M/S. Arsh Electronics Pvt. Ltd. vs M/S. Telematica Star Ltd. & Anr.
2010 Latest Caselaw 3441 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

+       Crl. L.P. Nos. 12-13/2009
%                                              Decided on: 23rd July, 2010

M/s. Arsh Electronics Pvt. Ltd.                                     ..... Petitioner
                         Through: Mr. R.S. Tomar, Adv.

                        Versus


M/s. Telematica Star Ltd. & Anr.                                 ..... Respondents
                         Through: None

        CORAM:
        HON'BLE MR. JUSTICE A.K. PATHAK

        1.Whether the Reporters of local papers
          may be allowed to see the judgment?                    Not necessary

        2.To be referred to Reporter or not?                     Not necessary

        3.Whether the judgment should be reported
          in the Digest?                                         Yes

     A.K. PATHAK, J. (ORAL)

1. Both the above petitions are being disposed of together as not

only the facts involved therein are similar but the question of law

which needs to be answered is also same.

2. Petitioner seeks leave to appeal against the judgments passed by

the learned Metropolitan Magistrate, Patiala House Courts, New Delhi

whereby complaints under Section 138 and 142 of the Negotiable

Instruments Act, 1881 (for short hereinafter referred to as "said Act"),

have been dismissed resulting in acquittal of the respondent (accused).

3. In the complaint involved in Crl. L.P. No. 13/2009, petitioner

alleged that it had supplied certain electronic goods to respondent No.

1 M/s. Telematica Star Ltd. vide bill No. 056 dated 21st May, 2003 for

Crl. L.P. Nos. 12-13/2009 Rs.1,07,467.26. In order to clear its liability respondent No. 1 issued a

cheque bearing No. 937273 dated 16th August, 2003 for

Rs.1,07,467.26 drawn on ICICI Bank Ltd., Defence Colony, New Delhi

favouring the petitioner. On presentation, said cheque was returned

dishonored vide memo dated 18th August, 2003 on the ground

"insufficient account balance". Petitioner informed this fact to the

respondent when he was asked to present the cheque again. As

advised, petitioner presented the cheque with its banker for

encashment but the same was again returned dishonored on 6th

September, 2003 on the ground "payment stopped by the drawer".

Since the amount involved in the cheque remained unpaid by the

respondent, within the statutory period, despite service of demand

notice dated 10th September, 2003, complaint was filed.

4. In the second complaint involved in Crl. L.P. No. 12/2009 it was

alleged that the respondent issued a cheque bearing No. 937275 dated

29th August, 2003 drawn on ICICI Bank, Defence Colony Branch for

Rs. 96,560/- favouring petitioner to square up the liability of bill No.

295 dated 17th March, 2003 for Rs.96560/- regarding supply of

electronic components to the respondent. On presentation, this

cheque was returned unpaid vide bank's memo dated 31st July, 2003

for the reasons "Insufficient Account Balance". When this fact was

brought to the notice of the respondent he advised the petitioner to

present the cheque again but on second time also cheque was

returned unpaid with the remarks "payment stopped by the drawer".

Crl. L.P. Nos. 12-13/2009 The amount was not paid within fifteen days of service of the notice of

demand, hence, the complaint.

5. In both the complaints respondent No. 2 was arrayed in the

cause title as an accused being Director (Marketing & Finance) of the

respondent. However, no averment was made in the complaint that he

was the person responsible for managing the day to day affairs of the

company and was vicariously liable for the offence under Section 138

of the said Act committed by the respondent No. 1 company by taking

aid of Section 141 of the Act.

6. Defence of the respondents before the trial court was that the

cheques were not issued by respondent No. 1 company. In fact,

cheques were issued by a partnership firm M/s. Telematica Star

Systems of which respondent No. 2 was one of the partner. No legal

notice was received either by M/s. Telematica Star Systems nor by

respondent No. 2 in that regard. Respondent No. 1 was not the drawer

of the cheques thus no offence can be said to have been committed by

it on the cheques of a third party namely M/s. Telematica Star

Systems having been dishonored. As no offence under Section 138 of

the Act was committed by the respondent No. 1 therefore, Section 141

of the Act would not be attracted to hold respondent No. 2 vicariously

liable for the offence under Section 138 of the Act.

7. On the basis of evidence adduced by the parties, learned trial

court has concluded that the cheques were issued by M/s. Telematica

Star Systems and not by the respondent No. 1, therefore, upon said

cheques having been dishonored, respondent No. 1 cannot be said to

Crl. L.P. Nos. 12-13/2009 be guilty for having committed offence under Section 138 of the Act.

Respondent No. 1 was not the "drawer" of the cheques. Mr. Vasim

Faruqi, who was impleaded as Director of respondent No. 1 could not

be held vicariously liable by taking aid of Section 141 of the Act as no

offence was committed by respondent No. 1. The fact that Mr. Vasim

Faruqi was common in both M/s. Telematica Star Ltd. and M/s.

Telematica Star Systems being Director and partner respectively was

not sufficient to maintain the complaint against the respondents.

Complaint could have been maintained only against the "drawer" of

the cheque i.e. M/s. Telemetica Star Systems and its partner as only

"drawer" of the cheque was liable for the offence under Section 138 of

the said Act. Since the cheque was issued by M/s. Telematica Star

Systems, criminal liability could have been fastened upon the said firm

alone. M/s. Telematica Star Ltd. and its Directors were not liable for

the offence under Section 138 of the said Act when admittedly cheque

was issued by M/s. Telematica Star Systems which was a different

entity.

8. In the facts of this case and the law applicable thereto I do not

find the view taken by the trial court to be perverse nor is there any

manifest error therein. The conclusion drawn by the trial court is in

consonance with the well settled legal position that it is the drawer of

the cheque, who alone would be liable for the offence under Section

138 of the said Act upon a cheque issued towards discharge of any

debt or liability, being returned unpaid on the ground of "insufficient

funds" in the account of the drawer.

Crl. L.P. Nos. 12-13/2009

9. At this stage, it would be relevant to refer to Section 138 of the

said Act, which reads as under:-

"Dishonor 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 provision of this Act, be punished with imprisonment for (a term which may be extended to two years) or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless-

         (a)    XXXXXXXXXXXXXXXXX

         (b)    XXXXXXXXXXXXXXXXX

         (c)    XXXXXXXXXXXXXXXXX

                                                     (emphasis supplied)

10. Section 7 of the said Act envisages that the maker of a bill of

exchange or cheque is called the "drawer"; the person thereby directed

to pay is called the drawee.

11. A conjoint reading of Sections 7 and 138 of the said Act clearly

indicates that it is only the drawer of the cheque who can be held

responsible for the offence under Section 138 of the said Act.

Exception to this rule is provided in Section 141 of the Act which

makes the persons other than drawer liable for the offence under

Section 138 of the said Act, but only if drawer is a company or firm or

Crl. L.P. Nos. 12-13/2009 association of individual and in such an eventuality all such persons

who at the time when offence was committed, were in charge or

responsible for the conduct of the business of such company or firm or

association of individuals, would be deemed to be guilty for the offence

under Section 138 of the said Act.

12. In M/s. Gujarat Oleo Chemical vs. State & Anr., reported in 2010

(1) JCC (NI) 84, it was held that it is only the signatory of the cheque

i.e. drawer of the cheque, who had drawn the cheque in his individual

capacity and from his individual account, would be liable for

prosecution under Section 138 of the said Act not the company and its

Director. Similarly, in Srikant Somani & Ors. vs. Sharad Gupta &

Anr., reported in 2005 (2) JCC (NI) 138, it was held that only drawer of

the cheque was liable for the offence under Section 138 of the said Act.

In Pratap Singh Yadav and Anr. vs. Atal Behari Pandey, reported in

2003(1) RCR (Criminal) 697, son had issued a cheque to discharge

debt of his father. Upon cheque being returned dishonored, complaint

under Section 138 of the Act was filed against the father as well as his

son. It was held that only son was liable and not the father. In Smt.

Kamana Gupta vs. N.C.T. of Delhi & Anr., reported in 2001(2) JCC

(Delhi) 61, cheque was not issued by the company but was issued by

one Ashok Gupta in his individual capacity. In these circumstances, it

was held that drawer of the cheque alone and no other person was

liable to be presecuted under Section 138 of the Act. In Manish Kant

Aggarwal vs. M/s. National Agricultural Cooperative Marketing

Federation of India Ltd. (NAFED) & Anr., reported in 2009(1) C.C.

Crl. L.P. Nos. 12-13/2009 Cases (HC) 155, it was held that Section 138 of the Act makes it

manifestly clear that if a cheque is drawn by a person on an account

maintained by him and issued for discharge of an existing debt and

the cheque bounces, either on account of insufficiency of the funds or

on account of the fact that it exceeded the amount arranged to be paid

from that account, that person was deemed to had committed the

offence. Well-settled legal position as emerges from the

aforementioned judgments is that only the drawer would be solely

liable for prosecution under Section 138 of the Act in case of

dishonorment of the cheque either on the ground of insufficiency of

funds or that it exceeded the amount available in the account. In case

the drawer happens to be a company, firm or association of

individuals, then all such persons as detailed in Section 141 of the Act

would be liable for prosecution.

13. In the case at hand, admittedly cheques were issued by M/s.

Telematica Star Systems and not by respondent No. 1. However,

complaints were not filed against M/s. Telematica Star Systems nor

respondent No. 2 was impleaded as its partner. Respondent No. 2 was

not impleaded as partner of the firm but had been impleaded as

Director of M/s. Telematica Star Ltd which was not the drawer of the

cheques. Without launching the prosecution against M/s. Telematica

Star Systems being the main offender, the question of respondent No.

2 being vicariously liable by taking aid of Section 141 of the said Act

would also not arise in this case.

Crl. L.P. Nos. 12-13/2009

14. Respondent No. 1 company is not the drawer of the dishonored

cheques, therefore, was not required to respond to the legal notice by

making payment. Respondent No. 1 not being drawer of the cheques

can be said to have committed no offence under Section 138 of the

said Act. As respondent No. 1 is not guilty of committing offence

under Section 138 of the Act, respondent No. 2 being its Director

cannot be fastened with vicarious liability of having committed offence

by taking aid of Section 141 of the said Act.

15. In view of above discussions, I do not find the view taken by the

learned trial court to be perverse or contrary to the evidence adduced

before it. I do not find any justification to grant leave to appeal to the

petitioner. Petitions are dismissed.

A.K. PATHAK, J.

July 23, 2010 rb

Crl. L.P. Nos. 12-13/2009