Bombay High Court
Indermal Pannalal Jain And Ors vs The State Of Maharashtra And Anr on 22 November, 2022
Bench: Amit Borkar
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AGK
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
WRIT PETITION NO.2018 OF 2017
Indermal Pannalal Jain & Ors. ... Petitioners
V/s.
The State of Maharashtra & Anr. ... Respondents
Digitally
signed by
Mr. Yashpal M. Thakur for the petitioners.
ATUL
Mr. R.M. Pethe, APP for respondent no.1/State.
ATUL GANESH
GANESH KULKARNI
KULKARNI Date:
2022.11.24
Mr. Zain Shroff with Mr. Zubin Sheth i/by Y&A Legal
11:47:24
+0530
Advocates for respondent no.2.
CORAM : AMIT BORKAR, J.
DATED : NOVEMBER 22, 2022
P.C.:
1. The petitioners, accused in a proceeding under section 138
of the Negotiable Instruments Act, 1881 (hereafter "NI Act", for
short), are challenging the order of issuance of process on the
following grounds:
(a) the averments in the complaint are not sufficient to
constitute pleading as mandatorily required under section
141 of the NI Act;
(b) petitioner no.2 resigned with effect from 16 th September
2014 and petitioner no.3 has resigned with effect from 20 th
September 2015 before the fifteenth (15 th) day of dishonor
of cheque; and
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(c) petitioner no.3 being independent non-executive director,
cannot be proceeded against.
2. Facts giving rise to the filing of the present petition relevant
for the adjudication of the issue involved are as under:
3. Respondent no.2 filed a complaint before the learned
Metropolitan Magistrate, 43rd Court at Borivali, Mumbai
(hereafter "learned Magistrate", for short) alleging that he had
sold polypropylene and towards satisfaction of the price of the
goods, cheques in question have been issued. Both the cheques
were dated 23rd August 2014. The date of dishonor of cheque is
25th August 2014. The date of receipt of demand notice is 20 th
September 2014. Fifteenth (15th) day after the date of receipt of
demand notice is 4th October 2014.
4. Respondent no.2, therefore, filed a complaint before the
learned Magistrate and the learned Magistrate by order dated 23 rd
January 2015 issued process against the petitioners. Aggrieved
thereby, the petitioners have filed present writ petition.
5. Learned advocate for the petitioners submitted that the
averments in the complaint are not sufficient to attract liability
under section 141 of the NI Act. To bolster his submission, he
relied on the judgment of the Apex Court in the case of SMS
Pharmaceuticals v. Neeta Bhalla & Anr. reported in (2005)
8 SCC 89. In so far as the said averment is concerned, the relevant
averments in the complaint read as under:
"1. ... I say that accused No.2 to 5 are the Directors of
the accused No.1. I say that accused Nos.2 to 5 are looking
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after day to day affairs of the business of the accused No.1
and are fully liable and responsible for the act of the accused
No.1. ..."
6. On perusal of the averments quoted above, in my opinion,
the said averments constitute sufficient compliance as mandated
by section 141 of the NI Act.
7. Learned advocate for the petitioners submitted that the
words 'at the time of offence' have not been incorporated in the
complaint and, therefore, there is non-compliance of the
averments as mandated by section 141 of the NI Act. The
interpretation of the averments and the approach of the Court
while interpreting the averments in no longer res integra in view
of the authoritative pronouncements of the Apex Court in S.P.
Mani and Mohan Dairy v. Dr. Snehalata Elangovan
reported in 2022 SCC OnLine SC 1238. In paragraph 33, the Apex
Court has laid down the legal principles to be adopted by the
Courts while approaching the averments as required under section
141 of the NI Act as under:
"33. Thus, the legal principles discernible from the aforesaid
decision of this Court may be summarised as under:--
(a) Vicarious liability can be fastened on those who are in-
charge of and responsible to the company or firm for the
conduct of its business. For the purpose of Section 141, the
firm comes within the ambit of a company;
(b) It is not necessary to reproduce the language of Section
141 verbatim in the complaint since the complaint is
required to be read as a whole'
(c) If the substance of the allegations made in the
complaint fulfill the requirements of Section 141, the
complaint has to proceed in regards the law.
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(d) In construing a complaint a hyper-technical approach
should not be adopted so as to quash the same;
(e) The laudable object of preventing bouncing of cheques
and sustaining the credibility of commercial transactions
resulting in the enactment of Sections 138 and 141
respectively should be kept in mind by the Court concerned.
(f) These provisions create a statutory presumption of
dishonesty exposing a person to criminal liability if payment
is not made within the statutory period even after the issue
of notice.
(g) The power of quashing should be exercised very
sparingly and where, read as a whole, the factual foundation
for the offence has been laid in the complaint, it should not
be quashed.
(h) The Court concerned would owe a duty to discharge
the accused if taking everything stated in the complaint is
correct and construing the allegations made therein liberally
in favour of the complainant, the ingredients of the offence
are altogether lacking."
8. The Apex Court has held that it is not necessary to reproduce
the language of section 141 verbatim in the complaint and the
complaint needs to be read as a whole. It is further held that in
construing the complaint hyper-technical approach should not be
adopted considering laudable object of preventing bouncing of
cheques and sustaining credibility of commercial transactions. In
my opinion, therefore, the averments in the complaint as quoted
above is sufficient compliance as mandated under section 141 of
the NI Act.
9. It is next submitted on behalf of the petitioners that
petitioner no.2 resigned with effect from 16th September 2014 and
petitioner no.3 resigned with effect from 20th September 2014.
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Fifteenth (15th) day from the date of receipt of demand notice was
4th October 2014 and, therefore, process could not have been
issued against petitioner nos.2 and 3 as they had already resigned
before the date of offence. According to him, fifteenth (15 th) day
from the date of receipt of notice is the date of offence (relevant
time).
10. In the case of S.P. Mani and Mohan Dairy (supra), the
Apex Court had occasion to interpret the expression "at the time
the offence was committed". While interpreting the said expression
in the light of earlier judgment of the Apex Court in K.
Bhaskaran v. Sankaran Vaidhyan Balan reported in 1999
(7) SCC 510, the Apex Court in paragraphs 29 and 30 held as
under:
"29. The seminal issue raised and requires to be settled in
the present case is one relating to a person liable to be
proceeded against under the provisions of sub-section (1) of
Section 141 for being in-charge of and responsible to the
company "at the time of offence was committed." It would,
therefore, be important to find out the "time" when the
offence under Section 138 can be said to have been
committed by the company. It is common place that an
offence means an aggregate of facts of omissions which are
punishable by law and, therefore, can consist of seveal parts,
each part being committed at different time and place
involving different persons. The provisions of Section 138
would require a series of acts of commission and omission to
happen before the offence of, what may be loosely called
"dishonour of cheque" can be constituted for the purpose of
prosecution and punishment. It is held by the Supreme Court
in K. Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC
510, that:--
"14. The offence under Section 138 of the Act can be
completed only with the concatenation of a number of
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acts. The following are the acts which are components
of the said offence : (1) drawing of the cheque, (2)
presentation of the cheque to the bank, (3) returning
the cheque unpaid by the drawee bank, (4) giving
notice in writing to the drawer of the cheque
demanding payment of the cheque amount, (5) failure
of the drawer to make payment within 15 days of the
receipt of the notice."
30. Different persons can be in-charge of the company
when each of the series of acts of commission and omission
essential to complete the commission of offence by the
company were being committed. To take an example, in the
case of a company, "A" might be in charge of the company at
the time of drawing the cheque, "B" might be in charge of
the company at the time of dishonour of cheque and "C"
might be in charge of the company at the time of failure to
pay within 15 days of the receipt of the demand notice. In
such a case, the permissibility of prosecution of A, B and
resply or any of them would advance the purpose of the
provision and, if none can be prosecuted or punished, it
would frustrate the purpose of the provisions of Section 138
as well as Section 141. The key to this interpretation lies in
the use of the phrase: "every person shall be deemed to be
guilty of the offence and shall be liable to be proceeded
against and punished accordingly" as it occurs in sub-section
(1) of Section 141 and the use of the phrase " provided that
nothing contained in this subsection shall render any person
liable to punishment if he proves..." that occurs in the first
proviso. Every person who was in charge of and was
responsible to the company for the conduct of its business at
the time any of the components necessary for the
commission of the offence occurred may be "proceeded
against", but may not be "punished" if he succeeds in proving
that the offence was committed without his knowledge and
despite his due diligence; the burden of proving that
remaining on him. Therefore, it also has to be held that the
time of commission of the offence of dishonour of cheque
cannot be on the stroke of a clock or during 15 days after the
demand notice has to be construed as the time when each of
the acts of commission and omission essential to constitute
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the offence was committed. The word "every" points to the
possibility of plurality of responsible persons at the same
point of time as also to the possibility of a series of persons
being in charge when the sequence of events culminating
into the commission of offence by the company were taking
place. As to what this 'relevant time' is, was a question that
this Court was called to answer, inter alia, in N Rangachari v.
Bharati Sanchar Nigam Limited, (2007) 5 SCC 108 : AIR
2007 SC 1682. In this case, Data Access, a company had
issued two cheques to the BSNL, which were duly presented,
but were dishonoured for insufficiency of funds. A complaint
under Section 138 of the NI Act was filed. While the BSNL
held the directors liable, the appellant, a chairman in the
company contended that he being a nominated chairman
and holding an Honorary post in the Company, was never
assigned with any of the company's financial or other
business activities. He was the Chairman for name sake and
was never entrusted with any job or business or constituted a
signing authority. Resolving the issue of when the liability
could be fastened, this Court said:
"In the case on hand, reading the complaint as a whole, it is
clear that the allegations in the complaint are that at the
time at which the two dishonoured cheques were issued by
the company, the appellant and another were the Directors
of the company and were in charge of the afairs of the
company. It is not proper to split hairs in reading the
complaint so as to come to a conclusion that the allegations
as a whole are not sufficient to show that at the relevant
point of time, the appellant and the other are not alleged to
be persons in-charge of the affairs of the company. Obviously,
the complaint refers to the point of time when the two
cheques were issued, their presentment, dishonour and
failure to pay in spite of notice of dishonour."
Emphasis supplied
11. Reading of paragraph 30 quoted above makes it clear that
the persons who are in-charge at the time of drawing of cheque;
on the date of dishonor of cheque; and on the fifteenth (15 th) day
from the date of receipt of demand notice are all liable for
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prosecution. The Apex Court by giving illustration has explained
the said expression in clear terms. In the present case, petitioner
nos.2 and 3 were directors of accused no.1-company on the date of
drawing of cheque (23rd August 2014), date of dishonor of cheque
(25th August 2014) and resigned with effect from 16th September
2014 and 20th September 2014 respective, therefore, in view of
authoritative pronouncement in paragraph 30, the submission
made on behalf of the petitioners cannot be accepted.
12. The last submission made on behalf of the petitioners is that
petitioner no.3 is an independent non-executive director. In
support of the said submission, the petitioners placed on record
Form No.32 pursuant to sections 303(2), 264(2), 266(1)(a) and
266(1)(b)(iii) of the Companies Act, 1956. Form No.32 which is
an unimpeachable and uncontrovertible document shows that
petitioner no.3 was an independent and non-executive director
appointed on 17th December 2011.
13. The Apex Court in Sunita Palita v. Panchali Stone
Quarry reported in 2022 SCC OnLine SC 945 granted relief to the
independent non-executive director by quashing process against
him.
14. In that view of the matter, the petition succeeds in so far as
petitioner no.3 is concerned. Hence, following order:
a) The impugned order dated 23rd January 2015 passed
by the learned Metropolitan Magistrate, 43rd Court at
Borivali, Mumbai in Criminal Complaint No.4161/SS/2014
confirmed by the learned Sessions Judge in Criminal
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Revision Application No.329 of 2016 dated 24th April 2017 is
quashed and set aside to the extent of petitioner no.3;
b) Rest of the order of issuance of process against
petitioner nos.1 and 2 is confirmed.
15. Rule is partly made absolute in above terms. No costs.
(AMIT BORKAR, J.)
