Meenu Bhist vs Vijay Kumar Gupta And Anr.
2007 Latest Caselaw 646 Del

JUDGMENT

S. Ravindra Bhat, J.

1. The petitioner invokes inherent jurisdiction of this Court and seeks a quashing order in respect of criminal proceedings initiated by the respondent/complainant for alleged commission of offences under Sections 138/141 of Negotiable Instruments Act.

2. The respondent had initiated the proceedings with a complaint alleging that he was given three cheques on 28.1.2003, 3.2.2003 and 6.2.2003 for a total sum of Rs. 5 lakhs. The first accused, in the complaint was M/s L.P. Papers Ltd. having its office at Philibhit in Uttar Pradesh and the other accused were arrayed in their capacity as either chairman/managing director or directors respectively. The complainant alleged that the cheques were issued to satisfy a liability i.e. return of loan, advanced to the company. The cheques were not honoured, when presented to the drawer's bank; notice was issued, followed by the complaint. A summoning order was issued. During pendency of the proceedings, the complainant compounded the offence by receiving 50% of the amount from accused Nos. 3 and 4. Accused No. 3, in the array of parties was described as a managing director. Upon this development, the complainant moved an application on 16.11.2004, for permission to withdraw the proceedings against those accused and permitting continuation of the proceedings in respect of the other accused. That was granted.

3. Mr. Mohit Kumar, learned Counsel contends that the proceedings initiated were without jurisdiction and their continuance is not only irregular but illegal. He has raised three fold submissions in this regard; it is firstly contended that no part of the cause of action arose within the jurisdiction of the courts in Delhi. The three cheques in question were drawn in Philibhit; the bank in terms of Section 138 was the drawer's bank in Bareilly; the cheques were presented to that bank and returned by it. In these circumstances the fact that the petitioner, a practicing advocate resided in Delhi and chose to present the instrument in his account in Delhi and also issued the notice from Delhi did not clothe the courts in Delhi with jurisdiction in this regard.

4. Learned Counsel relied upon the judgment of the Patna High Court in Binod Sarawagi v. State of Bihar and Anr. 1998 (4) Crimes 181, where it was contended, that a similar fact situation existed. The court had held that the venue of the enquiry or trial has to be primarily determined by the averments contained in the complaint. If on the basis of such averments the court possess jurisdiction, then it would proceed in the complaint. The court had also expressed the view that the place where the creditor resided or the place where a debtor resides could not define the place of payment unless there is any indication expressly or impliedly. He also relied upon an earlier Division Bench judgment of this Court reported as R.K. Jain v. State and Ors. 1998 (1) Crimes 514.

5. It was secondly contended that the complainant could not have chosen to continue with the proceedings as against the company and the other directors, selectively picking and choosing as it were. It is contended that the accused No. 3, deleted from the array of parties with permission of the court, was a co-signatory and in terms of Section 142, one of the persons in charge and in control of the affairs of the company. Counsel placed considerable emphasis on the fact that the provision cast a liability on both, the directors in charge and in control of the affairs as well as on the company, in order to submit that the condition was conjunctive and not disjunctive. It was contended that in the absence of all persons in charge of, or in control of affairs of the company the offence could not be tried and that the proceedings were incoherent and irregular, requiring to be quashed.

6. It was lastly contended that the complaint was not maintainable as it sought to enforce void transaction. Counsel relied upon the averments of the complaint to say that the respondent/complainant, a practicing advocate had alleged that he lent monies to the petitioner and co-accused. Reliance was placed in this regard on the Punjab Registration of Money Lenders Act, 1938, particularly Section 4(3) which placed a general prohibition on money-lending activity in the absence of licensing and cast criminal liability. It was contended that the averments in the complaint, taken as a whole were indicative of the respondent indulging in unlicensed money-lending activity which is prohibited and an offence. Additionally, being a practicing advocate he could not have, consistent with the standards of conduct, prescribed under the Advocates Act, 1961 carried on any other commercial or professional activity. In these premises it was urged that the transaction was void under Section 23 of the Contracts Act as the underlying consideration was contrary to public policy. In these circumstances the so-called debt, it was stated, was unenforceable and therefore the proceedings under Section 138 could not be maintained.

7. Counsel for the respondent/complainant, on the other hand, submitted that two of the directors, initially imp leaded, in the criminal proceedings were later, with the permission of the court dropped since they had after the filing of the complaint, deposited 50% of the amounts. Counsel contended that there was no infirmity or illegality in this course of action as the company, which had issued the cheque, although through the instrumentality of its officers, continued to be arranged as an accused. It was contended that the deletion of two accused was only in their personal capacity but the proceedings continued so far as the third accused's capacity as a managing director, representing the company. It was further contended that the other accused have been continued and that deletion of two accused did not inject any illegality or incurable infirmity warranting a quashing order.

8. As far as the question of jurisdiction is concerned, the counsel relied upon Sections 177 and 178 of the Code of Criminal Procedure and cited the decision in K. Bhaskaran v. Sankaran Vaidhyan Balan and Anr. . In that decision the Supreme Court had held that the criminal proceedings can be maintained in 5 distinct locales consistent with Section 178(d) of the Criminal Procedure Code.

9. It was lastly contended that the argument about the complainant engaging in prohibited professional activity moneylender is unfounded since he was a relative of some of the directors of the accused company and had advanced amounts at their request. The company was bound to return those amounts as and when they fell due. It failed to do so. This had constrained the complainant to initiate the proceedings. In these circumstances the argument about applicability of the said Act is merit-less; it was also contended that this contention was not originally advanced in the Section 482 petition; moved before the court but sought to be introduced by way of an amendment.

10. The facts as is evident, are not in dispute. The three cheques in question were issued in January and February, 2003, at Philibhit. They were drawn on the drawer's bank at Bareilly; the complainant had presented them. The bank had returned the cheques. In these circumstances three questions raised by the petitioner arise for consideration.

11. The first issue raised is as to the corporate liability of the company in the absence of one or more of its directors. In this respect the material circumstance is that originally all the directors said to be in control and in charge of the affairs of the company were apparently imp leaded. Therefore, it is not as if the complaint was per se not maintainable. During the course of proceedings the complainant, according to the petitioner, sought to pick and choose some of the directors for favorable treatment, dropping two of them (one of them being principal official, i.e. managing director) and the co-signatory of the cheque in question.

12. It is no doubt true that Section 141 specifically creates an offence, in respect of companies on whose behalf cheques are issued, but not honoured. One of the essential ingredients for alleging that a company is liable is that it should be made a party; every person who, at the time of the commission of offence, was in charge of and responsible to the company for the conduct of its business is guilty, of the offence, by a deeming fiction. They are also liable to be punished. What is significant to note is that the primary emphasis of the provision is corporate liability. But for the enacting part there would have been perhaps ambiguity and confusion as to whether a company could be made liable for offence under Section 138. As to whether a company can be held responsible and penalized for specific offences is no longer res integra. It has been so settled by a recent five Judges Bench in Standard Chartered Bank v. Directorate of Enforcement . The court had specific occasion to deal with this question in the context of special enactments. The court kept moot - the question as to whether corporate liability can be fastened in general penal law statutes like the Indian Penal Code. It is therefore not open to anyone to contend that a company per se cannot be proceeded against, if there are specific enactments pointing to that. In this case Section 141 is a specific class of offence, by the company. However, since a company by itself cannot be punished in the sense that a sentence of imprisonment cannot be imposed upon it, the principle of vicarious liability has been enacted by deeming fiction as it were, prescribing that every person at the time of commission of the offence, in charge of and responsible to its affairs, shall be deemed guilty. The emphasis here is that vicarious liability is fastened on every person who was in charge of the commission of offence.

13. At the first blush the argument of the petitioner that it is not open to the complainant to pick and choose some directors for prosecution seems attractive, yet I am unpersuaded to accept it. The enacting part of Section 141 provides for offence of the company and every person who at the time of commission of offence is deemed to be guilty of the offence. This does not however lead to an assumption that each and every director or each and every person responsible to the conduct of its business has to necessarily be imp leaded in the complaint and proceeded with. Having regard to the circumstances of each case the scheme of the provision gives choice to the complainant to proceed against some or all such directors, "deemed liable". Apparently, in the judgment reported as Rajneesh Aggarwal v. Amit Bhalla 2001 CRL. L.J. 708 the court had considered a situation where a part payment was accepted and yet the criminal complaint was allowed to be proceeded in regard to the other accused.

14. There is one more reason why the argument of the petitioner in this regard cannot be accepted. In such case the offence of the company, assuming there to be one, would go unpunished. The deeming fiction only extends liability so far as the directors are concerned to the extent they are in charge of and responsible to the affairs of the business of the company. In the course of the proceedings the complainant, who is in control of the proceedings has flexibility (having regard to the fact situations existing) as to which of the directors continue to be responsible to the company and whether any one or more of them were in charge at the time of commission of offences are willing to discharge the liability or any part of it. In other words, it is not as if in the absence of all the directors no proceeding can be continued.

15. As far as the last contention is concerned, I am of the opinion that this has no merit. The argument here is that the complainant did not plead that the accused petitioner was not legally liable to pay any amounts. What is being put that the transaction itself was void; i.e. the agreement leading to the issuance of the cheque is void since it contravenes the Punjab Registration of Money Lenders Act, 1938. Section 3 of the Act debars maintainability of suits by moneylenders who are unregistered and Section 4, deals with registration of registration of Money-lenders. Quite apart from the fact that these are matters of detail and perhaps can be taken during the defense in the proceedings they do not appear to be sound. The mere circumstance that the complainant is an advocate and that he had lent some amounts to the accused, itself would not lead to the inference that the agreement was hit by unlawful consideration - or that he was indulging in money-lending. This argument is also unconvincing because it is put by a party, in pari delecto, as the petitioner has not denied the transaction, but is questioning its efficacy and legality, after enjoying its benefits.

16. For the reasons stated I am of the opinion that this petition is without merit.

The parties are directed to appear before the trial court on the next date of hearing fixed in this regard. The petition is rejected.