Orissa High Court
M/S. Nandi Cotton vs M. Lakshman Kumar & .... Opposite ... on 12 September, 2025
Author: Chittaranjan Dash
Bench: Chittaranjan Dash
IN THE HIGH COURT OF ORISSA AT CUTTACK
CRLMC No. 1730 of 2022
M/s. Nandi Cotton .... Petitioner
Ginning Mill Private
Limited
Mr. C. Ananda Rao, Sr.
Advocate
-versus-
M. Lakshman Kumar & .... Opposite Parties
Anr.
Mr. Gopinath Mishra, Advocate
CRLMC No. 1731 of 2022
M/s. Nandi Cotton .... Petitioner
Ginning Mill Private
Limited
Mr. C. Ananda Rao, Sr.
Advocate
-versus-
M. Gouri Jagan Mohan .... Opposite Parties
Gandhi & Anr.
Mr. Gopinath Mishra, Advocate
CORAM:
THE HON'BLE MR. JUSTICE CHITTARANJAN DASH
Date of Judgment: 12.09.2025
Chittaranjan Dash, J.
1. By means of these applications, the Petitioner has sought to assail the order dated 17.02.2022 passed by the learned S.D.J.M., Rayagada in I.C.C. Nos. 28 of 2020 and 29 of 2020 respectively, CRLMC No. 1730 of 2022 CRLMC No. 1731 of 2022 Page 1 of 8 whereby cognizance of the offence under Section 138 of the Negotiable Instruments Act, 1881 was taken against them.
2. The background facts of the case, in brief, are that Opposite Party No.1 filed a complaint before the learned S.D.J.M., Rayagada alleging that the Petitioner-Company, through its Director being in charge of the affairs of the Company, purchased cotton on 05.01.2020 and, towards the price of such purchase, issued a cheque for a sum of Rs.7,50,000/- (Rupees Seven Lakhs Fifty Thousand only) drawn on Karur Vysya Bank, Saluru, District-Vizianagaram, Andhra Pradesh, dated 05.01.2020. The said cheque, when presented by the Complainant with his banker, Andhra Bank, Rayagada, on 13.02.2020, was returned dishonoured on 14.02.2020 for insufficiency of funds. Thereafter, in compliance with the statutory requirements under Section 138 of the N.I. Act, the Complainant issued a demand notice through his counsel on 05.03.2020 addressed to the Petitioner-Company as well as its Director. The Petitioner, however, neither responded to the notice nor complied with the demand for payment of the cheque amount. Consequently, the Complainant instituted a complaint before the learned S.D.J.M., Rayagada. Upon examination of the complaint, the supporting affidavit, and the statements of witnesses recorded in person, the learned Court found prima facie materials under Section 138 of the N.I. Act, took cognizance of the offence, and issued process. Aggrieved thereby, the Petitioner has approached this Court, inter alia, contending that being a Company registered under the Companies Act, 1956 and a juristic person, it had nominated its General Manager, namely, Selvem Kannan, as the Authorised Representative.
CRLMC No. 1730 of 2022 CRLMC No. 1731 of 2022 Page 2 of 83. Mr. Rao, learned counsel for the Petitioner, submits that the cheque in question was admittedly signed by Opposite Party No.2 on 05.01.2020. However, Opposite Party No.2 had already resigned from the Company with effect from 25.10.2019, which resignation had been duly accepted by the Board of Directors in its resolution dated 25.10.2019 and intimated to the Registrar of Companies, wherein the said fact stood duly recorded. It is thus contended that since Opposite Party No.2 was no longer in the service of the Company on the date of issuance of the cheque, his act of issuing the same was wholly unauthorised. Consequently, the Petitioner-Company cannot be held vicariously liable for the offence allegedly committed by a person who was not in its employment, more so when the act is alleged to have been done in collusion with the Complainant. It is the further contention of the Petitioner that Opposite Party No.2 had misappropriated Company funds to the extent of Rupees Four Crores, for which Rambhadrapuram P.S. Case No. 38 of 2020 had been registered. Mr. Rao also submits that certain material questions with regard to the alleged transaction, including delivery of goods and bills, were left out during the cross- examination of the Complainant. Consequently, the Petitioner moved an application before the learned S.D.J.M., Rayagada under Section 311 Cr.P.C. for recalling the Complainant as a witness. However, the said application came to be rejected by order dated 25.05.2022. In the above circumstances, it is prayed on behalf of the Petitioner that the continuation of the criminal proceeding would amount to an abuse of the process of law and therefore the impugned order deserves to be quashed.
4. The law is well settled that the provisions of Section 141 of the N.I. Act create vicarious liability by a legal fiction, which necessarily CRLMC No. 1730 of 2022 CRLMC No. 1731 of 2022 Page 3 of 8 presupposes the commission of the offence by the company or firm itself. In other words, unless the company or firm, being the principal accused, is shown to have committed the offence under Section 138, the persons referred to in sub-sections (1) and (2) of Section 141 cannot be fastened with criminal liability. The section extends vicarious liability to the officers associated with the company or firm only when the twin requirements envisaged therein are satisfied, namely, that such person was, at the time of commission of the offence, in charge of and responsible for the conduct of the business of the company, or that the offence was committed with his consent, connivance, or attributable to his negligence.
5. A three Judge Bench of the Hon'ble Supreme Court in Rangappa vs. Sri Mohan, reported in (2010) 11 SCC 441, held as follows:
26. In light of these extracts, we are in agreement with the respondent claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat [Krishna Janardhan Bhat v. Dattatraya G. Hegde, (2008) 4 SCC 54 : (2008) 2 SCC (Cri) 166], may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested.
However, there can be no doubt that there is an initial presumption which favours the complainant.
27. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act CRLMC No. 1730 of 2022 CRLMC No. 1731 of 2022 Page 4 of 8 specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendant-accused cannot be expected to discharge an unduly high standard of proof."
6. Further, the Hon'ble Apex Court in Anss Rajashekar vs. Augustus Jeba Ananth, reported in (2020) 15 SCC 348, has clarified as follows:
"Section 139 of the Act mandates that it shall be presumed, unless the contrary is proved, that the holder of a cheque received it, in discharge, in whole or in part, of a debt, or liability. The expression "unless the contrary is proved" indicates that the presumption under Section 139 of the Act is rebuttable. Terming this as an example of a "reverse onus clause" the three Judge Bench of this Court in Rangappa (supra) held that in determining whether the presumption has been rebutted, the test of proportionality must guide the determination. The standard of proof for rebuttal of the presumption under Section 139 of the Act is guided by a preponderance of probabilities. This Court held thus:
"28 In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of `preponderance of probabilities'. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to CRLMC No. 1730 of 2022 CRLMC No. 1731 of 2022 Page 5 of 8 raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own." (emphasis supplied)
7. Section 139 of the N.I. Act mandates that it shall be presumed, unless the contrary is proved, that the holder of the cheque received it in discharge, in whole or in part, of a legally enforceable debt or liability. The Hon'ble Supreme Court in Rangappa (supra), authoritatively held that this presumption does indeed include the existence of a legally enforceable debt, and though rebuttable, the initial burden lies upon the accused to establish a probable defence. The Court has further explained that Section 139 is a "reverse onus clause" introduced to improve the credibility of negotiable instruments, and therefore, while the presumption favours the complainant at the outset, the accused is not expected to discharge an unduly high standard of proof. This principle has been reiterated in Anss Rajashekar (supra), wherein the Apex Court clarified that the presumption under Section 139 is rebuttable on the standard of preponderance of probabilities. In other words, if the accused is able to raise a probable defence that creates reasonable doubt as to the existence of a legally enforceable debt or liability, the prosecution may fail. Thus, the settled legal position is that the rebuttal of the presumption under Section 139 is not to be tested on proof beyond reasonable doubt but on the yardstick of preponderance of probabilities, which necessarily requires appreciation of evidence at trial.
8. It is not in dispute that Opposite Party No.2 was a Director of the Petitioner-Company. The claim that he had resigned with effect from 25.10.2019, that such resignation was accepted by the Board of Directors, and that the same was subsequently recorded by the Registrar of Companies, are all matters requiring evidence and therefore are issues CRLMC No. 1730 of 2022 CRLMC No. 1731 of 2022 Page 6 of 8 to be considered during the course of trial. It is also not disputed that the cheque in question, admittedly signed by Opposite Party No.2, was drawn on the account of the Petitioner-Company. The allegations with regard to misappropriation of funds by Opposite Party No.2 and the action, if any, taken by the Company in that regard are also factual matters which can only be thrashed out during trial. There is no material, at this stage, to conclusively show that the issuance of the cheque by Opposite Party No.2 on behalf of the Company was wholly unauthorised or that he was not in possession of the cheque after his alleged resignation.
9. The grounds urged by the Petitioner, seeking to absolve itself from the rigor of the provisions of the N.I. Act, essentially pertain to factual defences which cannot be adjudicated within the narrow scope of inquiry permissible under Section 482 Cr.P.C. While exercising inherent powers under Section 482 Cr.P.C., this Court does not sit as a Court of Appeal or Revision. Though the power is wide, it has to be exercised sparingly, with circumspection, and only in cases where continuation of the proceedings would amount to an abuse of the process of the Court or where quashing of the proceedings would otherwise serve the ends of justice. Interference at this stage is therefore unwarranted.
10. Admittedly, in the present case there exists no legal bar to the lodging of the complaint against the Petitioner, particularly when the cheque in question was drawn on the account of the Company and relates to a transaction entered into between the parties, in discharge of which such cheque is alleged to have been issued.
11. In view of the foregoing discussion, this Court finds no ground to hold that the complaint does not, prima facie, make out a case against the CRLMC No. 1730 of 2022 CRLMC No. 1731 of 2022 Page 7 of 8 Petitioner so as to warrant quashing of the proceeding at this stage. The Petitioner, however, shall be at liberty to urge all such pleas and defences before the learned Trial Court during the course of trial, which shall be duly considered in accordance with law upon appreciation of the evidence adduced.
12. In the result, both CRLMC No. 1730 of 2022 and CRLMC No. 1731 of 2022, stand dismissed.
(Chittaranjan Dash) Judge Sarbani CRLMC No. 1730 of 2022 CRLMC No. 1731 of 2022 Page 8 of 8 Signature Not Verified Digitally Signed Signed by: SARBANI DASH Designation: Junior Stenographer Reason: Authentication Location: HIGH COURT OF ORISSA, CUTTACK Date: 15-Sep-2025 10:41:23