pending on the file of this Hon’ble
Court and thus render justice.”
7. According to the said application, it came to the notice of the
respondent during the course of cross-examination of the appellant
herein at the trial of the CC No.2925 of 2012 that the cheque in
question was drawn on the account of DAKSHIN and the appellant is
only a signatory on behalf of the DAKSHIN in his capacity as a Director
of DAKSHIN. The respondent had initially failed to lodge the complaint
against DAKSHIN by inadvertence and hence the application.
8. The application was contested by the appellant. The learned
Metropolitan Magistrate by his Order dated 21.4.2016 allowed the said
application. The petitioner carried the matter in Criminal R.C. No. 774
of 2016 to the Madras High Court unsuccessfully. Hence the instant
3
SLP.
9. Xerox copies of the three sale deeds are placed before us and
according to the said documents, the sale consideration for the three
sale deeds is Rs. 2,80,000/-, Rs. 2,50,000/- and Rs. 1,20,000/-, in all
Rs. 6,50,000/-. Nonetheless, the respondent filed the complaint stating
that the cheque in question for Rs.39 lakhs was drawn towards the
balance of the sale consideration of the transactions covered by the
above-mentioned three sale deeds. Prima facie, it is very doubtful
whether the cheque was drawn for any amount which is legally due to
the respondent from the appellant.
10. A xerox copy of the cheque is placed before us. The number of the
account on which the cheque was drawn is not very clear from the said
copy. But from the content of the application from out of which the
instant appeal arises and from the xerox copy of the cheque it appears
that it was drawn on the account of DAKSHIN by somebody who claims
to be a Director of DAKSHIN. It is a case of the respondent that the
cheque was signed by the appellant. There appears to be some dispute
regarding the identity of the person who signed the cheque. It can be
seen from para 2 of the complaint, the said cheque was handed over to
4
the respondent through “an unknown person at Chennai High Court
premises”.
11. Assuming for the sake of argument that an amount of Rs. 39 lakhs
was due towards the balance of the sale consideration of the
above-mentioned three sales from the FIRM of which the appellant is
said to be the Managing Partner. The cheque in question was drawn by
a private company (DAKSHIN) (a third party to the sale transactions and
such a payment is permissible under the Indian Contract Act) and
allegedly signed by the appellant in his capacity as the Director of
DAKSHIN.
12. The learned Counsel for the appellant argued;
(a) Since the cheque in question was drawn on the account
of DAKSHIN, the person primarily liable for punishment
under Section 138 of THE ACT would be DAKSHIN. The
appellant herein being the alleged signatory in his capacity as
the Director of DAKSHIN would only be vicariously liable (if at
all) for the offence committed by DAKSHIN. In view of the law
declared by this Court in Aneeta Hada1
the prosecution
1
Aneeta Hada v. Godfather Travels & Tours Private Limited, (2012) 5 SCC 661
5
against the appellant could not be successfully maintained
without prosecuting DAKSHIN. Since the complaint was
originally lodged only against the appellant, the respondent
resorted to the device of filing an application on 19.8.2015
under Section 319 CrPC to ‘implead’ (in substance summon)
DAKSHIN as an accused/ respondent to the complaint.
(b) Section 142(1)(a) of THE ACT inter alia stipulates that a
complaint regarding the commission of the offence under
Section 138 must be “made within one month of the date on which
the cause of action arises under clause (c) of the proviso to Section 138”.
The application under Section 319 of CrPC by which
DAKSHIN is sought to be impleaded (summoned) is in
substance a complaint against DAKSHIN which is filed some
three years after the expiry of the period of 15 days stipulated
under clause (c) of the proviso to Section 138. Therefore
barred by the stipulation contained in Section 141(1)(b) of
THE ACT. No valid explanation for condoning such a long
delay is offered by the respondent. Both the courts below
erred in coming to the conclusion that once the offence is
6
taken cognizance of, the question of delay does not arise.
(c) Section 1382
stipulates inter alia that (i) the payee of the
cheque must give a notice in writing to the drawer of the
cheque within 30 days from the “receipt of the information by him
from the bank regarding the return of the cheque as unpaid”; (ii) the
notice must contain a demand for the payment of the amount
due on the cheque; and (iii) upon the receipt of the notice, if
the drawer of the cheque fails to make payment within 15
days of the receipt of the notice, prosecution could be
launched within one month thereafter. The timelines
stipulated under clauses (a) to (c) of the proviso to Section
138 are mandatory.3
2
“Section 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 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, 20 [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.”
3
7
(d) The (instant) application under Section 319 CrPC came
to be filed (on 19.08.2015) some three years after the
dishonour of the cheque by the bank (on 30.8.2012). If the
respondent were to file complaint under Section 138 against
DAKSHIN on 19.8.2015, such a complaint would be clearly
not maintainable as it would have been far beyond the
permissible time within which a complaint could have been
filed under Section 138 of THE ACT. Therefore, both the
courts below erred in allowing the application.
13. On the other hand, the learned counsel for the respondent
submitted that the trial court and the High Court rightly impleaded the
appellant. The learned counsel submitted that the proviso to clause (b)
of Section 142 of THE ACT enables the Court to take cognizance of the
offence even beyond the prescribed period of limitation, if the
complainant satisfies the Court that he had sufficient cause for not
making the complaint within the period of limitation. The respondent
D. Vinod Shivappa v. Nanda Belliappa, (2006) 6 SCC 456
“14. ...There is good authority to support the proposition that once the complainant, the payee of the cheque, issues
notice to the drawer of the cheque, the cause of action to file a complaint arises on the expiry of the period prescribed for
payment by the drawer of the cheque. If he does not file a complaint within one month of the date on which the cause of
action arises under clause (c) of the proviso to Section 138 of the Act, his complaint gets barred by time.”
C.C. Alavi Haji v. Palapetty Muhammed and Another, (2007) 6 SCC 555
“9. ….It was further observed that once the payee of the cheque issues notice to the drawer of the cheque, the
cause of action to file a complaint arises on the expiry of the period prescribed for payment by the drawer of the cheque.
If he does not file a complaint within one month of the date on which the cause of action arises under Clause (c) of the
proviso to Section 138 of the Act, his complaint gets barred by time. …”
8
only got to know that the cheque in question was drawn on the account
of DAKSHIN only during the course of trial. Therefore, the respondent
made out a case for condonation of the delay.
14. It is rather difficult to understand the decision of the trial court.
We are given to understand that the order is made in vernacular and
only a translated copy4
of the same is placed before us. Be that as it
may, the ‘relevant’ portion of the translated copies reads as follows:-
“Hence whether cheque was drawn by company trial on the complaint
can be possible only if company is impleaded in complaint.
Hence as far as this case on hand, without impleading Dakshin Granite
(P) Ltd trial can not be conducted for impleading the company and
conditions as per Section 138 should be fulfilled. As per Section 138
Notice has been sent to Dakshin Granites – hence conditions fulfilled.
It is prayed by complainant that he should be permitted to implead
company and also condone the delay.
As per Section 142, complaint is to be filed with one month which has
been done. Hence as per Section 142(b) no separate petition is
required after cognizance of offence.
The offenders of crime can be decided. To take conginsance it is not
required to take cognizance in the case of each accused.
In view of the above the petition is allowed and I order for impleading
the company and summons to be served.”
15. While examining the legality of the trial court’s order, the High
Court took note of the fact that two applications were filed by the
respondent, one to condone the delay (of 1211 days) and other to
implead (summon?) DAKSHIN invoking Section 319 of the CrPC. The
High Court recorded an interesting finding:-
4
We are not informed whether it is an official translation by either of the courts below or any
one of the learned counsel who appeared in the case or by the parties.
9
“In this case, the present revision is preferred only against the order
passed in Crl.M.P. No. 6771 of 2015 in C.C. No. 2925 of 2012, which
was filed to implead M/s. Dakshin Granites Private Ltd., as an accused
in the private complaint and no appeal or revision was preferred against
the order passed in Crl.M.P. No. 1257 of 2016 by either side.”
16. We say it is an interesting finding because from the translation of
the trial court’s order placed before us, the trial court is silent about the
application for condonation of the delay. On the other hand, the trial
court observed “Hence as per Section 142(b) no separate petition is required after
cognizance of offence.”
After recording such a finding, the High Court proceeded to say;
“…The Trial Court, after considering the arguments of both sides, came
to a conclusion that since the case was already taken on file and
cognizance of the offence was taken, in this case, separate petition to
condone the delay of 1211 days is not necessary and M/s. Dakshin
Granites Private Ltd. was impleaded as an accused. Admittedly,
statutory notice under Section 138(b) of the Negotiable Instruments Act
was issued to M/s. Dakshin Granites Private Ltd., and M/s. Dakshin
Granites Private Ltd., has not preferred any revision before this Court.
Hence, the present petitioner is only the signatory. Even according to
the present petitioner, who is an individual person and who signed the
cheque represents the company.”
The High Court, concluded that as no revision is filed by DAKSHIN
the “revision preferred by the petitioner is not maintainable. No merits in the
petition.”
17. We are of the opinion that it is difficult to understand the
conclusions recorded by both the courts below. They are wholly
illogical, to use a very mild expression.
18. Section 142 of THE ACT inter alia stipulates that no court shall
10
take cognizance of any offence punishable under Section 138 unless a
complaint is made within one month of the date on which the cause of
action arises under clause (c) of the proviso to Section 138. The
relevant portion of Section 142 reads as follows:-
“142 Cognizance of offences. —Notwithstanding anything contained in
the Code of Criminal Procedure, 1973—
(a) no court shall take cognizance of any offence punishable under
section 138 except upon a complaint, in writing, made by the payee or,
as the case may be, the holder in due course of the cheque;
(b) such complaint is made within one month of the date on which
the cause of action arises under clause (c) of the proviso to section 138:
Provided that the cognizance of a complaint may be taken by the
Court after the prescribed period, if the complainant satisfies the Court
that he had sufficient cause for not making a complaint within such
period.”
19. The preliminary facts constituting an offence5
under Section 138 of
the Act are; (i) that a cheque is drawn, and (ii) that cheque is dishonored
by the Bank when presented by the payee. Under the scheme of Section
138 both the drawer of the cheque and the bank upon which the cheque
5
However, this Court in MSR Leathers v. S. Palaniappan and Another, (2013) 1 SCC 177 held;
10. Proviso to Section 138, however, is all important and stipulates three distinct conditions precedent, which must
be satisfied before the dishonour of a cheque can constitute an offence and become punishable. The first condition is that
the cheque ought to have 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. The second condition is that the payee or the holder in due course of
the cheque, as the case may be, ought to make 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. The third condition is that the drawer of such a cheque should have failed to make
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. It is only upon the satisfaction of all the three conditions mentioned
above and enumerated under the proviso to Section 138 as clauses (a), (b) and (c) thereof that an offence
under Section 138 can be said to have been committed by the person issuing the cheque.
11
is drawn are parties against whom the payee of the cheque can have
various legal rights, which may have either civil or criminal
consequences or perhaps both depending upon the facts of a given case.
Section 138 prescribes only one of the consequences, i.e. the
prosecution and punishment of only the drawer of the cheque. It is
possible in a given case that a bank may without any valid justification
decline to honor a cheque drawn on it. For which act of the bank, the
drawer of the cheque may in no way be responsible either in fact or in
law. In such a fact situation, the payee of the cheque may have legal
rights and remedies for the redressal of the injury (if any) caused by the
Bank in addition to his rights against the drawer of the cheque.
20. The offence under Section 138 of THE ACT is capable of being
committed only by the drawer of the cheque. The logic of the High Court
that since the offence is already taken cognizance of, there is no need to
take cognizance of the offence against DAKSHIN is flawed. Section 141
stipulates the liability for the offence punishable under Section 138 of
THE ACT when the person committing such an offence happens to be a
company - in other words when the drawer of the cheque happens to be
a company. Relevant portion of Section 141 reads as follows:-
“Section 141. Offences by companies.—
12
(1) If the person committing an offence under section 138 is a company,
every person who, at the time the offence was committed, was in charge
of, and was responsible to the company for the conduct of the business
of the company, as well as the company, shall be deemed to be guilty of
the offence and shall be liable to be proceeded against and punished
accordingly:”
21. This Court in Aneeta Hada, had an occasion to examine the
question “whether an authorised signatory of a company would be liable for
prosecution under Section 138 of the Negotiable Instruments Act, 1881 (for brevity
“the Act”) without the company being arraigned as an accused” and held as
follows:-
“59. In view of our aforesaid analysis, we arrive at the irresistible
conclusion that for maintaining the prosecution under Section 141 of
the Act, arraigning of a company as an accused is imperative. The
other categories of offenders can only be brought in the drag-net on the
touchstone of vicarious liability as the same has been stipulated in the
provision itself. …”
Yet the High Court reached a conclusion that the revision filed by
the petitioner is not maintainable because DAKSHIN did not choose to
challenge the trial court’s order.
The High Court failed to appreciate that the liability of the
appellant (if any in the context of the facts of the present case) is only
statutory because of his legal status as the DIRECTOR of DAKSHIN.
Every person signing a cheque on behalf of a company on whose
account a cheque is drawn does not become the drawer of the cheque.
13
Such a signatory is only a person duly authorised to sign the cheque on
behalf of the company/drawer of the cheque. If DAKSHIN/drawer of
the cheque is sought to be summoned for being tried for an offence
under Section 138 of THE ACT beyond the period of limitation
prescribed under THE ACT, the appellant cannot be told in view of the
law declared by this Court in Aneeta Hada that he can make no
grievance of that fact on the ground that DAKSHIN did not make any
grievance of such summoning. It is always open to DAKSHIN to raise
the defense that the initiation of prosecution against it is barred by
limitation. DAKSHIN need not necessarily challenge the summoning
order. It can raise such a defense in the course of trial.
Coming to the view of the High Court that only the offence is taken
cognizance of and there is no need to take cognizance of an offence
accused-wise is an erroneous view in the context of a prosecution under
THE ACT. Most probably the High Court recorded such conclusion
(though not expressly stated) on the basis of the judgment of this Court
in Raghubans Dubey v. State of Bihar, AIR 1967 SC 1167, where it
was stated:
“Para 9. … In our opinion, once cognizance has been taken by the
Magistrate, he takes cognizance of an offence and not the offenders;
once he takes cognizance of an offence it is his duty to find out who the
offenders really are and once he comes to the conclusion that apart from
14
the persons sent up by the police some other persons are involved, it is
his duty to proceed against those persons. …”
Such a statement of law was made by this Court in the background of
the scheme of the CrPC.
22. The CrPC is an enactment which is designed to regulate the
procedures governing the investigation of crimes in order to get the
perpetrators of the crime punished. A crime is an act or omission
prohibited by law attracting certain legal consequences like
imprisonment, fine etc. Obviously, acts or omissions constituting
offences/crimes are capable of being committed only by persons either
natural or juridical.
The CrPC imposes a duty on the investigating agencies to gather
evidence necessary to establish the occurrence of a crime and to trace
out the perpetrators of the crime in order to get them punished.
Punishment can be inflicted only by a competent Court but not by the
investigating agency. Courts are authorised to inflict punishment if only
they are satisfied that the evidence gathered by the investigating agency
is sufficient to establish that (1) a crime had been committed; and (2)
the persons charged with the offence (accused) and brought before the
Court by the investigating agency for trial are the perpetrators of the
15
crime.
Under the Scheme of the CrPC, any investigating agency (normally
the police) is bound to investigate by following the procedure prescribed
therein once it receives either information regarding the commission of a
cognizable offence or an order from a Magistrate to investigate into the
allegation of the occurrence of a non-cognizable offence and submit a
report under Section 173. Section 173(2)(i)(d) inter alia stipulates that
the report should contain a statement:
“Whether any offence appears to have been committed and if so by
whom?”
The conclusions reached by the police after investigation into the above
two questions are required to be scrutinized by a competent Court. It is
only after the Court is satisfied that the evidence collected by the
investigating agency is sufficient in law to punish the accused, such
accused can be punished. Taking cognizance of an offence by the Court
is one of the initial steps in the process. Thereafter, the investigating
agency is required to collect evidence (investigate) and place the same
before the Court under Section 173 CrPC.
23. The scheme of the prosecution in punishing under Section 138 of
THE ACT is different from the scheme of the CrPC. Section 138 creates
16
an offence and prescribes punishment. No procedure for the
investigation of the offence is contemplated. The prosecution is
initiated on the basis of a written complaint made by the payee of a
cheque. Obviously such complaints must contain the factual allegations
constituting each of the ingredients of the offence under Section 138.
Those ingredients are: (1) that a person drew a cheque on an account
maintained by him with the banker; (2) that such a cheque when
presented to the bank is returned by the bank unpaid; (3) that such a
cheque was presented to the bank within a period of six months from
the date it was drawn or within the period of its validity whichever is
earlier; (4) that the payee demanded in writing from the drawer of the
cheque the payment of the amount of money due under the cheque to
payee; and (5) such a notice of payment is made within a period of 30
days from the date of the receipt of the information by the payee from
the bank regarding the return of the cheque as unpaid. It is obvious
from the scheme of Section 138 that each one of the ingredients flows
from a document which evidences the existence of such an ingredient.
The only other ingredient which is required to be proved to establish the
commission of an offence under Section 138 is that inspite of the
demand notice referred to above, the drawer of the cheque failed to
17
make the payment within a period of 15 days from the date of the
receipt of the demand. A fact which the complainant can only assert
but not prove, the burden would essentially be on the drawer of the
cheque to prove that he had in fact made the payment pursuant to the
demand.
24. By the nature of the offence under Section 138 of THE ACT, the
first ingredient constituting the offence is the fact that a person drew a
cheque. The identity of the drawer of the cheque is necessarily required
to be known to the complainant (payee) and needs investigation and
would not normally be in dispute unless the person who is alleged to
have drawn a cheque disputes that very fact. The other facts required to
be proved for securing the punishment of the person who drew a cheque
that eventually got dishonoured is that the payee of the cheque did in
fact comply with each one of the steps contemplated under Section 138
of THE ACT before initiating prosecution. Because it is already held by
this Court that failure to comply with any one of the steps contemplated
under Section 138 would not provide “cause of action for prosecution”.
Therefore, in the context of a prosecution under Section 138, the
concept of taking cognizance of the offence but not the offender is not
appropriate. Unless the complaint contains all the necessary factual
18
allegations constituting each of the ingredients of the offence under
Section 138, the Court cannot take cognizance of the offence.
Disclosure of the name of the person drawing the cheque is one of the
factual allegations which a complaint is required to contain. Otherwise
in the absence of any authority of law to investigate the offence under
Section 138, there would be no person against whom a Court can
proceed. There cannot be a prosecution without an accused. The
offence under Section 138 is person specific. Therefore, the Parliament
declared under Section 142 that the provisions dealing with taking
cognizance contained in the CrPC should give way to the procedure
prescribed under Section 142. Hence the opening of non-obstante clause
under Section 142. It must also be remembered that Section 142 does
not either contemplate a report to the police or authorise the Court
taking cognizance to direct the police to investigate into the complaint.
25. The question whether the respondent had sufficient cause for not
filing the complaint against DAKSHIN within the period prescribed
under THE ACT is not examined by either of the courts below. As
rightly pointed out, the application, which is the subject matter of the
instant appeal purportedly filed invoking Section 319 CrPC, is only a
device by which the respondent seeks to initiate prosecution against
19
DAKSHIN beyond the period of limitation stipulated under the Act.
26. No doubt Section 142 authorises the Court to condone the delay in
appropriate cases. We find no reason to condone the delay. The
justification advanced by the respondent that it is during the course of
the trial, the respondent realized that the cheque in question was drawn
on the account of DAKSHIN is a manifestly false statement. On the face
of the cheque, it is clear that it was drawn on account of DAKSHIN.
Admittedly the respondent issued a notice contemplated under clause
(b) of the proviso to Section 138 to DAKSHIN. The fact is recorded by
the High Court. The relevant portion is already extracted in para 16.
27. The judgment under appeal is contrary to the language of THE ACT
as expounded by this Court in Aneeta Hada (supra) and, therefore,
cannot be sustained. The judgment is, accordingly, set aside. The appeal
is allowed. In the circumstances, the costs is quantified at Rs.
1,00,000/- (Rupees One Lakh Only).
….....................................J.
(J. CHELAMESWAR)
……. ………….....................J.
(S. ABDUL NAZEER)
New Delhi
August 30, 2017
20
