M/S. Mithi Interior Pvt. Ltd. vs M/S. Esscon Engineers Pvt. Ltd. & ...
2011 Latest Caselaw 1888 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                Judgment delivered on: March 31, 2011

+      CRL.L.P. NO. 136/2010 & CRL.M.A. NO.5095/2010
+      CRL.L.P. NO. 137/2010 & CRL.M.A. NO.5096/2010
+      CRL.L.P. NO. 139/2010 & CRL.M.A. NO.5102/2010

 M/S. MITHI INTERIORS PVT. LTD        .... PETITIONER
Through its Director   Through:Mr.R.K.Thakur, Advocate.

                              Versus

M/S. ESSCON ENGINEERS PVT. LTD & ORS......RESPONDENTS

Through:Mr.Aditya Gaur, Advocate.

CORAM:

HON'BLE MR. JUSTICE AJIT BHARIHOKE

1. Whether Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not ?

3. Whether the judgment should be reported in Digest ?

AJIT BHARIHOKE, J.(ORAL)

+Crl.M.A. No.5095/2010 in Crl.L.P.No.136/2010 +Crl.M.A. No.5096/2010 in Crl.L.P.No.137/2010 +Crl.M.A. No.5102/2010 in Crl.L.P.No.139/2010

Vide above applications, petitioners are seeking condonation of

delay in filing of appeals against the dismissal of their respective

complaints under Section 138 of the Negotiable Instruments Act (N.I. Act)

vide common judgment dated 28.8.2009. Learned counsel for the

respondent has no objection if the delay in filing of the appeals is

condoned.

In view of the concession given at the Bar and the reasons given in

the applications, delay in filing of the appeals against the impugned

judgment is condoned.

Applications stand disposed of.

Crl.L.P.No.136/2010 Crl.L.P.No.137/2010 Crl.L.P.No.139/2010

1. Vide this order, I propose to dispose of three leave petitions being

Crl.L.P.No.136/2010, Crl.L.P.No.137/2010 and Crl.L.P.No.139/2010 seeking

leave to appeal against the impugned judgment of learned Metropolitan

Magistrate dated 28.8.2009 vide which he dismissed the three complaints

filed by the appellants/petitioners against the common respondents under

Section 138 Negotiable Instruments Act.(N.I. Act).

2. Briefly stated, allegations in respective complaints are that

respondent No.1 is a private limited company and respondents No.2 and 3

are its Directors. It is alleged in the complaints that respondent No.1

company issued cheques in favour of the petitioner in discharge of the

existing legal liability for the services rendered by the petitioner. Those

cheques, when presented for encashment, were dishonoured by the

drawee bank, namely, UTI Bank. The petitioner, on receipt of information

regarding dishonour of the cheques, sent requisite demand notices under

Section 138 N.I. Act to the respondents but the respondents failed to

make the payment of the amount of those cheques despite service of

demand notices within reasonable period. This led to filing of above three

complaints under Section 138 N.I. Act against the respondents.

3. The defence taken by the accused persons in the said complaint

was that the complainant earlier was one of the Directors of the accused

company M/s Esscon Engineers Pvt. Ltd. Being a Director, complainant

also was one of the authorised signatories to operate the bank account of

accused company along with accused/respondent No.2, namely,

Shubhendu Shekher Awasthi. As respondent No.2 used to travel

frequently in connection with the business of the company, some blank

cheques signed by him were kept in the custody of the complainant.

According to the accused persons, those cheques have been misused by

the complainant after his resignation and the cheques in question were

never issued in discharge of any debt or liability. The accused persons

also claimed that on the retirement of the complainant as a Director of the

accused company, instructions were issued to the bank withdrawing the

name of the complainant as an authorised joint signatory in respect of

bank account of the company and instead instructions were issued to the

bank that the bank account of the company would be operated under joint

signatures of respondents No.2 Shubhendu Shekhar Awasthi and

respondent No.3 Ms.Mukta Awasthi who were inducted as Directors of the

company. To prove this, the accused persons examined a witness from

the bank as DW-1.

4. Learned Metropolitan Magistrate, on consideration of evidence led

by the parties, dismissed the complaint mainly on the ground that as per

the testimony of DW-1 Shri Vivek, Executive UTI Bank vide resolution

dated 1.4.2005, respondent No.1 company had appointed respondents

No.2 and 3 as authorised signatories to operate its bank account jointly.

However, the cheques forming basis of the complaints filed by the

petitioner were signed only by one of the authorised signatories, thus,

learned M.M. came to the conclusion that the cheques in question which

formed basis for the trial of the accused persons under Section 138 N.I.Act

were not valid cheques in the eyes of law. As such, the complaints under

Section 138 N.I. Act could not be maintained.

5. Learned Shri R.K.Thakur, Advocate appearing for the petitioner

submits that learned M.M. has committed a grave error in dismissing the

complaints under Section 138 N.I. Act ignoring the fact that the cheques

forming basis of those complaints were issued in discharge of valid

liability. Learned counsel argued that trial court has committed a grave

error in dismissing the complaints on the ground that the cheques in

question were not valid cheques for want of the signatures of the second

joint authorised signatory. He contended that the factum of authorised

signatories to operate the bank account of the company was within the

special knowledge of the accused persons and petitioner, being an

outsider, could not have known about the facts. Therefore, the accused

persons cannot be permitted to take shelter of the aforesaid technical

defence to escape the liability under Section 138 N.I. Act.

6. Learned Mr.Aditya Guar, Advocate appearing for the respondent, on

the contrary, has contended that unless the cheque is signed by the

authorised signatory/s, it cannot be termed as a valid cheque and learned

M.M. has, therefore, taken a correct view in holding that the cheques in

question not being signed by the second joint signatory were not valid

cheques, as such he has rightly dismissed the complaints under Section

138 N.I. Act.

7. In order to appreciate the contentions of rival parties, it would be

useful to have a look on Section 138 N.I. Act. The complainant is required

to prove following essential ingredients:-

     (a)     That a cheque was drawn by the accused;

     (b)     The cheque was presented by the payee or holder in due course

             for encashment;

     (c)     The cheque was returned unpaid by the drawee bank'

     (d)     That a notice of demand was issued in writing to the drawer

             calling upon him to pay the cheque amount;

     (e)     Failure of the drawer to make the payment within 15 days of the

             receipt of demand notice.

8. Thus, in order to bring home the guilt of the respondents under

Section 138 N.I. Act, the petitioners are first required to establish that the

instruments which were presented for encashment and returned unpaid

were actually the cheques as defined under Section 6 of the N.I. Act.

Section 6 of the N.I. Act defines a cheque as follows:-

"6 . "Cheque"

A "cheque" is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.

Explanation 1 .-- For the purposes of this section, the expressions--

(a) "a cheque in the electronic form" means a cheque which contains the exact mirror image of a paper cheque, and is generated, written and signed in a secure system ensuring the minimum safety standards with the use of digital signature (with or without biometrics signature) and asymmetric crypto system;

(b) "a truncated cheque' means a cheque which is truncated during the course of a clearing cycle, either by the clearing house or by the bank whether paying or receiving payment, immediately on generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing.

9. On plain reading of aforesaid definition, it is clear that a cheque is a

bill of exchange drawn on a specified banker authorising him to pay the

amount mentioned in the cheque on demand to the drawee and debit the

same to the account of the drawer.

10. Shri Vivek, Executive of UTI Bank(now Axis Bank) Pitam Pura Branch

deposed on the basis of the record of the bank account maintained in the

bank by respondent No.1 company. He deposed that as per the

instructions of respondent No.1 company, mode of operation of its bank

account was joint by two Directors of the company, namely respondent

No.2 Shubhendu Shekhar and petitioner Mithilesh Jha. He further stated

that on 31st March, 2005 petitioner Mithilesh Jha tendered his resignation

as Director of the company and vide instructions letter dated 1st April,

2005 of the respondent No. 1 company, the mode of operation of the bank

account of respondent No.1 was changed inasmuch as that the petitioner

Mithilesh Jha was replaced as a joint signatory for operation of bank

account by respondent No.3 Mukta Awasthi. Admittedly, the purported

cheques on the basis of which complaints have been filed by the

petitioner are signed by only one of the joint signatories namely

respondent No.2 Mukta Awasthi. Since the aforesaid purported cheques

do not bear the signatures of the second joint signatory, the aforesaid

instruments do not qualify the definition of a valid cheque which could be

acted upon by the bank in terms of the instructions regarding the mode of

operation of the bank account. Thus, in my considered view, learned M.M.

has rightly concluded that aforesaid instruments cannot be termed as

validly drawn cheques and as such one of the most essential ingredients

of offence under Section 138 N.I. Act is lacking in this case. Thus, he has

rightly acquitted the respondents for the offence under Section 138 N.I.

Act.

11. As regards the submission of learned counsel for the petitioner that

the petitioner could not have known about internal arrangements about

mode of operation of bank account of respondent No.1 company, it is

suffice to say that if the respondents No.2 and 3 have induced the

petitioner to accept the cheques signed by one of the joint signatories

only by misrepresenting and concealing the fact that valid cheques could

be signed jointly by both the authorised signatories, the respondents may

have committed an offence of cheating punishable under Section 420 IPC

but by no means it can be said that they are guilty of offence under

Section 138 N.I. Act.

12. In view of my discussion above, I do not find any merit in the

petitions for leave to appeal. Petitions are accordingly dismissed.

(AJIT BHARIHOKE) JUDGE MARCH 31, 2011 ks