Jharkhand High Court

Krishna Kumar Dokania vs The State Of Jharkhand on 8 June, 2022

                                         1                           Cr.M.P. No.2183 of 2017
                                                                              With
                                                                     Cr.M.P. No.2190 of 2017




             IN THE HIGH COURT OF JHARKHAND, RANCHI
                               ----

Cr.M.P. No. 2183 of 2017

----

Krishna Kumar Dokania, s/o late Ganesh Ram Dokania, resident of Dokania Market, Banka, PO, PS and District Banka, State Bihar ..... Petitioner

-- Versus --

1.The State of Jharkhand

2.Smt. Miru Soren, w/o Sri Hemal Murmu, resident of Village Barhait, PO and PS-Barhait, District Sahebganj ...... Opposite Parties

With

Cr.M.P. No. 2190 of 2017

----

Krishna Kumar Dokania @ KRISHNAN KUMAR DOKANIA, S/o late Ganesh Ram Dokania, resident of Dokania Market, Banka, PO, PS and District- Banka, State-Bihar ...... Accused -petitioner

-- Versus --

1.The State of Jharkhand

2.Smt. Miru Soren, w/o Sri Hemlal Murmu, resident of Village -Barhait, PO and PS Barhait, District Sahebganj ........ Complainant-O.P.No.2

----

CORAM: HON'BLE MR. JUSTICE SANJAY KUMAR DWIVEDI

---

For the Petitioners :- Mr. Umesh Prasad Singh, Sr. Advocate For the State :- Mr. Rajneesh Vardhan, APP For the O.P.No.2 :- Mr. R.S.Mazumdar, Sr. Advocate Mr. Vikash Kumar, Advocate

----

12/08.06.2022 Heard Mr. Umesh Prasad Singh, the learned Senior counsel

appearing on behalf of the petitioners, Mr. R.S.Mazumdar, the learned

Senior counsel assisted by Mr. Vikash Kumar, the learned vice counsel

appearing on behalf of the O.P.No.2 and Mr. Rajneesh Vardhan, the

learned counsel appearing on behalf of the respondent State.

In both the petitions, a common question of fact and law

are involved and that is why both the petitions are being heard together

With Cr.M.P. No.2190 of 2017

with the consent of the parties.

These petitions have been filed for quashing of the entire

criminal proceeding arising in connection with complaint case bearing

C.C.No.110/2016 and the order taking cognizance dated 05.12.2016

passed Judicial Magistrate, 1st Class, Rajmahal and pending in that

learned court in Cr.M.P. No. 2183 of 2017; and for quashing of the

entire criminal proceeding arising out of and in connection with

complaint case being C.C.No.178 of 2016 presently pending in the

court of learned Sub Divisional Judicial Magistrate, Sahibganj as

also to quash the order dated 22.09.2016 passed by learned Sub

Divisional Judicial Magistrate, Sahibganj in Complaint Case being

C.C.No.178 of 2016 whereby under section 138 of N.I.Act, the

concerned court directed to issue summons to the petitioner in

Cr.M.P. No. 2190 of 2017.

The facts of the case in Cr.M.P. No.2183 of 2017 are as

follow:

The O.P.No.2 has filed the instant complaint case alleging therein that the opposite party no.2 being the complainant filed the criminal complaint being Complaint Case No.110/2016 alleging therein that complainant is the owner of 'Vikash Vishal Urja Kendra' situated at Barhait and is dealing with stone chips and petrol pump at Barhait. It has been stated that the accused is a reputed construction company got the work of construction of road from Dharampur more to Sunderpahari between Godda to Pakur District. The accused persons allegedly approached the complainant and requested some financial and material assistance. On the agreed terms of the agreement, the accused started lifting the chips and diesel with assurance that when payment will come he will return the amount. The accused persons found it difficult to continue with the work

With Cr.M.P. No.2190 of 2017

and asked the complainant for some financial support and the complainant transferred money in the account of the accused. In the month of September, 2015 when the work was about to finish and the accused started getting money from the concerned department, the accused started demanding money from the accused. The accused person issued one cheque worth Rs.10 Lakhs bearing no.128768 drawn on State Bank of India. The cheque was deposited by the complainant in her account, however, it returned by the Bank on 19.11.2015 on the ground of insufficient fund in the account of the accused. The complainant served a legal notice to the accused through her lawyer on 18.12.2015, and the accused assured through negotiation that he will pay the money but nothing has been paid. It is alleged that the accused knowing it well that there is no sufficient fund in the account still issued the cheque and made himself liable u/s 138 of N.I.Act.

The facts of the case in Cr.M.P. No. 2190 of 2017 are

as follow:

The O.P.No.2 has filed the instant complaint case alleging therein that the opposite party no.2 being the complainant filed the criminal complaint being Complaint Caes No.178/2016 alleging therein that the complainant is the owner of 'Vikash Vishal Urja Kendra' situated at Barhait and is dealing with stone chips and petrol pump at Barhait. It has been stated that the accused is a reputed construction company got the work of construction of road from Dharampur More to Sunderpahari between Godda to Pakur District. The accused persons allegedly approached the complainant and requested some financial and material assistance. On the agreed terms of the agreement, the accused started lifting the chips and diesel with assurance that when payment will come he will return the amount. The accused persons found it difficult to continue with the work and asked the complainant for some financial support and the complainant transferred money in the account of the accused. In the month of September, 2015 when the

With Cr.M.P. No.2190 of 2017

work was about to finish and the accused started getting money from the concerned department, the accused started demanding money from the accused. The accused person issued one cheque worth Rs.1 Lakh bearing no.128772 drawn on State Bank of India, Banka and cheque No.128767 for Rs.10 Lakhs. The cheques were deposited by the complainant in her account, however, both the cheques were returned by the Bank on 19.11.2015 on the ground of insufficient fund in the account of the accused. The complainant served a legal notice to the accused through her lawyer on 18.12.2015, and the accused assured through negotiation that he will pay the money but nothing has been paid. It is alleged that the accused knowing it well that there is no sufficient fund in the account still issued the cheques and made himself liable u/s 138 of N.I.Act.

Mr. Umesh Prasad Singh, the learned Senior counsel

appearing on behalf of the petitioners assailed the impugned order

on the ground that the petitioners are not the drawer of the cheque

in the both the cases and on that ground both the petitions are fit

to be allowed in favour of the petitioners. He further elaborated his

argument by way of inviting attention of the Court to proviso to

section 141 of the Negotiable Instruments Act, particularly, the

explanation and submits that it has been explained therein that the

company means any body corporate and includes a firm or other

association of individuals. He submits that the cheque was issued to

the complainant and was issued on behalf of the firm and the firm

is not made accused in the complaint case. He submits that it is

crystal clear from the explanation of section 141 of Negotiable

Instruments Act that unless the company or firm is not made

accused and the persons who are having control over the day to

day affairs of the company or the firm thereafter only it can be

With Cr.M.P. No.2190 of 2017

made to vicarious liability. To buttress his such argument, he relied

in the case of "Aneeta Hada v. Godfather Travels and Tours Private

Limited" reported in (2012) 5 SCC 661 and by way of referring this

judgment, Mr. Singh, the learned senior counsel appearing on

behalf of the petitioners submits that this case was referred to the

Larger Bench by Hon'ble Supreme Court and the Larger Bench has

held that the law laid down by the Hon'ble Supreme Court in the

case of in the case of "State of Madras v. C. V. Parekh and another",

[(1970) 3 SCC 491] has held to be the correct law and in the

Division Bench of Hon'ble Supreme Court in the case of "Aneeta

Hada v. Godfather Travels and Tours Private Limited" (supra) has

held not to be the correct law. Mr. Singh, the learned senior counsel

appearing for the petitioners further relied on the paragraph

nos.41, 42, 52, 53, 58 and 69 of the said judgment, which are

quoted hereinbelow:

"41. After so stating, it has been further held that while analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. In para 18 of the judgment, it has been clearly held as follows: (S.M.S. Pharmaceuticals Ltd. case, SCC p. 102) "18. ... there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability."

42. Presently, we shall deal with the ratio laid down in C.V. Parekh.

In the said case, a three-Judge Bench was interpreting Section 10 of the 1955 Act. The respondents in C.V. Parekh, were active participants in the management of the company. The trial court had convicted them on the ground that the goods were disposed of at a price higher than the control price by Vallabhadas Thacker with the aid of Kamdar and the same could not have taken place without the knowledge of the partners of the firm. The High Court set aside the order of conviction on the ground that there was no material on the basis of which a finding could be recorded that the respondents knew about

With Cr.M.P. No.2190 of 2017

the disposal by Kamdar and Vallabhadas Thacker.

52. At this juncture, we may usefully refer to the decision in U.P. Pollution Control Board v. Modi Distillery. In the said case, the company was not arraigned as an accused and, on that score, the High Court quashed the proceeding against the others. A two-Judge Bench of this Court observed as follows: (SCC p. 690, para 6) "6. ... Although as a pure proposition of law in the abstract the learned Single Judge's view that there can be no vicarious liability of the Chairman, Vice-Chairman, Managing Director and members of the Board of Directors under sub- section (1) or (2) of Section 47 of the Act unless there was a prosecution against Modi Industries Ltd., the Company owning the industrial unit, can be termed as correct, the objection raised by the petitioners before the High Court ought to have been viewed not in isolation but in the conspectus of facts and events and not in vacuum. We have already pointed out that the technical flaw in the complaint is attributable to the failure of the industrial unit to furnish the requisite information called for by the Board. Furthermore, the legal infirmity is of such a nature which could be easily cured. Another circumstance which brings out the narrow perspective of the learned Single Judge is his failure to appreciate the fact that the averment in para 2 has to be construed in the light of the averments contained in paras 17, 18 and 19 which are to the effect that the Chairman, Vice-Chairman, Managing Director and members of the Board of Directors were also liable for the alleged offence committed by the Company."

Be it noted, the two-Judge Bench has correctly stated that there can be no vicarious liability unless there is a prosecution against the company owning the industrial unit but, regard being had to the factual matrix, namely, the technical fault on the part of the company to furnish the requisite information called for by the Board, directed for making a formal amendment by the applicant and substitute the name of the owning industrial unit. It is worth noting that in the said case, M/s Modi Distilleries was arrayed as a party instead of M/s Modi Industries Ltd. Thus, it was a defective complaint which was curable but, a pregnant one, the law laid down as regards the primary liability of the company without which no vicarious liability can be imposed has been appositely stated.

53. It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant.

58. Applying the doctrine of strict construction, we are of the

With Cr.M.P. No.2190 of 2017

considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words "as well as the company" appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted.

59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parek which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada is overruled with the qualifier as stated in para 51. The decision in Modi Distiller has to be treated to be restricted to its own facts as has been explained by us hereinabove."

Mr. Singh, the learned senior counsel appearing for

the petitioners further submits that it is well settled that every

person signing a cheque on behalf of a company on whose

account a cheque is drawn does not become the drawer of the

cheque. To buttress his such argument, he relied on the case of

"N.Harihara Krishnan v. J. Thomas" reported in (2018) 13 SCC

663, paragraph nos.22, 26 and 27 of the said judgment are

quoted hereinbelow:

"22. The High Court failed to appreciate that the liability of the appellant (if any in the context of the facts of the present case) is only statutory because of his legal status as the Director of Dakshin. Every person signing a cheque on behalf of a company on whose account a cheque is drawn does not become the drawer of the cheque. Such a signatory is only a person duly authorised to sign the cheque on behalf of the company/drawer of the cheque. If Dakshin/drawer of the cheque is sought to be summoned for being tried for an offence under Section 138 of the Act beyond the period of limitation prescribed under the Act, the appellant cannot be told in view of the law declared by

With Cr.M.P. No.2190 of 2017

this Court in Aneeta Hada that he can make no grievance of that fact on the ground that Dakshin did not make any grievance of such summoning. It is always open to Dakshin to raise the defence that the initiation of prosecution against it is barred by limitation. Dakshin need not necessarily challenge the summoning order. It can raise such a defence in the course of trial.

26. The scheme of the prosecution in punishing under Section 138 of the Act is different from the scheme of CrPC. Section 138 creates an offence and prescribes punishment. No procedure for the investigation of the offence is contemplated. The prosecution is initiated on the basis of a written complaint made by the payee of a cheque. Obviously such complaints must contain the factual allegations constituting each of the ingredients of the offence under Section 138. Those ingredients are: (1) that a person drew a cheque on an account maintained by him with the banker; (2) that such a cheque when presented to the bank is returned by the bank unpaid; (3) that such a cheque was presented to the bank within a period of six months from the date it was drawn or within the period of its validity whichever is earlier; (4) that the payee demanded in writing from the drawer of the cheque the payment of the amount of money due under the cheque to payee; and (5) such a notice of payment is made within a period of 30 days from the date of the receipt of the information by the payee from the bank regarding the return of the cheque as unpaid. It is obvious from the scheme of Section 138 that each one of the ingredients flows from a document which evidences the existence of such an ingredient. The only other ingredient which is required to be proved to establish the commission of an offence under Section 138 is that in spite of the demand notice referred to above, the drawer of the cheque failed to make the payment within a period of 15 days from the date of the receipt of the demand. A fact which the complainant can only assert but not prove, the burden would essentially be on the drawer of the cheque to prove that he had in fact made the payment pursuant to the demand.

27. By the nature of the offence under Section 138 of the Act, the first ingredient constituting the offence is the fact that a person drew a cheque. The identity of the drawer of the cheque is necessarily required to be known to the complainant (payee) and needs investigation and would not normally be in dispute unless the person who is alleged to have drawn a cheque disputes that very fact. The other facts required to be proved for securing the punishment of the person who drew a cheque that eventually got dishonoured is that the payee of the cheque did in fact comply with each one of the steps contemplated under

With Cr.M.P. No.2190 of 2017

Section 138 of the Act before initiating prosecution. Because it is already held by this Court that failure to comply with any one of the steps contemplated under Section 138 would not provide "cause of action for prosecution". Therefore, in the context of a prosecution under Section 138, the concept of taking cognizance of the offence but not the offender is not appropriate. Unless the complaint contains all the necessary factual allegations constituting each of the ingredients of the offence under Section 138, the Court cannot take cognizance of the offence. Disclosure of the name of the person drawing the cheque is one of the factual allegations which a complaint is required to contain. Otherwise in the absence of any authority of law to investigate the offence under Section 138, there would be no person against whom a court can proceed. There cannot be a prosecution without an accused. The offence under Section 138 is person specific. Therefore, Parliament declared under Section 142 that the provisions dealing with taking cognizance contained in the CrPC should give way to the procedure prescribed under Section 142. Hence the opening of non obstante clause under Section 142. It must also be remembered that Section 142 does not either contemplate a report to the police or authorise the Court taking cognizance to direct the police to investigate into the complaint."

Relying on this judgment, the learned senior counsel

for the petitioners further submits that it has been held by the

Hon'ble Supreme Court that drawer of the cheque is required to

be made accused in the complaint case and in the case in hand

the petitioner has neither the drawer of the cheque nor issued

the cheques. He submits that the cheques have been brought

on record by the petitioners in supplementary affidavit and

draws the attention of the Court to the cheques and submits

that the cheques brought on record by way of I.A. No.6162 of

2018, it has been issued by the firm namely Ganesh Ram

Dokania by one of the employee of the said firm. By further

advancing his argument, Mr. Singh, the learned senior counsel

for the petitioners has relied on section 5 of the Transfer of

Property Act, 1882 and submits that any person includes a

With Cr.M.P. No.2190 of 2017

company or association of body of individuals.

Per contral, Mr. R.S. Mazumdar, the learned senior

counsel appearing for the O.P.no.2 submits that there is no

illegality in the cognizance order and the learned court has

rightly taken cognizance as the cheques have been issued by

the firm. He draws the attention of the Court to Clauses 6, 9

and 13 of the partnership deed, he submits that the petitioner is

having major share in the firm and that is why the petitioner is

liable to be prosecuted under section 138 of the Negotiable

Instruments Act. He further submits that even if notice not

issued in favour of the firm a petition is maintainable. He relied

in the case of "Mainuddin Abdul Sattar Shaikh v. Vijay D. Salvi"

reported in (2015) 9 SCC 622. Paragraph nos.11 and 13 of the

said judgment are quoted hereinbelow:

"11. About the liability under Section 138 of the NI Act, where the cheque drawn by the employee of the appellant Company on his personal account, even if it be for discharging dues of the appellant Company and its Directors, the appellant Company and its Directors cannot be made liable under Section 138. Thus, we observe that in the abovementioned case, the personal liability was upheld and the Company and its Directors were absolved of the liability. The logic applied was that the section itself makes the drawer liable and no other person. This Court in P.J. Agro Tech Ltd. noted as under: (SCC p. 150, para 14) "14. ... An action in respect of a criminal or a quasi- criminal provision has to be strictly construed in keeping with the provisions alleged to have been violated. The proceedings in such matters are in personam and cannot be used to foist an offence on some other person, who under the statute was not liable for the commission of such offence." Going by the strict interpretation of the provision, the drawer which in the present case is the respondent, is liable under Section 138 of the NI Act.

13. Thus, in the light of the position which the respondent in the present case held, we are of the view that the respondent be made liable under Section 138 of the NI Act, even though the Company had not been named

With Cr.M.P. No.2190 of 2017

in the notice or the complaint. There was no necessity for the appellant to prove that the said respondent was in charge of the affairs of the Company, by virtue of the position he held. Thus, we hold that the respondent Vijay D. Salvi is liable for the offence under Section 138 of the NI Act."

By way of referring paragraph no.11 of the said

judgment on this ground he submits that the petition is fit to be

dismissed.

Mr. Rajneesh Vardhan, the learned counsel

appearing on behalf of the respondent State submits that there

is no illegality in the cognizance order and this Court may not

interfere under section 482 Cr.P.C.

In light of the above arguments advanced by the

learned counsels appearing on behalf of the parties, the Court

has gone through the materials on record and finds that in the

complaint the firm is not made an accused. On perusal of the

cheques which have been brought on the record by way of I.A

petition it transpires that the cheque in question was issued by

the firm and the petitioner is not a drawer in both the cases. For

correct appreciation of section 141 of the Negotiable

Instruments Act, which is quoted hereinbelow:

"141. Offences by companies.--(1) If the person committing an offence under Section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence.

[Provided further that where a person is nominated as a Director of a company by virtue of his holding any

With Cr.M.P. No.2190 of 2017

office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this chapter.] (2) Notwithstanding anything contained in sub- section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

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

(a) "company" means any body corporate and includes a firm or other association of individuals; and

(b) "director", in relation to a firm, means a partner in the firm."

On perusal of this section, it is crystal clear that

vicarious liability under sub section 1 or 2 of section 141 of the

Negotiable Instruments Act can be fastened if the person is

having the control over the day to day affairs of the company.

Looking to the explanation of the said section, it is crystal clear

that the firm or the company are required to be made an

accused in the complaint, which is lacking in the case in hand.

However, such vicarious liability arises only when the company

or the firm commits offence as primary offence. The judgment

relied by Mr. Singh, the learned counsel appearing on behalf of

the petitioners in the case of "Aneeta Hada v. Godfather Travels

and Tours Private Limited" (supra) is on the same footing which is

helping the petitioners. Recently, the Hon'ble Supreme Court has

again examined this aspect of the matter in the case of "Dilip

Hariramani v. Bank of Baroda" reported in (2022) 0 Supreme

(SC) 417. In this case, the subject matter was the firm itself

and the Hon'ble Supreme Court discussed the law laid down on

With Cr.M.P. No.2190 of 2017

this point. As the argument of the learned senior counsel

appearing for the petitioners, reference is made to paragraph

nos. 14 and 15 of the said judgment, which is quoted below:

"14. The provisions of Section 141 impose vicarious liability by deeming fiction which presupposes and requires the commission of the offence by the company or firm. Therefore, unless the company or firm has committed the offence as a principal accused, the persons mentioned in sub-section (1) or (2) would not be liable and convicted as vicariously liable. Section 141 of the NI Act extends vicarious criminal liability to officers associated with the company or firm when one of the twin requirements of Section 141 has been satisfied, which person(s) then, by deeming fiction, is made vicariously liable and punished. However, such vicarious liability arises only when the company or firm commits the offence as the primary offender. This view has been subsequently followed in Sharad Kumar Sanghi v. Sangita Rane,17 Himanshu v. B. Shivamurthy and Another,18 and Hindustan Unilever Limited v. State of Madhya Pradesh.19 The exception carved out in Aneeta Hada (supra),20 which applies when there is a legal bar for prosecuting a company or a firm, is not felicitous for the present case. No such plea or assertion is made by the respondent.

15. Given the discussion above, we allow the present appeal and set aside the appellant's conviction under Section 138 read with 17 (2015) 12 SCC 781:11. In the case at hand as the complainant's initial statement would reflect, the allegations are against the Company, the Company has not been made a party and, therefore, the allegations are restricted to the Managing Director. As we have noted earlier, allegations are vague and in fact, principally the allegations are against the Company. There is no specific allegation against the Managing Director. When a company has not been arrayed as a party, no proceeding can be initiated against it even where vicarious liability is fastened under certain statutes. It has been so held by a three-Judge Bench in Aneeta Hada v. Godfather Travels and Tours (P) Ltd. in the context of the Negotiable Instruments Act, 1881. 18 (2019) 3 SCC 797:13."

By the Hon'ble Supreme Court in the judgment

clearly held that section 141 of the Negotiable Instruments Act

extends vicarious criminal liability to the officers associated with

company or firm when one of twin requirements of section 141

has been satisfied, which person(s) then, by deeming fiction, is

made vicariously liable and punished. In absence of the firm

With Cr.M.P. No.2190 of 2017

and looking into the admitted position that the petitioner is not

the drawer and in both the case he cannot be liable to be

punished. In the judgment relied by Mr. Mazumdar, the learned

Senior counsel appearing on behalf of the O.P.No.2 in the case

of "Mainuddin Abdul Sattar Shaikh v. Vijay D. Salvi"(supra), the

petitioner was the drawer in that case and in that situation, the

Hon'ble Supreme Court has held that when the drawer is an

accused even if the company is not made accused, or noticed,

the case can be maintained. This fact is lacking in the case in

hand.