Madras High Court
Ramasamy Selvam vs M/S.M.S. Metals And Steels (P) Ltd on 7 July, 2021
1 Crl O.P. Nos.10825 and 10826 of 2015
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 07.07.2021
CORAM:
THE HON'BLE MRS. JUSTICE V.BHAVANI SUBBAROYAN
Crl.O.P.Nos.10825 and 10826 of 2015
and
Crl. M.P Nos.1 & 2 of 2015
1.Ramasamy Selvam
Director, M/s. Mehala Castings and Components
Pvt. Ltd.
147/14, Valayankadu Main Road,
Kumar Nagar South, Tiruppur – 641 603.
2. Chinnaiya Gounder Subramaniam,
Director, M/s. Mehala Castings and Components
Pvt. Ltd.
1, College Road, II Cross Street,
Odakkadu, Tiruppur – 641 602. ...Petitioners
(In both petitions)
Vs.
M/s.M.S. Metals and Steels (P) Ltd.,
Rep by its Senior Executive Marketing,
V. Vimal V. Shah,
No.VI(A), Calve Chateau,
No.808, Poonamallee High Road,
Chennai – 600 010. ...Respondent
(In both petitions)
https://www.mhc.tn.gov.in/judis/
2 Crl O.P. Nos.10825 and 10826 of 2015
COMMON PRAYER: Criminal Original Petitions are filed under
Section 482 Cr.P.C., to call for the records relating to in C.C.Nos.367 and
368 of 2015 on the file of the Judicial Magistrate Court No.1, Tiruppur
and quash the same.
For Petitioners : No Appearance
For Respondent : Mr.P.K.Srinivasan
*****
COMMON ORDER
These Criminal Original Petitions have been filed seeking to call
for the records relating to in C.C.Nos.367 and 368 of 2015 on the file of
the Judicial Magistrate Court No.1, Tiruppur and quash the same.
2. The case of the petitioners is that the complainant/respondent
herein has made a complaint against the petitioners among others in C.C.
Nos.367 and 368 of 2015 on the file of the learned Judicial Magistrate
Court No.I, Tiruppur for alleged offences punishable under Sections 138
r/w Section 142 of the Negotiable Instrument Act. The complaint is that
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the complainant/respondent herein had supplied waster and scrap of Iron
and Steel to M/s.Mehala Castings and Components Pvt. Ltd in which the
petitioners are directors and towards such supplies, 8 cheques were
issued to the total value of Rs.24,00,000/-. When the said Cheques were
presented for collection, they were returned by their Bank with a memo
“Account Closed”. In view of the return of said cheques, the
complainant/respondent herein had issued a Statutory Notice dated
12.01.2015 under Section 138 of the Negotiable Instrument Act,
demanding payment of the amount due on these Cheques. Thereafter, the
petitioners herein have sent a reply notice dated 22.01.2015 stating that
the company is not functioning from January 2014, and that the
Managing Director would have issued the cheques on his own accord,
and the complainant/respondent herein was called upon to indicate the
name of the person who had drawn the cheques and to send a copy of the
cheques. Further, It was also stated that the accused company was
entirely managed by the Managing Director Mr. Rathinasamy and that,
these petitioners were not at all involved in the day to day affairs of the
company. Further, the respondent/complainant did not send the xerox
copy of the cheques as demanded by the petitioners and rebutted the
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allegations made in the reply notice. Thereafter, the
respondent/complainant instituted the complaint against the petitioners in
C.C. Nos.367 and 368 of 2015 on the file of the Judicial Magistrate
Court-I,Tiruppur. Against the aforesaid complaints made by the
complainant/respondent herein, the petitioners have filed the present
Criminal Original Petitions to quash the same.
3. The learned counsel for the petitioners submitted that the
learned Magistrate ought not to have taken cognizance of the complaint
against these petitioners while there is no specific allegations made
against these petitioners about their role in issuing the cheques in
question and its subsequent dishonour.
4. The learned counsel relying on the Judgment of the Supreme
Court in the case of “Pooja Ravinder Vs. State of Maharastra reported
in JT 2014 [14]SC 1, pointed out the following observations made
therein:
“(i) to fasten vicarious liability under Section 141 of
the Act on a person, at the material point of time, the person
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should have been at the helm of the affairs of the company
and particularly responsible for the conduct of its business.
(ii) the complaint must disclose the role of the
[directors] in the affairs of the company and in what
manner the [directors] were responsible for the conduct of
the business of the company.
In view of the aforesaid observations made by the Supreme Court, as the
petitioners are not responsible in issuing the cheques, the learned counsel
for the petitioners prays this Court to call for the records in C.C. No.368
of 2015 on the file of the Judicial Magistrate, Tiruppur and quash the
same.
5. Per contra, the learned counsel appearing for the respondent had
filed the counter affidavit denying all the averments made in the petition
filed by the petitioners wherein it has been stated that the respondent
supplied “Waste and Scrap of Iron and Steel to M/s. Mehala Castings &
Components P. Ltd in which the petitioners were directors on various
dates. In view of the supply of the material to the petitioner company, it
is liable to pay the amount towards their debit. Hence, the petitioner
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company had issued 8 cheques each Rs.30,000/- to the total value of
Rs.24,00,000/- on various dates. The aforesaid cheques were presented
for collection through respondent's bankers viz., ICICI Bank at Kilpauk
Branch on 06.01.2015. The said cheques were returned on 07.01.2015 as
unpaid with the endorsement of “Account Closed”. It will not be out of
place to mention that after the first batch of cheques for the 24 Lakhs
were returned by Memo dated 03.01.2015, with the endorsement
“Exceeds arrangement”. After that, the account has been closed
deliberately by the petitioner company. Consequently, the second batch
of cheques for Rs.24 Lakhs were returned with the Memo dated
07.01.2015 endorsing “Account Closed”. Subsequent to the return of
the cheques, the respondent/complainant issued a statutory notice dated
12.01.2015 under Section 138 of the Negotiable Instrument Act
demanding the payment of amount due on the 8 cheques totaling to Rs.24
Lakhs for the supply of the material.
6. In the counter affidavit, the Respondent/Complainant extracted
the below relevant portion of the Statutory Notice CFL/SdK:12.01.2015
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“Our Client states you have issued an email dated
22.01.2014 which reads as follows:
“Dear Sir,
We hereby confirm that the balance outstanding as
per our books of accounts as on 22.01.2014 is
Rs.69,86,275/-. Issued but not cleared cheques are not
accounted in our books. Please find attached our account
statement as on 22.01.2014.
However, in reply to the Statutory notice the petitioner/accused
forwarded their letter dated 22.01.2015 mentioning inter alia
4. Your Clients may be advised to furnish a copy of
the Cheque leaf to our client for their investigation. Our
client sincerely believe that Mr. Rathinasamy, when he was
managing the affairs of the Company, might have parted the
Cheques with your client that is before March 2013.
5. The fact is that the company was entirely managed
by the then Managing Director Mr. Rathinasamy and he had
misused his office during his tenure. There was absolutely
no occasion for our clients, to issue any cheque to your
clients in the month of November, December 2014.”
Further, the respondent/Complainant forwarded their rejoinder dated
14.02.2015 as follows:
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"We are in receipt of your reply notice dated
22.01.2015. Our client states your clients want to project
an innocent face though fully involved, obviously on legal
advice. Your client admits that Mr. Rathinasamy was the
Managing Director of the Company. Your Client do not
deny that Mr.Ramasamy Selvam and Mr. Chinnaiya
Gounder Subramanian were/are Directors of the Company.
Our Client states that your clients were in charge of
and responsible for the affairs of the company.
Our Client states use/misuse of the office of the
Managing Director has nothing to do with our clients, and
is purely an internal matter of your client."
Email referred to in para 7 of your notice as emanated upon from your
clients companies email ID to your client and copy has also been marked
to officials of your company. Our client wonders how your clients can
disown mails emanating from your clients companies email ID to our
client, and also marked to officials of your client. Thus, the statutory
notice dated 12.01.2015 and the rejoinder dated 14.02.2015 clearly
mentioned the petitioner/accused are in-charge of and responsible for the
affairs of the company.
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7.It has been further submitted that the complaint will not be
maintainable without the statutory notice under Section 138 of the
Negotiable Instrument Act and therefore the notice under Section 138 of
the Negotiable Instrument Act, being a statutorily vital document, has to
be looked into, along with re-joinder to find out the
respondent/complainant's case.
8. In the complaint dated 26.02.2015, the respondent/complainant
has specifically stated in Para 1 as follows:
"1.The Complainant and the 1st accused are the
companies registered under the Companies Act. The
accused No.2 to 4 are the directors in the Accused No.1
company. The Accused Nos.2 to 4 are actively participating
in the affairs of the 1st accused Company...
2. Towards the supplies, the Accused No.4 on behalf
of the Accused No.1 and with the consent of the Accused
Nos.2 & 3 had issued Post Dated Cheques on various dates
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drawn on the Oriental Bank of Commerce, Vallipalayam
Branch, Thirupur - 641 601 and bearing Nos575323,
575326, 575327, 575329m 575330, 575332, 575333m
575335 dated 03.11.2014, 05.11.2014, 09.11.2014,
11.11.2014, 13.11.2014, 15.11.2014, 17.11.2014 for an
amount of Rs.3,00,000/- each in favour of the Complainant.
The Total Cheque amount is Rs.24,00,000/-. The above
cheques were issued towards part satisfaction.
9. It has been explicitly averred in the complaint that the directors
have actively participated in the affairs of the 1st accused company and
that towards the supplies, Accused No.4 with the consent of the Accused
Nos.2 & 3 have issued the Post Dated Cheques. Since the complaint
discloses that the petitioners were/are directors of the Company at the
relevant point of time, and the concerned Cheques were issued with their
consent towards the supplies made and hence, this would be prima-facie
sufficient to constitute an offence under Section 141 of the N.I. Act.
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10. In the present case, it is reiterated that (1). the Statutory notice,
(2). the rejoinder and (3). the complaint read together clearly establishes
the fact that:
"1. The Accused Directors are in charge of and
responsible for the day-to-day affairs of the Company.
2. Accused Directors 2 to 4 actively participated in
the affairs of the 1st accused company.
3. Accused Director No.4 with the consent of the
Accused Directors 2 & 3 have issued the Post Dated
Cheques."
11. It has further been submitted that apart from the Cheques,
Statutory Notice and the re-joinder, are part and parcel of the complaint
dated 26.02.2015 and therefore, the complaint cannot be looked into in
isolation but have to be read together with the documents and not
disjointly. Therefore, it is respectfully submitted pre-requisites of
Section 141 of Negotiable Instrument Act has been complied with.
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12. The Counter further states that if there is no statutory notice,
no complaint is maintainable, and consequently no court can take
cognizance of any offence punishable Under Section 138 of N.I. Act. On
the contrary, it is open to the Magistrate to take cognizance against the
petitioners on the contents of the complaint and documents submitted in
support thereof.
13. It is further submitted that the petitioner/accused made
averments that the Managing Director Mr. Rathinasamy who had
misused his office during his tenure, has nothing to do with the
respondent/complainant and is purely an internal matter of the petitioner
company and at best is a matter for trial. The complainant being the
outsider cannot be aware of the internal business of the accused
company.
14. Relying on the Judgment of the Supreme Court in the case of
"N. Rangachari Vs. Bharat Sanchar Nigam Ltd." reported in AIR 2007
S.C. 1682, wherein it has been held that
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"14. A person normally having business or
commercial dealings with a company, would satisfy himself
about its creditworthiness and reliability by looking at its
Promoters and Board of Directors and its nature and extent
of its business and its memorandum or Article Association.
Other than that, he may not be aware of the arrangements
within the company in regards to its management, daily
routine etc;. Therefore, when the Cheque issued to him by
the Company is dishonored, he is expected only to be aware
generally of who are in charge of the affairs of the
Company. It is not reasonable to expect him to know
whether the person who signed the Cheque was instructed
to do so when he actually signed the cheque. Those are
matters peculiarly within the knowledge of the company and
those in charge of it. So, all that a payee of a Cheque that
is dishonored can be expected to allege is that the persons
name in the complaint are in charge of its affairs. The
Directors are preimafacie in that position.
19. We think that, in the circumstances, the High
Court has rightly come to the conclusion that it is not a fit
case for exercise of jurisdiction under Section 482 of the
Code of Criminal Procedure for quashing the complaint. In
fact, and advertence to Sections 138 and 141 of the
Negotiable Instrument Act shows that on the other elements
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of an offence under Section 138 being satisfied, the burden
is on the Board of Directors or the Officers in charge of the
affairs of the Company to show that they are not liable to be
convicted. Any restricts on their power or existence of any
special circumstances that make them not liable is
something that is peculiarly within their knowledge and it is
for them to establish at that trial such a restriction or to
show that at the relevant time they were not incharge of the
affairs of the company. Reading the complaint as the whole,
we are satisfied that it is a case where the contentions
sought to be raised by the appellant can only be dealt with
after the conclusion of the Trial".
In view of the above, in the complaint and in the statutory notice,
presumption under Section 139 of the Negotiable Instrument Act is that
the accused are guilty. Accordingly, it is for the accused to prove that
they are not guilty as the Company is run by its Board of Directors.
15. It has been further submitted in the counter that it has been
held by the Hon'ble Supreme Court that there is no bar to take
cognizance of the offence by the concerned magistrate on the return of
cheques by the bank with the endorsement such as "Exceeds
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Arrangment" or "Account Closed". NEPC MICON LTD. AND OTHERS
Vs. MAGMA LEASING LTD.: AIR 1999 S.C. 1952.
8. Secondly, proviso (c) gives an opportunity to the
drawer of the cheque to pay the amount within 15 days of
the receipt of the notice as contemplated in proviso (b)
further, Section 140 provides that it shall not be a defence in
prosecution for an offence under Section 138 that the
drawer has no reason to believe when he issued the cheque
that the cheque may be dishonoured on presentment for the
reasons stated in that Section. Dishonouring the Cheque on
the ground that account is closed is the consequence of the
Act of the drawer rendering his account to a cipher. Hence,
reading Sections 138 and 140 together, it would be clear
that dishonour of the cheque by a bank on the ground that
account is closed would be covered by the phrase "the
amount of money standing to the credit of that account is
insufficient to honour the cheuqe.
16. It has further been submitted that it will not be out of place to
mention that the 2nd petitioner has issued cheques in favour of the
respondent/complainant which have also bounced. Details of two such
bounced cheques among others are given below:
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Date Cheque No. Signed on behalf of Amount
04.10.2013 010889 Mehala Castings and Components 500000/-
Pvt. Ltd.
26.10.2013 010990 Mehala Castings and Components 520211/-
Pvt. Ltd.
Thus, it is not as though only the Managing Director signed the cheques
and they were not aware of the transactions. Therefore, the role of the
Directors are all the matters to be decided at the Trial.
17. Heard the learned counsel for the petitioner and perused the
material available on record.
18. On reading of the aforesaid Judgments relied by the learned
counsel for the petitioner and the learned counsel for the respondent, it
makes clear that the responsibility of the directors and day to day
activities of the directors in the company would be disclosed in the Trial.
Further, the reliance of the Judgment in the case of "Pooja Ravinder
Devidasani Vs. State of Maharashtra and another" placed by the learned
counsel for the petitioners wherein it is held that "the appellant was
neither a Director f the accused company nor in charge of or involved in
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the day to day affairs of the company at the time of commission of the
alleged offence. There is not even a whisper or shred of evidence on
record to show that the appellant could be vicariously held liable for the
offence with which she is charged". However, in the present case, it is
admitted fact that the cheques were issued by the Directors with seal of
the company and signature of the petitioners who were the directors in
the company in favour of the respondent/complainant for the supply of
the material.ie. waste and scrap of iron and steel to M/s. Mehala Castings
and Components Pvt. Ltd. These cheques have been given for the
business transaction held between the petitioner's company and the
complainant's company. In such circumstances, the petitioners/Directors
of the company have issued the said cheques in question in favour of the
respondent/complainant. However, the petitioners herein are denying
their liability and that the company is not functioning from January 2014
and the Managing Directors would have issued the said cheques on their
own accord is not supported by any material evidence. Whether the
company is not functioning from January 2014 and the petitioner were
not directors in the company at that point of time could be tried and
decided only in the Trial. Further the aforesaid averments made by the
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petitioner is not acceptable while the petitioners have not produced any
substantial material to prove that the directors have not involved in the
affairs of the company and they were not responsible in the day to day
activities of the company.
19. Further, in the complaint made by the complainant/respondent
it has been stated specifically that "1.The Complainant and the 1st
accused are the companies registered under the Companies Act. The
accused No.2 to 4 are the directors in the Accused No.1 company. The
Accused Nos.2 to 4 are actively participating in the affairs of the 1st
accused Company...
2. Towards the supplies, the Accused No.4 on behalf of the
Accused No.1 and with the consent of the Accused Nos.2 & 3 had issued
Post Dated Cheques on various dates..."
In the above complaint, the complainant had specifically explained the
role of the petitioners in the day to day affairs of the company and in
what manner the petitioners are not responsible for the conduct of the
business of the company has to be proved by the petitioners beyond any
doubt.
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20. All these averments are factual in nature and the same has to be
established only at the time of Trial.
21. In view of the above, the petitioners cannot seek to quash the
C.C.Nos.367 and 368 of 2015 on the file of the Judicial Magistrate Court
No.1, Tiruppur as they have failed to produce the substantial evidence to
prove their averments before this Court. Hence, this Court is not inclined
to accept the contentions of the petitioners.
21. In the result, these Criminal Original Petitions stand dismissed.
Consequently, connected miscellaneous petitions are closed.
07.07.2021
Lbm
Index : Yes / No
Speaking order/Non-speaking order
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V.BHAVANI SUBBAROYAN.,J
Lbm
To
1. The Judicial Magistrate Court No.1,
Tiruppur
2.The Additional Public Prosecutor,
High Court of Madras,
Chennai.
Crl.O.P.Nos.10825 and 10826 of 2015
and
Crl. M.P Nos.1 & 2 of 2015
07.07.2021
https://www.mhc.tn.gov.in/judis/
