Mukesh Pyarchand Jagetiya vs State Of Gujarat

Gujarat High Court

Mukesh Pyarchand Jagetiya vs State Of Gujarat on 11 December, 2023

                                                                                      NEUTRAL CITATION




     R/CR.MA/11465/2017                                ORDER DATED: 11/12/2023

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             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

     R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
                   FIR/ORDER) NO. 11465 of 2017

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                          MUKESH PYARCHAND JAGETIYA
                                    Versus
                          STATE OF GUJARAT & 1 other(s)
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Appearance:
MR. KISHAN H DAIYA(6929) for the Applicant(s) No. 1
MR.KISHAN PRAJAPATI(7074) for the Applicant(s) No. 1
MR MANISH J PATEL(2131) for the Respondent(s) No. 2
MR SOAHAM JOSHI, APP for the Respondent(s) No. 1
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 CORAM:HONOURABLE MR. JUSTICE SANDEEP N. BHATT

                                 Date : 11/12/2023

                                  ORAL ORDER

1. This application is filed under Section 482 of the Code of Criminal Procedure, 1973 (`the Code' for short) for quashing and setting aside the complaint being Criminal Case No.7811 of 2016 pending before the District Court, Ahmedabad Rural filed under the provisions of the Negotiable Instruments Act (`NI Act' for short) and the consequential orders passed thereto.

2. The brief facts leading to filing of this application as stated in the application are such that the impugned complaint came to be filed by the complainant alleging that the applicant herein is doing business of contractor and the Page 1 of 13 Downloaded on : Wed Dec 13 20:41:22 IST 2023 NEUTRAL CITATION R/CR.MA/11465/2017 ORDER DATED: 11/12/2023 undefined complainant is doing the business of iron and steel; that initially, the faith was created by making payment in time;

thereafter, in December, 2013 to February, 2014, the applicant has purchased TMT bars worth Rs.58,50,019/- and issued cheques as authorized signatory of the company towards part payment; that the cheques were presented for payment and the same were returned on account of insufficient fund on 21.7.2014; thereafter the complainant issued statutory notice on 19.7.2014 and as no payment was made inspite of statutory notice issued, the impugned complaint came to be filed by the complainant.

3. Heard learned advocates for the parties.

4. Learned advocate Mr.Daiya for the applicant submits that the applicant is one of the Directors of Venu Engineering Private Limited and the same is registered under the Companies Act before ROC Ahmedabad and the business is done by the applicant on behalf of the company and the bills were also issued in the name of the company, then also the complainant did not send notice to the company and it is sent to the applicant alone and even in the complaint, the company is not joined as accused and therefore, the impugned complaint deserves to be quashed. He further submitted that the as the business is done on behalf of his Page 2 of 13 Downloaded on : Wed Dec 13 20:41:22 IST 2023 NEUTRAL CITATION R/CR.MA/11465/2017 ORDER DATED: 11/12/2023 undefined company, even cheques were also issued of the company, he is not alone liable for any offence and he alone cannot be prosecuted for the same; that no ingredients of Section 138 of the NI Act are satisfied and therefore no prima facie case is made out against the applicant. He, therefore, submitted that this application be allowed and the complaint be quashed qua the applicant.

5. In support of his submissions, learned advocate for the applicant has relied on the decision in the cases of Aneeta Hada V/s Godfather Travels & Tours Pvt.Ltd., reported in (2012)5 SCC 661 and Rallis India Limited V/s Poduru Vidya Bhusan reported in 2011(13) SCC 88.

6. Per contra, learned APP Mr.Joshi for respondent no.1-state and learned advocate Mr.Patel for the respondent no.2-complainant have objected these petitions and submitted that this Court should not exercise its powers by interfering with the proceedings of recovery of amount and the proceedings initiated under Section 138 of the Act are perfectly justified and the facts are subject matter of trial and this Court should not exercise inherent powers under Section 482 of the Code, which otherwise, should be exercised sparingly. He, therefore, prayed to dismiss this application.

NEUTRAL CITATION R/CR.MA/11465/2017 ORDER DATED: 11/12/2023 undefined

7. I have considered the rival submissions and perused the material on record.

8. At the outset, the provisions of Sections 138 of the NI Act are required to be seen, which read 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 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 extend to two year", or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall Page 4 of 13 Downloaded on : Wed Dec 13 20:41:22 IST 2023 NEUTRAL CITATION R/CR.MA/11465/2017 ORDER DATED: 11/12/2023 undefined 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 induce 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 cheques 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 purpose of this section, "debt or other liability"

means a legally enforceable debt or other liability."

9. Now, if the facts of the present case are perused, it transpires that the applicant was a director of the company viz. Venu Engineering Private Limited, the bills were issued in the name of the company, the cheques were Page 5 of 13 Downloaded on : Wed Dec 13 20:41:22 IST 2023 NEUTRAL CITATION R/CR.MA/11465/2017 ORDER DATED: 11/12/2023 undefined issued by the applicant in the name of the company, however, the notice is not issued to the company and the company is not arraigned as an accused in the impugned complaint and therefore the applicant cannot be held vicariously liable under Section 141 of the NI Act; even the Section 141 is not invoked in the complaint;

10. The Honourable Apex Court observed in paragraphs Nos. 39, 42 and 43 as under:

"39. It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant.

42. We have referred to the aforesaid passages only to highlight that there has to be strict observance of the provisions regard being had to the legislative intendment because it deals with penal provisions and a penalty is not to be imposed affecting the rights of persons whether juristic entities or individuals, unless they are arrayed as accused.

NEUTRAL CITATION R/CR.MA/11465/2017 ORDER DATED: 11/12/2023 undefined It is to be kept in mind that the power of punishment is vested in the legislature and that is absolute in Section 141 of the Act which clearly speaks of commission of offence by the company. The learned counsel for the respondents have vehemently urged that the use of the term as well as in the Section is of immense significance and, in its tentacle, it brings in the company as well as the director and/or other officers who are responsible for the acts of the company and, therefore, a prosecution against the directors or other officers is tenable even if the company is not arraigned as an accused. The words as well as have to be understood in the context. In Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. And others it has been laid down that the entire statute must be first read as a whole, then section by section, clause by clause, phrase by phrase and word by word. The same principle has been reiterated in Deewan Singh and others v. Rajendra Prasad Ardevi and others and Sarabjit Rick Singh v. Union of India. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words as well as the company appearing in the Section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One Page 7 of 13 Downloaded on : Wed Dec 13 20:41:22 IST 2023 NEUTRAL CITATION R/CR.MA/11465/2017 ORDER DATED: 11/12/2023 undefined cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a director is indicted.

43. 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 dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh (AIR 1971 SC 447) (supra) which is a threeJudge Bench decision. Thus, the view expressed in Sheoratan Agarwal, (AIR 1984 SC 1824) (supra) does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada, (AIR 2000 SC 145 :

1999 AIR SCW 4228) (supra) is overruled with the qualifier as stated in paragraph 37 the decision in Modi Distilleries, (AIR 1988 SC 1128) (supra) has to be treated to be restricted to its own facts as has been explained by us hereinabove."

11. It is also fruitful to refer to the judgment in case of Alka Khandu Avhad V/s Amar Syamprasad Mishra reported in (2021)4 SCC 675 equivalent citation is AIR Page 8 of 13 Downloaded on : Wed Dec 13 20:41:22 IST 2023 NEUTRAL CITATION R/CR.MA/11465/2017 ORDER DATED: 11/12/2023 undefined Online 2021 SC 124, wherein it is held in paragraphs 7,8 and 8.1 as under:

"7. On a fair reading of Section 138 of the NI Act, before a person can be prosecuted, the following conditions are required to be satisfied:

i) that the cheque is drawn by a person and on an account maintained by him with a banker;

ii) for the 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; and

iii) the said cheque 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.

Therefore, a person who is the signatory to the cheque and the cheque is drawn by that person on an account maintained by him and the cheque has been issued for the discharge, in whole or in part, of any debt or other liability and the said cheque has been returned by the bank unpaid, such person can be said to have committed an offence. Section 138 of the NI Act does not speak about the joint liability. Even in case of a joint liability, in case of individual persons, a person Page 9 of 13 Downloaded on : Wed Dec 13 20:41:22 IST 2023 NEUTRAL CITATION R/CR.MA/11465/2017 ORDER DATED: 11/12/2023 undefined other than a person who has drawn the cheque on an account maintained by him, cannot be prosecuted for the offence under Section 138 of the NI Act. A person might have been jointly liable to pay the debt, but if such a person who might have been liable to pay the debt jointly, cannot be prosecuted unless the bank account is jointly maintained and that he was a signatory to the cheque.

8. Now, so far as the case on behalf of the original complainant that the appellant herein - original accused No. 2 can be convicted with the aid of Section 141 of the NI Act is concerned, the aforesaid has no substance.

8.1 Section 141 of the NI Act is relating to the offence by companies and it cannot be made applicable to the individuals. Learned counsel appearing on behalf of the original complainant has submitted that "Company" means any body corporate and includes, a firm or other association of individuals and therefore in case of a joint liability of two or more persons it will fall within "other association of individuals" and therefore with the aid of Section 141 of the NI Act, the appellant who is jointly liable to pay the debt, can be prosecuted. The aforesaid cannot be accepted. Two private individuals cannot be said to be "other association of individuals".

NEUTRAL CITATION R/CR.MA/11465/2017 ORDER DATED: 11/12/2023 undefined Therefore, there is no question of invoking Section 141 of the NI Act against the appellant, as the liability is the individual liability (may be a joint liabilities), but cannot be said to be the offence committed by a company or by it corporate or firm or other associations of individuals. The appellant herein is neither a Director nor a partner in any firm who has issued the cheque. Therefore, even the appellant cannot be convicted with the aid of Section 141 of the NI Act. Therefore, the High Court has committed a grave error in not quashing the complaint against the appellant for the offence punishable under Section 138 r/w Section 141 of the NI Act. The criminal complaint filed against 8 the appellant for the offence punishable under Section 138 r/w Section 141 of the NI Act, therefore, can be said to be abuse of process of law and therefore the same is required to be quashed and set aside."

12. It is also relevant to refer to the judgment of the Hon'ble Apex Court in the case of Inder Mohan Goswami and Another versus State of Uttaranchal reported in (2007) 12 SCC 1, more particularly para : 23 & 24 thereof, which read as under :

NEUTRAL CITATION R/CR.MA/11465/2017 ORDER DATED: 11/12/2023 undefined "23. This Court in a number of cases has laid down the scope and ambit of courts' powers under Sec. 482 CrPC. Every High Court has inherent power to act ex debito justitiae to do real and substantial justice, for the administration of which alone it exists, or to prevent abuse of the process of the court. Inherent power under Sec. 482 CrPC can be exercised:

[(i) to give effect to an order under the Code;] [(ii) to prevent abuse of the process of court, and] [(iii) to otherwise secure the ends of justice.]

24. Inherent powers under Sec. 482 CrPC though wide have to be exercised sparingly, carefully and with great caution and only when such exercise is justified by the tests specifically laid down in this section itself'.

Authority of the court exists for the advancement of justice. If any abuse of the process leading to injustice is brought to the notice of the court, then the court would be justified in preventing injustice by invoking inherent powers in absence of specific provisions in the statute. Discussion of Page 12 of 13 Downloaded on : Wed Dec 13 20:41:22 IST 2023 NEUTRAL CITATION R/CR.MA/11465/2017 ORDER DATED: 11/12/2023 undefined decided cases."

13. In view of the above settled position of law and after considering the facts as alleged in the complaints and circumstances of the present case, when the company is not arraigned as an accused, continuation of further proceedings qua the applicant pursuant to the said complaint will cause greater hardships to the applicant and no fruitful purpose would be served if such further proceedings are allowed to be continued. The Court must ensure that criminal prosecution is not used as instrument of harassment or for seeking private vendetta or with ulterior motive to pressurise accused or to settle the score.

14. Resultantly, this application is allowed. Criminal Case No.7811 of 2016 pending before the District Court, Ahmedabad Rural is hereby quashed and set aside qua the present applicant. Direct service is permitted.

(SANDEEP N. BHATT,J) SRILATHA Page 13 of 13 Downloaded on : Wed Dec 13 20:41:22 IST 2023