Sh. Sadhu Ram Singla vs State And Ors.
2002 Latest Caselaw 376 Del

JUDGMENT

K.S. Gupta, J.

1. This order will govern the disposal of Crl.M.(M) Nos. 4492, 4731, 4673, 4732 and 4173 of 2000 filed by the same petitioner seeking quashment of complaints under Section 138 of the Negotiable Instruments Act, 1881 (for short the 'Act').

2. In Crl.M.(M) 4492/2000 quashment is sought of 7 complaints filed by Raunaq Finance Ltd. In Crl.M.(M) 4731/2000 quashment is sought of one complaint filed by Daewoo Motors Ltd while in Crl.M.(M) 4673 of one complaint filed by Dalmia Cement (Bharat) Ltd. Fortis Financial Services Ltd is the complainant of the complaint whereof quashment is sought by filing Crl.M.(M) 4732/2000. In Crl.M.(M) 4173/2000 quashment is sought of a complaint filed by DCM Sri Ram Leasing and Finance Ltd. In complaints filed by said Raunaq Finance Ltd, Daewoo Motors Ltd, Dalmia Cement (Bharat) Ltd and DCM Sri Ram Leasing and Finance Ltd, the petitioner has been imp leaded as accused No. 2. In the complaint filed by Fortis Financial Services Ltd, petitioner has been imp leaded as accused No. 1. Cheques which were dishonoured, in the complaints filed by Raunaq Finance Ltd and DCM Sri Ram Leasing and Finance Ltd were towards lease rentals. Dishonoured cheques in complaints filed by Daewoo Motors Ltd, Dalmia Cement (Bharat) Ltd and Fortis Financial Services Ltd were towards pat payment of inter-corporate deposits. It is not in dispute that at the relevant time the petitioner was the Chairman-cum-Managing Director of Rom Industries Ltd for whom a Provisional Liquidator has been appointed by Punjab & Haryana High Court; payments of dishonoured cheques in question were not made to the said complainants despite service of demand notices on said company and directors thereof including the petitioner.

3. Submission advanced by Sh. S.K. Singla for petitioner was that it was the joint liability of all 7 directors of Rom Industries Ltd to repay the amounts of dishonoured cheques. Barring one complaint, in complaints filed by Raunaq Finance Ltd 5 directors had not been arrayed as accused. Although in one of the complaints filed by said Raunaq Finance Ltd., 3 directors including the petitioner were imp leaded as accused 2 to 4 in one complaint filed by DCM Sri Ram Leasing and Finance Ltd all the directors were imp leaded as accused 2 to 8 but the director imp leaded as accused No. 4 in the complaint filed by Raunaq Finance Ltd and directors arrayed as accused 4 to 8 in the complaint filed by DCM Sri Ram Leading and Finance Ltd were later on given up by said two complainants. Reliance was placed on the decision in Saj Flight Services (P) Ltd v. P.T. Gopala Raja, Vol. 88 Company Cases 344. Submission is, however, without any merit. In the decision in Sheoratan Agarwal and Anr. v. State of Madhya Pradesh, which was quoted with approval in the decision in Anil Handa v. Indian Acrylic Ltd, 2000 Cri.L.J. 373, one of the points which fell for consideration before the Supreme Court was if the Managing Director and Production Manager of a company against whom complaint was made by State of Madhya Pradesh through the Inspector, Food and Civil Supplies, Dewas for violation of Clause 2(c)(i) and 3 of the Madhya Pradesh Pulses, Edible Oil Seeds and Edible Oil Dealers Licensing Order, 1977 and Clause 3 of the Madhya Pradesh Essential Commodities (Price Exhibition and Price Control) Order, 1977 read with Sections 3 and 7 of the Essential Commodities Act, could be legally prosecuted unless the company itself was prosecuted. While dealing with that point after extracting Section 10 of the Essential Commodities Act it was held:-

"The section appears to our mind to be plain enough. If the contravention of the order made under Section 3 is by a company, the person who may be held guilty and punished are (1) the company itself (2) every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company whom for short we shall describe as the person-in-charge of the company, and (3) any director, manager, secretary or other officer of the company with whose consent or connivance or because of neglect attributable to whom the offence has been committed, whom for short we shall describe as an officer of the company. Any one or more or all of them may be prosecuted and punished. The company alone may be prosecuted. The person-in-charge only may be prosecuted. The conniving officer may individually be prosecuted. One, some or all may be prosecuted.

There is no statutory compulsion that the person-in-charge or an officer of the company may not be prosecuted unless he be ranged alongside the company itself. Section 10 indicates the persons who may be prosecuted where the contravention is made by the company.

It does not lay down any condition that the person-in-charge or an officer of the company may not be separately prosecuted if the company itself is not prosecuted. Each or any of them may be separately prosecuted or Along with the company. Section 10 lists the person who may be held guilty and punished when it is a company that contravenes an order made under Section 3 of the Essential Commodities Act. Naturally, before the person-in-charge or an officer of the company is held guilty in that capacity it must be established that there has been a contravention of the order by the company....."

(Emphasis supplied)

4. In Saj Flight Services (P) Ltd's case (supra), cheque for Rs. 2 lac was drawn by the respondent as Managing Director/partner of the firm and on complaint being filed by petitioner under Sections 138 and 141(2) of the Act in respect of said cheque which was dishonoured, respondent was discharged by the Magistrate on the ground that complaint was bad for not adding the other partners of the firm. On revision petition being filed against that order of discharge by the compliant, the Madras High Court affirmed the order of Magistrate holding that every partner of the firm had to be added as party in the complaint. Needless to repeat that sheoratan Aggarwal's case (supra) rendered by Apex Court rules that even a person in charge of and responsible to the company could be prosecuted under Section 10 of the Essential Commodities Act. To be only noted that provision of Section 141 of the Act is by and large similar to said Section 10. Saj Flights Services Ltd's case, thus, has to be ignored as not reflecting the correct position of law and the complaints filed against petitioner who was the Chairman-cum-Managing Director, are legally maintainable even without impleading the other directors of company.

5. Relying on the decision in Srimati Peelamedu Rajeswary Ramkrishna and Ors. v. B.N. Misra, Civil Supplies Officer, Jeypore, Vol. xxxviii 1972 Cuttack Law Times 422, further contention advanced on behalf of petitioner was that means read is a part of the offence under Section 138 of the Act but the same had neither been pleaded in the complaints nor evidence adduced in support thereof. In the said decision, Civil Supplies Officer, Jeypore had sent a report on 27th October 1971 to the Sub Divisional Magistrate at Rayagada alleging contravention of Clauses 3 and 5 of the Sugar (Control) Order, 1966 and Clause 4(1) of Sugar (Packing and Marking) Order, 1970 punishable under Section 7 of Essential Commodities Act, 1955 and on the basis thereof Sub Divisional Magistrate took cognizance of the offences alleged. In aforesaid report it was noticed that factory produced 2931 bags of sugar during the year 1969-70 and on samples being drawn from the stock of sugar, quality of sugar was found to be below ISS (Indian Sugar Standards). So, the Chief Director, by the letter dated 20th April 1971 directed Jeypore Sugar Co. Ltd not to dispatch the said stock of sugar till remarking it according to grade of sugar inside the bags or change the marking to correspond to contents of sugar in the bags. By the letter dated 2nd May 1971, the Managing Director of company intimated the Chief Director that entire stock had been disposed of by 15th March 1971 and requested him to condone the irregularity. Contention advanced on behalf of petitioners before the court was that unless it was alleged that all the members of Board of Directors and Chemist had knowledge of the breach or that it was alleged that breach was committed with the consent or connivance of the petitioners, the prosecution was unjustified. While dealing with that contention it was held that it appeared from the report dated 27th October 1971 that many of the directors of company lived away from the place of production; company had a full time Director and a Manager who were petitioners 2 and 11 respectively; only these two petitioners could be taken to be the persons who were in charge of and responsible to the company for the conduct of its business and with regard to them the provision of Sub-section (1) of Section 10 of the Essential Commodities Act, 1955 would apply. It was further held that burden in law is cast upon them to prove the absence of mens- rea while in respect of others Sub-section (2) applied and burden lay on the prosecution to establish their complicity in the commission of offence by consent or connivance. In this backdrop, criminal proceeding against petitioners other than 2 and 11 was dropped. Assuming that mens- read is an ingredient of the offence under Section 138 of the Act, as per ratio of the above decision it is for the petitioner who is Chairman-cum-Managing Director of the company, to prove absence of mens- read on his part in all the complaints.

6. For the foregoing discussion, it must follow that none of the complaints filed by Raunaq Finance Ltd, Daewoo Motors Ltd, Dalmia Cement (Bharat) Ltd, Fortis Financial Services Ltd and DCM Sri Ram Leading and Finance Ltd deserve to be quashed on either of aforesaid two grounds. Petitioners are, therefore dismissed.